Private rental housing in Hong Kong

Abstract

This paper examines selected aspects of housing policy and its influence on private rental housing in Hong Kong. Its ambitions are modest, in part because so little research has been conducted on the sector, as a consequence of the small size of the sector as well as the concentration of socio-political, economic and policy analyses on the other major housing sectors, namely public renting and home ownership. It is argued that a fundamental function of private renting, to provide a functional substitute and counter-balance to distortions in the market for private home ownership, has been systematically undermined in Hong Kong. In spite of its historical importance in meeting Hong Kong people's housing needs, the sector's decline has been steep and it can now be fairly described as a marginalised tenure, despite incomplete structural adjustment post- Asian Financial Crisis. It is suggested that a fundamental reason for the decline of the private rental sector has been the impact of governmental policy, which undermined the private rental sector and thus an important element of the market mechanism in housing provision. The government's ideology of home ownership has also functioned to transfer lower middle-income families into the owner occupied sector. Although the Hong Kong government has not been as overtly hostile to this sector as governments have been elsewhere, it nevertheless also seems to envisage no real role for the private rental sector in a housing delivery system molded by policy preference for home ownership, rather than fostering viable economic competition by also facilitating an efficient private rental sector.