Effectiveness of housing subsidy policy in Hong Kong and its equitable issue

Abstract

Hong Kong Public Housing Program was initiated by a disastrous fire sixty years ago which made thousands people lose their shelter. Public rental housing (PRH) was built to provide affordable accommodation to people who are in housing need, such as the victims of disaster, low income families, etc. The financial situation of some PRH households had been improved after receiving years of housing subsidy by residing in PRH, which is heavily subsidized by the Government. They had affordability in finding a home in private sector, but they chose to stay in PRH and continued to receive housing subsidy, which they should not entitled. This phenomenon aroused widespread public concern in 1980s.

After conducting public consultation in 1984-85, the Hong Kong Housing Authority (HKHA) finally implemented the Housing Subsidy Policy (HSP) in April 1987 to reduce the housing subsidy to those who are no longer in need of it.

Under the HSP, tenants who have resided in public housing for 10 years or more are required to declare their household income. Households with income exceeding the Subsidy Income Limits (SIL) are required to pay double net rent plus rates. The policy was reviewed after implemented for five years. Responding to PRH’s opinion on the policy, the policy was revised in 1993.Under the new measure, households with income between two to three times of the WLIL would be charged 1.5 times rent. Tenants, with income exceeds 3 times of the WLIL would have to pay double rent.

Although HKHA did not adopted the method of eviction to force the well–off tenants to move out from the PRH, the ultimate aim of HSP was to vacate the flats resided by them. Instead of taking enforcement action, a moderate method of reducing subsidy and encouragement of home ownership was adopted to encourage well-off PRH tenants to surrender their PRH units, so that they can be re-allocated to the people who had genuine housing need. With a moderate approach, the effective of HSP has been reduced. The first part of this study would conduct an examination of the effectiveness of HSP. Effectiveness in achieving its aim and the policy outcomes would be the focus of this part.

Public Housing is a scarce and limited social resource. A rational and equitable allocation of the PRH units is expected. The HSP is the first step for HKHA to take measure to rationalize the distribution of the existing heavily subsidized PRH units since the public housing program started in 1953. The later part of this study would evaluate the equity of the HSP based on some theorists’ conception on equity. Recommendations would be made in conclusion to provide future policy directive on HSP.