Richard Wong

Hong Kong can ease its housing crisis by giving more families a chance to buy public housing flats

Families owning a home under the Tenants Purchase Scheme have lower divorce and single parent rates and more people living in the same unit than those renting public housing, thus reducing the pressure on the city’s housing stock

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A child plays in front of Oi Wo House in an estate under the Tenants Purchase Scheme in Tai Wo on January 4. By promoting home ownership, the scheme has also facilitated family stability. Photo: Winson Wong

Richard Wong

Published: 1:00pm, 26 Mar 2019Updated: 10:20pm, 26 Mar 2019

Under Hong Kong’s Tenants Purchase Scheme, introduced in 1998, 140,298 public rental housing units have been sold to existing tenants. Initially, about 57 per cent of the units available for sale found buyers and, in the past decade, this has increased to 72 per cent. By promoting home ownership, the scheme has increased the labour force participation rate and decreased unemployment among families that have bought these units.

But there have been two other important effects. The scheme has also lowered inequality in housing property wealth and promoted family stability.

The scheme has promoted family stability by providing an opportunity for tenants to become homeowners. It has created an economic stake for families to stay together – their jointly owned asset, the value of which appreciates over time. In the case of a divorce, sharing the value of the housing asset becomes less certain.

Unlike Tenants Purchase Scheme homeowners, public rental housing estate tenants suffer very little economic loss in a divorce because they do not jointly own an asset to begin with. Normally, one of the divorced tenants keeps the public rental unit; often the mother who has custody of the children. The other spouse leaves the unit but is free to apply for another one and join the waiting list. The wait is shorter if the applicant remarries and has children in the meantime.

This implies that Tenants Purchase Scheme homeowners have a strong incentive to maintain family stability to avert the economic loss of a divorce. Perversely, public rental housing tenants face no such deterrence. Given this, the current government policy to shift public housing policy towards home ownership and away from rental housing is to be lauded.