Lok Fu Place in Kowloon, a shopping centre managed by the Link Reit. Photo: Sam Tsang
by Francis Neoton Cheung
by Francis Neoton Cheung

Don’t blame mall owners or Link Reit for problems at public housing estate shops

  • Issues over provision of retail facilities to estate tenants go back a lot further than recent sales by Link to private buyers

In the past few years, buyers of shopping centres at public housing estates sold by Link Reit have come under increasing criticism for the changes they have made to their acquisitions.

Public housing tenants complain about the gentrification of malls that are supposed to serve them, while steep rent rises have forced out many small businesses, leaving increasing numbers of vacant shop spaces. There are even claims that the new owners of certain former Link shopping malls have deliberately kept store spaces empty so they could be rented out at higher rates later.

Last month, New People’s Party chairwoman Regina Ip Lau Suk-yee mooted a private member’s bill in Legco to cap rent rises at the Link’s current and former shopping malls. She also called for a vacancy tax on stores left empty for more than six months. Pan-democratic lawmaker Au Nok-hin joined in, demanding a complete ban on any further rent increases as well as on any change of use at the malls.

However, many of the common criticisms are misplaced. From a planning and urban governance perspective, the issues surrounding former Link shopping malls stem from the government’s poorly conceived decision to hive off huge swathes of the Housing Authority’s retail facilities 15 years ago.

More importantly, any attempt to control the business decisions of private owners of shopping centres in public housing estates would go against the principles of Hong Kong’s free market economy. That would be a very questionable and dangerous path for any politician to tread.

The original purpose of shopping centres in public housing estates was that they formed, physically and socially, an integral part of the residential communities they served. Public housing tenants were naturally the primary customer base of these retail hubs. Subsidised by the government and effectively run as government facilities, they operated outside the dictates of free market economics. They provided affordable goods and services that satisfied the day-to-day needs of low-income families.

All that changed in 2004 with the privatisation of the Housing Authority’s shopping malls, wet markets and car parks. The divestment of these former public assets created Link Reit, which is today Asia’s largest real estate investment trust. Market forces took over as the provision of public housing amenities ceased to be government responsibilities.

What is also important is that many of the issues with these facilities today reflect the ageing demographics of public housing estates.

As those who moved into public housing in the 1970s and 1980s grow older, their spending power falls. Consumer demand from this demographic alone is not enough to sustain business at shopping centres. It is for this reason that private owners had to follow market logic, change tack and broaden their customer reach.

In fact, many of the Link’s shopping centres in public housing estates were already quiet before they were sold, and the owners have nothing to gain from leaving shop spaces empty, because there are still maintenance costs to cover.

After changing hands, the malls were renovated to attract more shoppers. It was perhaps inevitable that shop rents would be raised as the new owners sought to recoup the costs of acquisition and upgrades. At the same time, some of these shopping centres are not served by any MTR station or are just difficult to get to, and no facelift could instantly get the shops rented out or pull in visitors from afar.

While it is undeniable that many shopping centres in public housing estates have today been gentrified beyond the reach of local residents, pinning the blame on Link Reit or the buyers is missing the point. Ultimately, it is imperative for any private business to balance the books and generate profit. Any attempt to force the contrary would only make a mockery of the free market.

Probably the only remedy is for the government to talk to the owners of these premises and make arrangements to provide appropriate subsidised facilities to targeted low-income groups.

Francis Neoton Cheung is the convenor of Doctoral Exchange, a public policy research collective, and a former member of the Land and Building Advisory Committee