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The SAR government's My Home Purchase Plan (MHPP) has some attractions, but it also has some qualities that render it less attractive than traditional HOS housing. Whether it is an "improved version" of the Home Ownership Scheme cannot be conclusively stated.
First of all, My Home Purchase Plan is similar to the HOS in that it increases the housing supply, particularly at the lower end. It aims to provide "no frills" flats that are more affordable than the majority of the new private flats that developers would like to supply. This is good.
Under the new scheme, the government will provide land for the Housing Society to build about 5,000 "no-frills" flats for lease to applicants, individuals and families. Rent will be set at the market level, but will be frozen, for up to five years. During that time tenants may buy the flat they are renting or another flat at market price, or buy a flat in the private market, within a specified time.
Second, the MHPP involves subsidies to a target group that would not qualify for public rental housing, in the same way that the HOS did, although the eligibility criteria are less restrictive. Applicants with families need a household income of no more than HK$39,000 a month and assets of no more than HK$600,000. HOS applicants are subject to a monthly income limit of HK$27,000 for households of up to eight people and an asset limit of HK$530,000.
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Third, the MHPP guarantees that the rent will not be increased for five years, and that one half of the rents paid will be refunded toward the purchase of a home, whether it is the unit being rented or another one in the private market. The HOS provides a subsidy essentially through lower land premiums charged against the unit at the time of sale. But this land premium subsidy is essentially a loan that needs to be repaid in full at market rate if the owner eventually sells his unit in the free market. Suppose the land premium "subsidy" were HK$300,000 at the time of original purchase. The repayment of the land premium could be HK$900,000. Thus the government may actually capture a good rate of return on the original land premium "loan."
An objection to the HOS is that many homeowners have not repaid their land premiums, and that turnover in HOS units is low. But this may not be a problem at all, if the original purpose of the HOS is to provide affordable housing rather than to enrich the buyers. If the HOS owner is happy to stay where he is, and is not selling his unit, it is usually because he is not yet ready economically to trade up to something better. If owners have become financially able to trade up, the difficulty in repaying the land premium at market price would not have arisen at all.
Thus low turnover in HOS units simply reflects low upward mobility for many families. There is nothing wrong with their staying in housing that they can afford. All told, 64,700 units out of 320,000 have had the land premium fully repaid. Considering the state of the economy over the last decade or so, the turnover hardly hints at a problem. Moreover, HOS units with land premiums not repaid are still available on the secondary market to Green Form applicants, i.e., public rental housing tenants. I do not really see an urgent need to "revitalize" the HOS market turnover. I would agree only to "revitalizing" by giving owners the right to rent their units in whole or in part, to allow them to repay the land premium in installments by applying rents collected. If people are not yet ready to trade up, so be it.
I am worried about MHPP attracting people who have no intention to buy homes, but who will sign up anyway, thus shutting out many with the keen desire to buy. The relaxed eligibility criteria and the guaranteed no-increase in rents, as well as the promise to repay half the rents back to the tenant, provide great incentives to people, including many who have never tried to save money for a home purchase at all.
On the other hand, we have people whose incomes and assets are lower, and who have painstakingly accumulated sufficient downpayment for an HOS home, who are turned away because HOS units are no longer built and because they now have to compete with people with better means, including people with no initial desire to purchase a home.
According to a reported estimate, an HOS housing unit costs taxpayers HK$650,000 as compared to HK$1.03 million for a public rental housing unit. HOS therefore saves money for taxpayers. The MHPP is untried, and according to the government, it promises to save more. But it is clear that the MHPP, in place of the HOS, will leave many aspiring homeowners disappointed, while appeasing others with greater financial means who will eye the rental subsidy. Is this a wise use of taxpayers' money? Let's think it over.