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Speech by PSH


The following is issued on behalf of the Housing Authority:

Following is a speech by the Permanent Secretary for Housing, Planning and Lands (Housing), Mr Leung Chin-man at the closing session of the International Housing Conference 2004 "Housing in the 21st Century: Challenges and Commitments" today (February 3):

Dr. Renaud, distinguished guests, ladies and gentlemen,

I have the honour to conclude the formal proceedings of this Conference with some closing remarks. During the past two days, we have heard some of the most distinguished international experts give profound insights into the challenges in housing that face their respective communities around the world, as well as the solutions they are adopting - or currently considering - to address them. On behalf of the organizers and delegates, I would like to express my sincere appreciation to all of you for your presence and for your contributions.

It would be totally impossible to do justice to all the many topics that have been discussed within the time available to me. However, I would like to briefly mention a few major issues, especially those that affect not only us here in Hong Kong, but also other societies worldwide.

The Impact of Urbanization

The first of these is the impact of urbanization, as it affects housing and the general living environment of people in cities around the world. In his keynote address, Dr. Renaud observed that, for the first time in history, more than 50% of the world's population will live in urban areas by the year 2007. He pointed out the enormous impact this will have - especially in Asia, where the urbanization process is advancing with particular momentum.

Mainland China is one clear example of this. As China's national economy develops, the percentage of urban residents will increase until it reaches 60% by 2020. That means that more than 15 million people - or 5 million households - will move from rural to urban areas every year between now and then. Besides meeting the extra demand for urban housing, Dr Renaud pointed out that urbanization poses three major challenges for China: how to develop suitable financial mechanisms for developing urban infrastructure; how to develop effective systems of urban governance and management; and how to ensure residents of the growing cities can enjoy access to services and employment.

China - Moving Towards Marketization

Our speakers from the Mainland discussed the changes that have taken place in China's housing policies, in response to the urbanization challenge and the aspirations of its citizens for better living standards. These changes began at the same time as the economic reform process, over 20 years ago. They have become especially profound since the traditional administrative system for allocating housing was abolished and the marketization of housing started in 1998. Stimulated by market demand and the new policies, the real estate industry has developed rapidly and successfully, emerging as a pillar in China's national economy. Investment in real estate development in China during 2002 accounted for nearly 18% of all investment in fixed assets - a big increase from 12.7% in 1997. The total area of domestic property completed in urban cities over the five years to 2002 amounted to 3.4 billion square metres, an annual average of 680 million square metres.

At the same time, there have been concerns that the market has become overinvested and overbuilt. To address these, China's housing policies will in future be directed at encouraging the development of more affordable housing in the market. The government intends to intensify its monitoring and macro-control of the market, to ensure its proper and equitable operation. It also aims to strike a balance between supply and demand; and this must be based on the needs of ordinary people, as well as their ability to afford the homes that are being built.

The housing problems of lower-income families in China must be addressed, to avoid the emergence of urban slums. Urban residents must have access to homes that are better built and better managed. The process of marketization will require further refinement - both in its concept and in the operation of the market system. A healthy and coherent housing market system that is capable of self-adjustment needs to be developed. Which is an important lesson Hong Kong has learned and I shall elaborate on this point later.

Globalization is expected to have a major impact on China's property market. The adoption of the open-door policy in the early 1980s has been followed by China's accession to the WTO, as well as the signing last year of the Closer Economic Partnership Arrangement between Mainland China and Hong Kong.

Besides further enhancing the freedom of trade and investment, these developments will have an impact on the property market. Hong Kong and overseas companies and individuals will be welcome to contribute their professional expertise in services related to real estate, as well as financial services, institutional investment and building technology.

There will also be greater scope for participation by Hong Kong and overseas professionals, such as urban planners, architects, landscape architects, engineers, project managers, surveyors, appraisers and brokers, as well as property and facility managers. The key challenges for these professionals will be to localize their service models to suit conditions in China, as well as their ability to cooperate effectively with other participants in the Chinese property market.

Singapore - Responding to Public Demand

Singapore is another country of special interest to us in Hong Kong, because of the similarity of its housing challenge of accommodating a relatively large community in a limited land area. There are other similarities too. Singapore began an ambitious programme to re-house large numbers of squatter area residents during the 1950s, the same time as Hong Kong. It later moved on to inaugurate a Home Ownership Scheme, starting to sell large numbers of public housing units to residents as part of its nation-building programme in 1964.

Besides subsidized prices and direct loans at concessionary rates, Singapore's Home Ownership Scheme allows citizens to use the contributions they are obliged to make to the Central Provident Fund to fund the purchase of their homes. This makes home purchase more affordable, because it does not reduce a family's monthly disposable income. Today, more than 84% of Singapore's residents live in homes that are rented or have been bought in the public sector.

Like Hong Kong, Singapore has increasingly taken up the challenge of responding to public demand by providing better homes, amenities and communities. It has also emphasized cost management in its public housing programme by optimizing land use, and cost-effective building design and construction.

In the early and mid-1990s, Singapore enjoyed a sustained property boom, when people regarded real estate as a sure-fire investment. But this came to an abrupt end with the outbreak of the Asian financial crisis in 1997. The years of economic volatility that ensued had a severe impact on both the structure and performance of both the public and private sector residential markets, resulting in numerous fresh challenges for Singapore.

Globalization has also had a major influence. It has increased the influence on the country of uncertainty and volatility in the world economy, and it has brought changes in its overall economic structure. The emergence of China and India as large and low-cost manufacturing centres has forced a rethink of Singapore's economic development strategies.

Japan - A Gradual Retreat

Japan is another society where economic factors have forced a rethink about public housing policies. Years of recession, increased unemployment and price deflation in the property market as a result of economic adversity and oversupply have all called into question the Government Housing Loan Corporation's longstanding role of providing long-term, fixed low-interest home purchase loans. There has been a gradual retreat by the government from active centralized housing policy control; and the marketization of housing is now being promoted. The GHLC itself is scheduled for abolition. It will be replaced by another body, which will focus on the secondary market, where home loans changed into bonds will be circulated.

Canada - Focusing on Housing Finance

As we have heard, the Canada Mortgage and Housing Corporation has promoted housing quality, affordability and choice in that country for the past 50 years. Like Hong Kong, Canada suffered from a severe housing shortage in the post-war years, compounded by increasing immigration and the return of war veterans. Mortgage default insurance, under which the Corporation insured the lender against default by the borrower, was introduced in the 1950s. The Corporation has actively encouraged quality and cost-effective housing design by developing certification programmes for builders and appraisers. More recently, it has focused on housing finance and providing fiscal incentives to stimulate housing supply. One crucial factor in the Corporation's success has been its flexibility in adapting and responding to the needs of Canada's community.

Australia - Helping Those in Greatest Need

Housing policy and governance in Australia, the restructuring that have taken place in the public housing sector, and the challenges that have arisen as a result of this process formed the subject matter of another interesting presentation. The lesson learned there is that public housing needs to focus on the core business of helping those in greatest need, which has a strong resonance with Hong Kong's own experience in recent years. At the same time, good networking and seamless relationships between government and non-governmental not-for-profit providers of social housing is crucial. Good governance is not necessarily the solution to housing problems, and it may even become part of the problem if it obscures the need for systemic reform that matches changing conditions.

New Zealand - an Emphasis on Sustainability

The challenge of sustainability in housing is an emerging one in most countries. However, as one thought-provoking presentation from New Zealand pointed out, we have not yet even agreed on a definition of this current buzzword in housing. Yet it is undeniable that there is increasing awareness and concern all around the world about the impact our use of natural resources and economic activity is having on the planet and its eco-system. People are more and more conscious of the need to protect our world, so that its riches are not destroyed for future generations.

There is some confusion between environmentalism and sustainability, which is understandable when you consider the close interrelationship between the two. Environmentalism is a movement against pollution, degradation and serious depletion of the environment, and the protection of nature from the ravages accompanying economic development. On the other hand, sustainable development is concerned with redesigning the economy and society more generally.

Sustainability requires understanding and integration across the social and natural sciences, as well as a rethink of how we plan and develop the urban environment as a whole. When we talk about sustainable housing, we must look beyond the physical and emotional aspects of housing - what has been termed as the "green" or "natural" housing concept. These include elements that minimize impact on the environment, such as the minimal use of manufactured products associated with pollutants and leakages; more indigenous designs and traditional materials that are less invasive of the local ecology; energy efficiency, less need for artificial heating or cooling, and the greater use of solar energy.

Yet sustainable housing has another facet we must consider. Houses and flats are not just physical shells. They are homes filled with meaning for their inhabitants. The making of a home is a social process in which people consciously engage. Sustainable housing policies must also take into account the social wellbeing of residents and the relationships of homes to their neighbourhood and city.

We in Hong Kong are totally committed to promoting healthy living, green environment and sustainable development, as pointed out by several local speakers. Though we are still in the developing stage, we have taken a holistic approach right from the beginning that encompasses all facets of sustainability, from planning and design to procurement and construction.

Government and Governance in the Netherlands

We heard some interesting information about the Netherlands, which has the highest percentage of social housing in the European Union. Housing policy in that country is based on governance, rather than government. Instead of directly supplying large numbers of homes, local authorities in the Netherlands work closely with local Housing Associations, which are private, yet not-for-profit, housing providers.

Besides fulfilling their social obligations, these Housing Associations have become quite successful risk-taking investors, who do not avoid problem areas and who often create good architecture in their developments.

Most of the private rental stock, including Housing Association properties, is regulated in the Netherlands. The government sets maximum rents for homes up to a certain value. These are based on a national points system, which takes their size, facilities and quality, rather than their locations, into account. Low-income families receive rental subsidies, according to their means and their housing needs.

Housing Associations and local governments also collaborate on allocating homes. Housing Associations have joined forces to establish a user-friendly national social housing application system, which is a good model that other communities may wish to consider. People seeking new homes can apply by Internet, post or telephone. In fact, 70% of all applications are now made online, which has made the Housing Association's website the most popular one in the country. Although there are many applicants for each unit, people regard it as a good, transparent system.

In the Netherlands, Housing Associations are regarded as the best way to fund social housing. The country's housing policies have also proved successful in preventing the sharp income segregation in housing that has developed in some other countries.

However, they face a number of problems nowadays. The biggest one is that many Housing Associations are unable to make a profit or break even on their existing stock, due to rent controls. They also incur losses when they upgrade homes, because subsequent rent increases seldom cover the full cost of the work. Therefore, they have to balance income and expenditure by selling some units or relying on subsidies from other, richer, Housing Associations. The rents sitting tenants pay are so low and the sale prices are so high that few of them find it attractive to buy their rented homes. These challenges must obviously be addressed at both local and national levels in the future.

Hong Kong - New Strategies

Perhaps I should now return from my mini-tour of the world to some of the housing challenges here in Hong Kong. In their presentations, our local speakers outlined the public housing programme we have undertaken to date, and the challenges we face in its future development. As our Chief Executive said yesterday, Hong Kong's public housing programme has a long and remarkable history, and it has played a major role in our social and economic development.

However, the overall property market in Hong Kong suffered as a result of the Asian financial crisis in 1997 and the SARS outbreak last year. Prices of private residential property fell drastically, and the issue of negative equity created great concern to the public. Our economic adversities, and the loss of confidence they engendered, created a considerable oversupply in the private property market, further depressing property values.

Following a thorough review, we announced at the end of 2002 that we would in future focus our public housing activities on providing basic subsidized rental housing for families in need, within the existing average waiting time of around three years.

As you know, to address the malaise in the private sector, the government has withdrawn from the role of acting as a property developer, by halting the production and sale of public subsidized flats. Instead, our aim is now to maintain a fair and stable environment that will faciliate the fair and healthy development of the property market.

Cultivating a New Service Culture

However, retreating from the market does not mean that we are retreating from our commitment to provide for the housing need of the people. There will always be a sector of the community who need assistance in order to satisfy their basic housing need, and, indeed, to provide such assistance for those who are in need is the prime responsibility of the Housing Authority. Our commitment in this respect is unwavering, as has been the case for the past fifty years.

To date, over one-third of Hong Kong's population lives in public rental housing estates, and we have basically achieved our target of keeping reasonably short waiting time for eligible applicants for public housing. Our commitment, therefore, will and has to go beyond simply providing a living space for the people. We will have to help public housing tenants to turn a cell into a home, to help develop housing blocks into a community, and to achieve and maintain a good living environment in public housing estates, which, afterall, form one-third of Hong Kong's living space!

Unlike in the past, we are no longer dealing only with buildings. We have to think, to talk and to plan with the needs of the people living in these buildings in mind, on how to provide the sort of services and products that would help to build homes and communities from these housing blocks. On the other hand, we will have to sustain the momentum of our housing programme so that we could continue to provide for the need of the greatest number of people with the limited resource available. It is a big challenge. We will need a new culture in public housing management if we want to meet the challenge head on with any success.

Of course we will have to start from constructing buildings. The target we set for ourselves is to build smarter buildings in more cost-effective ways and to ensure that they are functional and environmentally friendly. We shall further develop our partnership with the construction industry, architects and designers to explore and implement new design concepts and building technologies. We shall also review with a view to reducing the development density of public housing estates so as to create a better living environment for the residents in new estates.

We shall ensure that our housing estates will provide homes for healthier and safer living. Apart from all the basic facilities required for maintaining a high degree of hygiene and safety, what is even more important is the day-to-day management of housing estates, which must be people-oriented and be able to address residents' concerns in a prompt and effective manner. We should try to understand and, even better, be able to anticipate their needs and respond to them as far and as fast as we reasonably could. With rising expectation from the residents, the onus on our management staff will continue to grow, not just on how to meet such expectation, but also on how to explain to the residents the best we could why certain requests could not be met, particularly during a period of economic adversity.

We are proud of what we have done in the business of providing and managing public housing. We are also saddened whenever we come across serious criticisms from tenants and in the media. I am sure this bitter-sweet feeling is shared by our colleagues in the same business all over the world. However, it is my firm conviction personally that we could overcome all the misgivings the public may have on us as long as we always keep people in the front of our mind, think from the point of view of residents instead of from the management, and address the needs of the residents rather than following blindly bureaucratic instructions. This, I am sure, will be the direction for our department in the next fifty years to come.

Thank you.

Ends/Tuesday, February 3, 2004


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