Hong Kong’s Unaffordable Housing Crisis: A Qualitative Report on How Government Can Promote Affordable Housing

Hong Kong’s Unaffordable Housing Crisis: A Qualitative Report on How Government Can Promote Affordable Housing


One of the basic needs that every human being should be able to enjoy is a shelter. Having a roof above one's head does not only make them comfortable but also safe from some health threatening factors. Housing needs to be affordable to enable the family to overcome any financial difficulties. What is the significance of affordable housing? If one lives in a house that takes up a significant percentage of their salary, they will find it challenging to meet other basic needs such as food and education (Gurran, 2016). With an affordable house, people enjoy financial freedom, which also impacts the quality of health and security that their families receive. An affordable housing system is required because of the lasting impact that it may have on the homeowners. The government is responsible for the continuous increase in the prices of housing in Hong Kong. This is because they can subsidize the building and construction of houses so that people can afford them easily. At the same time, the government is in charge of the land, and they can dictate the terms and conditions that have to be followed by the constructors. The government can also put in place rules and regulations that control the prices. This would prevent the ordinary citizens from being exploited by their house or nurse thereby making life a little bit easier for them.

Hong Kong has one of the most expensive housing markets in the globe. It has been on top of Demographia's list for the better part of the last ten years. Demographia International Housing Affordability Survey is an organization focused on comparing the cost of housing versus the average income of residents within a given city. The ratio of the two variables is then used to rank the cities. If, for instance, a city has a value more than ten, it means that the gap between the market price of the houses and the average income is quite huge. As such, the affordability of such housing is quite low; high unaffordability is another way to put it (Tsang et al., 2016).

Why is Hong Kong's housing costly? Many reasons could answer this question. There are two ways to look at it, one of them being the price of the houses and the other being the income of the citizens. At any given time, a product can be unaffordable because some buyers cannot raise the asking price, or the cost of the goods is generally too high for everyone. Such scenarios may be caused by the supply of housing not matching the demand. This factor is among the primary reasons why the people of Hong Kong are finding it difficult to buy new homes within the city. It is the nature of any business to raise their prices whenever they see an opportunity. The low supply of houses is because there is no much developable space available(Wu, 2015). Another important explanation is the cost of land in Hong Kong. The government is in charge of all the public, and the developers can only get any plot through tenders, which makes it quite expensive.

How can Hong Kong's government make the housing market affordable to its citizens? There is a very high probability that the relevant authorities have posted this question to themselves several times. The only way to find the solution is to reevaluate all the causes. This paper will focus on the results of an online study concerning the housing crisis of Hong Kong. Some of them include supply and demand and the cost of land as the leading causes of unaffordability. One one hand, the government, being the controller of all lands hikes the prices as the main source of income other than taxing other goods. When the prices are high, developers will set the rent or price of a house high. Also, the government is reluctant to develop more land for houses leading to low supply. A combination of low supply and high demand, from the law of supply and demand, makes the price to hike. Most of the land is hilly making it unsuitable for building houses. A conclusion is made after going through several online materials including the most recent reports published by Demographia. The study sets questions, which are asked through social media concerning the income and cost of housing. The data collected is analyzed and compared to the existing literature to come up with the conclusion.

The study found that housing in Hong Kong is unaffordable because of high pricing of land by the government to generate income. Also, there are few people supplying housing services compared to demand thereby raising the cost of housing. The limited supply also results from limited area to elect houses because of the landscape and government’s move to conserve the environment. A conclusion is given that the government to create more land which people can develop and therefore increase supply.


Literature Review

A person's success, as well as that of the country, is significantly affected by housing. The affordability of a house will directly impact the spending power of an individual hence restricting them from enjoying quality products and services (Rogers et al., 2017). For example, if the price of private housing in a given city is about ten times the salary of a given individual, this service alone will eat into most of their annual salary. Therefore, as a rule of thumb, one should always buy a house that they can pay for without having to sacrifice other basic needs such as food, education, and health.

Although this rule is quite useful to the financial health of a person, it is sometimes impossible to implement it due to expensive housing in some cities, or countries. Hong Kong is an example of such a region where it is quite challenging to come across a cheap and decent house. Many people living in Hong Kong find it challenging to pay for their homes and still sustain all the other basic needs. According to Demographia, Hong Kong's score was 18.1 in the 2017 financial year (Kim et al., 2017). It is essential to look at how Demographia calculates it to have a deeper insight into this result.

Demographia finds the quotient of the housing costs versus the average yearly salary within the area. When applied to Hong Kong, the result was found to be 18.1. It means that the price of houses in this area is eighteen times the average salary of an individual living in the region. This value was the highest in the world according to the 2017 survey. A better interpretation would be, a person earning $60,000 per year will use about $1,080,000 on housing. That value is quite high even for those receiving a fortune. As such, if one needs a house, they will need to make several sacrifices to achieve their goals.

The calculations above indicate that the most critical component is the ratio of the annual salary to the housing prices. These are the two variables that are typically used in any survey by Demographia. Therefore, if a government wants to tackle the issue of housing, it will have to consider narrowing the ratio to a smaller value. In other words, the difference between the amount paid for a house and the amount earned by an individual should not be significant. For instance, if on average, people make around $40,000 per year, the cost of houses should be in the range of $200,000 to $300,000. Although this value is still high, the apartments will be a lot more affordable, and the citizens will be able to afford most of the basic needs.

The most reasonable way of reducing the gap between the two variables will be to reduce the cost of housing. It is the only possible way because it is quite difficult to increase everyone's wages. It is almost impossible because people work in different companies and every organization has its financial policy. Therefore, the government has no moral right to compel any company to change its financial rules unless it is well-stipulated by law. However, the government can reduce the cost of housing by adjusting some factors such as taxes and land rates. Hong Kong is one city that could benefit from these adjustments because the government has full control over the public land.

According to Saiidi (2017) from CNBC, Hong Kong's tax system is one of the friendliest in the world. Also, a study by the TMF Group of Netherlands ranked Hong Kong among the top ten countries with the lowest taxes (Zhang, 2017). Hong Kong's government is more dependent on the sale of properties than the deductions in people's and business profits. Some of these assets include land, and their prices are kept high enough to ensure economic sustainability. If by any chance the cost of these assets is lowered, less money will be gained by the government and it will not be able to accomplish all its goals.

Another reason that c

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