Use of seized, donated plots for public rental apartments to help address housing shortage

The plan by the Hong Kong Special Administrative Region's government to invoke the Lands Resumption Ordinance, and recent land donations by the city's largest developers, may signal that a more vigorous approach is being taken to solve the housing shortage.

On Sept 26, the administration announced it will take back 784 plots of private farmland covering 68 hectares in the northern New Territories for the first development phase of the Kwu Tung North New Development Area and the Fanling North New Development Area, in which 71,800 housing units will be provided when the area is fully developed.

Henderson Land Development, of which property tycoon Lee Shaukee is majority owner, confirmed that its three plots of farmland totaling approximately 10 hectares in Fanling will be seized for public rental apartments under the land resumption program. The land accounts for 2.3 percent of the developer's farmland reserves.

Michael Wong Wai-lun, the city's secretary for development, said on Sept 26 that the government will aim to take ownership of 400 hectares of private land under the Lands Resumption Ordinance over the next five years, signifying the government is accelerating the pace of resumption to enhance the city's land supply.

The ordinance empowers the government to take back private land only for an established "public purpose" such as public housing, or for the development of new towns or community facilities such as schools, parks, hospitals or welfare service buildings.

The SAR government has invoked the ordinance 13 times for public rental housing since Hong Kong's return to the motherland in 1997.

Observers say the government's latest moves signal that the administration will be more proactive in boosting the land supply compared with previous years.

"I think using (the Lands Resumption Ordinance) to increase the residential land supply is an effective way compared with land reclamation or developer-driven lease modifications/land exchanges, because it enables the market to predict the time frame of future land and housing supply more accurately," said Reeves Yan, CBRE Hong Kong's executive director and head of capital markets.

David Ji, Knight Frank's head of research and consultancy for Greater China, said, "If the government is successfully resuming agricultural land for affordable housing, it would help relieve part of the housing demand, as currently the waiting time for public housing is over five years."

However, Terence Chong Taileung, executive director of Chinese University of Hong Kong's Lau Chor Tak Institute of Global Economics and Finance, said that enhancing the supply of public apartments is not enough. He said the government should increase the proportion of public housing in its housing strategy and should bolster the turnover of public rental housing units so that more local residents can be allocated public rental housing units at a faster pace.

The city's home price index in August, as tracked by the Rating and Valuation Department, fell for the third consecutive month to 389.8, a monthly decrease of 1.4 percent and a cumulative drop of 1.8 percent from the peak level in May－narrowing the cumulative rise of property prices to nearly 8.5 percent in the first eight months.

Home prices in Hong Kong have rocketed over 200 percent in the past decade, driven by a limited land supply and large capital inflows from Chinese mainland buyers, frustrating many residents who cannot afford property.

The Hong Kong SAR's government and the city's major developers have recently faced blame for the SAR's soaring property prices.

"I do not think land resumption is an extraordinary measure, because the law has been in place for a long period of time," said CBRE's Yan. "It is up to the government discretion to use the ordinance to control the pace of land supply in order to address market demand."

Last month, New World Development, founded by tycoon Cheng Yu-tung, who died in 2016, announced the decision to donate approximately 28 hectares of agricultural land, accounting for 17 percent of the company's agricultural land reserves, to build public housing or related facilities as well as social or transitional housing.

NWD said the land offer has nothing to do with the recently proposed invoking of the Lands Resumption Ordinance, emphasizing that the company's move has been more than a year in the making.

Major Hong Kong developers such as HLD, NWD, Sun Hung Kai Properties and CK Asset Holdings are estimated to own a land bank of 1,000 hectares of abandoned farmland－equivalent to approximately 20 percent of the total 8,300 hectares of farmland.

"According to our estimation, more than 600,000 residential units can be built on those agricultural lands," global real estate advisory company Cushman & Wakefield said in response to a China Daily inquiry.

If the government first develops the farmland and builds infrastructure in the surrounding area, nearby brownfield sites－previously developed land that is not currently in use－would be released accordingly, Cushman & Wakefield added. It said the government can assist building infrastructure on the brownfield sites after land resumption.

Due to the fragmented ownership of brownfield sites, it can take years to convert such sites into residential land supply.

Last month, Sun Hung Kai Properties said it had between five and seven plots of land in areas already zoned for subsidized housing in Hung Shui Kiu and in the northern New Territories that could be offered to the government.