The Future for Reluctant Intervention: The Prospects for Hong Kong's Public Rental Sector

Abstract

The growth and resilience of Hong Kong's public rental sector has occurred in the context of an apparent guiding political ethos of minimal and reluctant intervention. This paper offers an account of why this has occurred. A brief account of economic change and housing policy development over the last three decades is followed by an analysis of changes in the social role and social composition of the tenure. This discussion is complemented by some new data on current popular attitudes towards public rental housing in Hong Kong. The paper then explores various theoretical perspectives to provide an explanation of why it has remained as a substantial part of Hong Kong's housing system and points to the key drivers that will shape its future role and trajectory. The empirical data are drawn mainly from an analysis of five waves of the census and a survey of 3000 adults across all housing sectors.

Keywords::

• public rental housing
• neoliberalism
• Hong Kong
• social mix
• social theory

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Corrigendum

Introduction

Castells et al. observed:

As everybody knows, with the possible exception of Mr. Milton Friedman, the free-market paradise of Hong Kong operates the second-largest public housing system in the capitalist world in terms of the percentage of the population living in units developed, built and managed by the government …. (1990, p. 9)

Over 20 years later, after a further period of dominant neoliberal policies, the situation has not markedly changed. Hong Kong remains a low-tax and market-friendly society and a key hub of global, financialised capitalism. And, by international standards, it still retains an unusually large public rental sector. In many other parts of the world, public rental housing systems have been deregulated, privatised, downsized and residualised-a pattern evident from the capitalist Anglo-Saxon core to the so-called transitional economies of Eastern Europe and China, from the developed ‘North’ to the underdeveloped ‘South’. Right to Buy type policies, large stock transfers and substantial reductions in new investment have variously, and in combination, shrunk public rental sectors. These processes do not, however, describe what has happened to Hong Kong's public rental sector nor, as this paper will argue, is it likely to describe its medium-term future.

With reference to the opening quotation, as a public rental landlord, Hong Kong now occupies the top position. When Castells and his co-authors were writing, it was the Northern Ireland Housing Executive (NIHE) that was the largest public landlord. In 1981, some 38 per cent of households in Northern Ireland were in public housing—5 per cent higher than in Hong Kong at that time. Privatisation policies and reduced investment have now shrunk the Irish sector to around 20 per cent (Paris, 2008). A report by the NIHE in 2009 referred to the ‘growing residualisation of the Housing Executive's stock, characterised by a growing concentration of low income households’ (NIHE, 2009, p. 17). In Hong Kong, however, between 1981 and 1991 there was an increase in the number of households living in public rental housing. Even after 1996 when the subsidised homeownership scheme (HOS) and tenant purchase schemes (TPS) began to have an impact, the decline of public renting was modest and the percentage of households in the sector stabilised above 30 per cent between 2001 and 2011. Moreover, following the post-handover building targets announced in Tung Chee-hwa's (the first post-colonial Chief Executive) 1997 Policy Address, the beginning of the next decade saw new building for public rental at an all-time high.

The growth and apparent resilience of the public rental sector in Hong Kong has also occurred in the context of a consistent government orientation and guiding political ethos of minimal and reluctant intervention. It is against this background that this paper offers an account of the factors that have sustained public renting in Hong Kong. The structure of the paper is as follows. Initially, it offers a brief account of economic change and housing policy development over the last three decades in Hong Kong. Then the paper focuses on the social composition of public rental housing and the extent to which the sector's resilience in terms of its size may be qualified by a more residual social role. This is complemented by some new data on current popular attitudes towards the role and status of public rental housing. The remainder of the paper then reviews the various theoretical explanations for the pattern and scale of government housing intervention in Hong Kong. This provides an understanding of why it has remained as a substantial part of Hong Kong's housing system and also points to the key drivers that will shape its future role and trajectory. The empirical data are drawn mainly from an analysis of five waves of the census and a recently completed household survey.

Economic Change and Housing Policy Development

Over the last three decades, Hong Kong has experienced substantial social and economic changes. These are well known and well documented (for example, Forrest et al., 2004; Lui & Chiu, 2009) but they bear repeating because they have had significant impacts on the role of public rental housing and its social composition. First, Hong Kong has been transformed from a manufacturing to a service sector city. Second, the population has aged significantly. Third, immigration has continued to swell the population. In 1981, the resident population was 4.8 million. In 2011, the Census recorded a population of 7.07 million—an increase of more than a third in 25 years. This has been a product of different waves of both low- and high-income immigration over this period, particularly from Mainland China in recent years.

In line with general international trends, the level of individual, market homeownership increased by some 13 percentage points, from 23 to 36 per cent between 1981 and 2011. This was paralleled by a substantial reduction in the role of private renting, from 28 to 13 per cent. Again, the decline of private landlordism was a trend that, certainly until recently, was commonplace internationally. However, in contrast to patterns elsewhere, over that same period the proportion of all Hong Kong households in the public rental sector declined only marginally, by some two percentage points. In 2011, 30 per cent of households were public rental tenants. While the proportion of the population in public renting has fallen from a peak of 39 to 32 per cent, in absolute numbers there were more public rental tenants in 2011 than in 1981. This is because of the continuing expansion of the city's population. The early results from the 2011 Census indicate a continuation of these broad trends. The proportion of dwellings that are public rental, has fallen only marginally from 31.1 to 30.4 per cent. There has, however, been a modest decline since 2006 of some 36 000 in terms of the absolute number of people accommodated in the sector.

An additional and important element of the story is the expansion of state-assisted homeownership and the limited impact of sitting TPS in Hong Kong. By 2011, some 16 per cent of households (from less than 1 per cent in 1981) were in what is referred to as public homeownership. This group is overwhelmingly a product of low-cost HOS rather than TPS and it is this development that largely explains the relatively modest decline in public renting. Thus, unlike the development of homeownership in Northern Ireland or the UK, the rising level of owner occupation in Hong Kong has not been a result of any substantial transfer of properties from the public to the market sectors.

Policy ambitions to privatise Hong Kong's public rental housing had been evident in various documents. The 1997 Policy Address contained a number of measures under the broad theme, Homes for Hong Kong, including plans to sell 250 000 public rental flats under a TPS and to boost homeownership through increased use of subsidised purchase schemes. However, the former colonial administration was rather more ideologically committed to housing privatisation than its post-colonial successor. This was evident in the 1987 long-term housing strategy (Hong Kong Housing Authority [HKHA], 1987) which was intended to signal a sharp change in direction and to set in place a policy framework that would provide the foundation for a substantial privatisation of Hong Kong's public rental housing-and to ensure that it was more targeted on the poorest households (La Grange, 1998). Much of the emphasis in this document was on the aspiration for homeownership, reflecting the ‘changing needs and aspirations’ and ‘rising expectations’ brought about by improving living standards. In meeting these aspirations, the ‘underutilized resources’ of the private sector were to be mobilised. If the present public rental policies were continued, the paper argued, there would be overprovision of public rental housing. The suggestion was that by 1996 it would be mainly new household formation that would be fuelling demand for public renting, a demand that would be satisfied by a programme not exceeding 10 000 dwellings per year. In fact, although new building for public rental did fall during the 1990s, it only met that target figure in the post-Asian Financial Crisis year of 1998/1999. The following year it had crept up to 32 000, reflecting the post-handover policy shift.

Resilient or Residual?

It is evident that Hong Kong's public rental sector has continued to house a large section of the population. This could, however, be consistent with a change in the tenure's social role, social reputation and social status. In line with developments elsewhere, public rental housing in Hong Kong may be becoming more residual. Now, a process of residualisation can take different forms and has varied social and spatial implications (see discussion in Forrest & Murie, 1988, pp. 194–199). The concept is essentially rooted in a European welfare state literature in which social interventions and policies may have universal or residual coverage or aims. In the case of social housing, for example in the UK, it referred to a process in which council housing was shifting from being housing for the working classes to being housing for the poor. In this context, it has often been pointed out that post-war public housing provision was aimed at the so-called labour aristocracy, the skilled working class and not the poor. The poor were long-term private renters.

Residualisation has also been linked more generally with processes of social and spatial marginality. A shrinking public housing sector caters for an expanding population of poor, unemployed and underemployed, often ethnic minorities. These increasingly economically marginal groups are channelled into less popular, lower quality public housing areas in the inner city or on the periphery. The public housing sector becomes increasingly disconnected from mainstream society. Residualisation, that is a stronger association between public sector housing and the poorest groups in a society, does not in itself produce social and spatial marginalisation. For example, one could conceive of a situation in which a low-income, employed group were housed in high-quality social housing in desirable locations. This is theoretically possible but unlikely—the reality is likely to be closer to the old adage that ‘housing for poor people is usually poor housing’.

The relevance of this discussion to Hong Kong is that by the 1980s an expanding public rental sector had become the ‘normal’ tenure for the working classes (Gurney, 1999). At that time, the poorest households were concentrated in various forms of private renting and informal housing. Now, the privately rented sector has substantially declined and the poor have migrated into public rental housing. Thus, the social role of public renting does appear to be changing. There are two key dimensions of change in relation to Hong Kong's public housing sector to consider—occupational status/social mix and the income distribution across tenures.

With regard to occupational change, the changing pattern of employment in public renting has reflected the broader transformation in Hong Kong society. Over the last three decades, Hong Kong has become a more highly educated society with a substantial increase of white-collar workers. Between 1986 and 1991, in particular, there was a rapid shrinkage of those in skilled manual occupations and a parallel ‘professionalisation’ of the workforce. By 2011, more than two-thirds of the working population were in professional, white-collar and other non-manual employment—compared with around a third in 1981. These changes were also reflected in the profile of the public rental sector. For example, between 1981 and 1991, the proportion of tenants in professional or white-collar work rose from 5 to 12 per cent, subsequently stabilising at around 15 per cent. At the same time, there was a substantial decline in the proportion of tenants in skilled manual categories and an increase of the least skilled. In 1981, more than 50 per cent of the working population in the public rental sector were plant and machine operators. By 2006, the comparable figure was less than 9 per cent. Thus, as Hong Kong has become generally more professionalised, so too has the public rental sector. In relation to the working population, it is certainly no longer the tenure of a skilled manual working class but nor has it become merely the housing sector for low-paid service sector workers and those in unskilled and semi-skilled manual work.

Broad occupational categories can, however, conceal a wide range of employment positions. Are there really highly paid professionals living in Hong Kong's public housing? We need to look more closely at this occupational category to ascertain whether there are different groups of professionals in the different tenures? The Hong Kong Census includes income data and thus it is possible to compare income levels for similar occupational groups across the different tenures. Analysis of these data shows that those classified as managers, administrators and associate professionals have lower average incomes if they are in the public sector than if they are private homeowners. For example, the average total employment incomes for professionals in public rental housing in 2006 was less than half of the incomes of professionals in homeownership. This is true across all the occupational categories with, for example, public sector workers in elementary occupations earning 91 per cent of their equivalent in private homeownership. The difference is, however, most marked for the white-collar categories. In every one of the main occupational categories, those in the public rental sector are the lowest or the second lowest earners. One part of the explanation is that professionals in the public rental sector may be a younger group and at an early stage in their careers. Many may be living with their parents. However, it also needs to be borne in mind that house price/median earnings ratios in Hong Kong currently stand at around 18:1, and with the need for a substantial deposit. Thus, many in white-collar professional and semi-professional employment are distant from, rather than on the margins of, homeownership.

This takes us onto changes in the income distribution. Hong Kong has one of the most unequal income distributions in the world (see, for example, Hung, 2010; LegCo, 2004). Despite rising affluence and the significant transformations in its economic role in the region, sharp divisions between rich and poor remain deeply entrenched. The poor may now be much better off than they were 25 years ago but the rich have pulled further away. From 1981 to 2006, the median income of the poorest households (the lowest income decile group) nearly doubled (1.8 times) in real terms (4.5 times in nominal terms). However, as Table 1 shows, such an increase lags behind the change in median income of the population as a whole, which rose by 2.4 times over the same period. Moreover, the median incomes of the richest households (top income decile group) rose more than threefold. Thus, in line with income trends across a number of societies during recent decades, the differences between the poorest households and their richest counterparts have widened. In 1981, the median income of the poorest group stood at 17 per cent of overall median income. This had fallen to 13 per cent in 2006. Conversely, the corresponding figures for the richest households had increased from 345 per cent in 1981 to 448 per cent in 2001.

Table 1 Median income of income decile groups (1981–2006)

	Median income of the relevant income decile group as a percentage of the population median income						Income in 2006 as multiple of income in 1981 (at 2006 price)
Income decile group	1981	1986	1991	1996	2001	2006
1	17	24	20	16	15	13	1.8
2	41	48	44	41	36	35	2.0
3	60	62	61	57	54	53	2.1
4	74	79	73	71	70	71	2.3
5	90	92	90	90	89	89	2.4
6	107	110	108	110	109	114	2.6
7	131	133	132	133	138	141	2.6
8	162	164	168	169	173	180	2.7
9	210	218	224	225	238	247	2.8
10	345	377	406	400	427	448	3.1
	Median income (all income groups)
2006 price level	$7108	$8858	$10 857	$14 031	$15 781	$17 005	2.4
Nominal market level	$2900	$5000	$9 850	$17 500	$18 500	$17 005

Source: Authors' re-analysis of the Census microdata.

If we inspect these income trends more closely, poorer households (the lowest three income decile groups) in fact experienced a slight improvement of their income relative to that of the population in the 1980s but their situation deteriorated rapidly in the 1990s. This largely parallels the trajectory of Hong Kong's economic restructuring. Deindustrialisation began in the 1980s. While most industries moved their more labour-intensive processes to Mainland China, high-end and knowledge-intensive processes were retained in Hong Kong. This helped to improve both the skills and the pay of manufacturing workers. However, when production lines were moved to the Mainland, what were left were the headquarters functions of marketing, design, finance and so on. The demand for skilled manual workers was greatly reduced. Hong Kong's increasing integration into the global economy with its rapid development of trade and financial services in the 1990s further reinforced this trend and widened the gap between the rich and the poor.

For the purposes of this paper, the key question is what has happened within the public rental sector and between that tenure and others. Has the income gap between public renting and homeownership widened? If we look more closely at households in decile 1, the census data show their increasing concentration in both homeownership and public renting with the private rental sector now playing a very small role in accommodating Hong Kong's poorest households. In relation to the particular role played by the public rental sector, Figure 1 is especially revealing. Whereas the proportion of poorer tenants (households in deciles 1, 2, 3 and 4) shows a rising trend over the 25-year period, the opposite pattern is true for richer households in deciles 6, 7, 8, 9 and 10. In proportionate terms, in 1981, some 15 per cent of the richest 20 per cent of households were in public renting. In 2006, only 4 per cent of such households were in that sector. However, whereas in 1981, 28 per cent of the poorest one-third of households were public rental tenants, by 2006 this figure had risen to over 46 per cent. These trends were the direct result of a more targeted role for public rental housing and of policies to encourage better-off public tenants to leave the sector (Lau, 2004). Even so, in 2006, there were still around 10 per cent of public rental tenants in deciles 8, 9 and 10—a not insignificant proportion of the wealthier households in Hong Kong.

Figure 1 Income decile profile of public rental households.Source: Authors' re-analysis of the Census microdata.

Moreover, Figure 1 also demonstrates what was said earlier about public renting being the ‘normal’ tenure in the past. In 1981, with the exception of the richest households, all other income decile groups occupied around their ‘fair share’ (or 10 per cent) of the public rental sector. It was only the richest (decile 10) and the poorest (deciles 1 and 2) households that were under-represented.

So what do these data suggest about the current and future role of public rental housing in Hong Kong? The data above indicate that the current trajectory of public rental housing is towards a sector catering more for the poorest, the most disadvantaged and the retired working class. For example, the 2011 Census showed the disproportionate concentration of over 65-year-olds in the public rental sector. However, although that is the direction of change, it would be inappropriate, and certainly premature, to suggest that Hong Kong's public rental sector is being residualised.

For example, the sector retains a relatively high degree of social mix, has experienced sustained upgrading and investment and is not spatially or socially peripheralised. Public tenants may be highly concentrated in only 10 per cent of census tract areas but these concentrations are actually more dispersed now than they were previously. The development of new towns, which was public housing-led, expanded to the fringes of the city in the 1980s and 1990s. In the old inner-city areas, urban regeneration has involved smaller plot sizes and small-scale public rental development. Moreover, the major developers have responded to an expanding and more affluent middle class by building more upscale apartments. In the older inner-city areas, decaying, lower rise apartments have been demolished and have been replaced by more expensive, high-rise tower blocks. This process of revalorisation and gentrification not only displaces the previous residents to public rental housing, often on the urban periphery, but also has injected an apparently higher degree of ‘social mix’ across poor, inner area neighbourhoods. Analyses of social mix are, of course, highly sensitive to issues of scale and disaggregation. Moreover, social mix and social interaction are different concepts and cannot be assumed to be coincident. These are, however, issues for a different paper.

Another important factor is that while public rental housing has seen an increase in the non-working, retired population, it is not a tenure of the unemployed. Unemployment remains exceptionally low by western standards. There is certainly a substantial stratum of low-paid workers in Hong Kong's public rental sector but, in the main, the working-age population is economically active. They are low paid but play an important and necessary role in the local economy. Public rental tenants are not therefore a socially peripheral and economically marginal segment of the population.

The Interconnectedness of Tenures and Attitudes Towards Public Rental Housing

The relatively integrated relationship that still exists between the public rental sector and the broader Hong Kong society can also be demonstrated in other ways. Homeowners and public tenants, by and large, are not two distinct groups but they strongly overlap. A middle generation of homeowners were typically brought up in public rental housing and their parents may still live in that tenure. There is, it seems, currently little stigma attached to living in public rental housing in Hong Kong. Many members of the current governing and business elite in Hong Kong also probably had public rental childhoods. This cross tenure connection is evident from a survey of Housing Histories which was undertaken in 2002, as well as from a recent survey carried out in 2011. A total of 41 per cent of private homeowners in the former survey and a third in the recent survey had experience of living in public rental housing. Moreover, this figure excludes those currently living in state subsidised, HOS flats or sitting tenant purchasers. Over time, of course, these generational links will weaken but at present the rapidity of Hong Kong's social and economic development has created a relatively common set of housing experiences.

The recent study also demonstrates a generally strong level of support for the public rental sector and a positive attitude in relation to its position in the social structure. For example, in the survey, people were asked to imagine the housing system as a ladder with 10 rungs, with the top rung (rung 10) representing the best possible housing situation, and the bottom rung (rung 1) representing the worst. Then they were asked to pick the rung where they thought their own housing situation fell. Public tenants gave the second highest average score (5.43) among the tenure groups suggesting that tenant themselves have a generally positive view of the sector and its social status (for more details, see Forrest & Wu, 2014)

Respondents across all tenure groups also thought that public rental housing made a positive contribution to social equality in Hong Kong (Figure 1) and there was also significant support for an expanded, more widely available public rental sector (Figure 2). Even among private owners, 46 per cent thought that it should be available to a wider cross-section of the population. Moreover, a striking 87 per cent of those interviewed supported building more public housing (Figure 3)—the lowest level of support being 77 per cent among homeowners. Therefore, rather than imagining a more residual function for public renting in the future, people were more inclined to see it widening its social role.

Figure 2 Does public rental housing help create a more equal society? (Views by housing tenure groups).Source: Household Survey conducted by the authors.

Figure 3 Housing for the poor or for a wider cross section of the population? (Views by tenure group).Source: Household survey conducted by the authors.Note: PRH – public rental, TPS – tenant purchase scheme, HOS – homeownership scheme; P.Own – private ownership, P.Rent – private renting.

The Emergence of Public Housing in Hong Kong: Understanding the Past, Explaining the Future

In considering the apparent resilience of Hong Kong's public housing, it is necessary and appropriate to revisit the various theories that attempt to explain the emergence, and subsequent expansion, of the sector. There are four main influential theoretical perspectives. The first is the benevolent state argument that stresses the intention of the government to improve the poor housing conditions and general welfare of squatter dwellers (Hopkin, 1971; Pryor, 1973). The second explanation accounts for the origin of public housing from a political economy perspective, arguing essentially that it was a means to free up land illegally occupied by squatters for industrial and public development (Drakakis-Smith, 1979; Keung, 1985). This is also underpinned by arguments about the government's interest in maximising revenue from land development (Cuthbert, 1991) and the need to get rid of the health hazard in the squatter settlements (Ip, 2004). The third explanation, offered by Castells et al. (1990), describes public housing as instrumental to the reproduction of labour, a form of social wage that supported the export-oriented industry. Smart (2006), on the other hand, put forward a fourth political explanation, namely that large-scale public housing helped to mitigate the risk of social instability caused by the dissatisfied squatter dwellers who were being displaced but not rehoused. Moreover, rising social unrest in Hong Kong could have made it more vulnerable to potentially destabilising, diplomatic pressure from Communist China.

From the outset, the benevolent state and welfare provision argument did not stand up to close scrutiny-not least because such inferred intensions were contradicted by government statements at that time (Smart, 2006). The sequence of clearing the squatter settlements also did not seem to match the need to improve the welfare and living conditions of the relevant populations. They were settled in more peripheral lands and in areas that were only a fraction of the acreage they had previously occupied (Drakakis-smith, 1979). On the one hand, when public housing became an apparent welfare good, the government was ambivalent about whether it was a ‘right’ like education, social assistance and public health. The construction of new public flats serviced the need for squatter clearance up to the early 1980s and the redevelopment of old public housing estates up until late 1990s. But it was not for households on the waiting lists who had to undergo means tests. This contrasts to state intervention in other social policy areas like education, social security and public health service, which, as conceptualised by the reluctant welfarism (Midgley, 1986) or the productivist state regime (Holliday, 2000) thesis, were embedded in the overall developmental state strategy with subtle but extensive interaction with the economic and social structure.

Moreover, in such theorisations, housing is less evident as social welfare, compared to health and education. It may have been the more subtle position of housing as welfare within a pro-growth social consensus and the productivist pragmatism of the business and administrative elites which has effectively shielded public rental housing from ideological attack from the conservative or business sectors—in sharp contrast to attacks on social security and public health. And as was noted earlier, it also remains intact despite the short-lived privatisation policy of selling off public flats. The only casualty resulting from the pressure of the big property developers was the assisted HOS which was perceived, after the asian financial crisis, as eating into potential effective demand for private housing developments. That programme was terminated in 2002. However, with the escalating public outcry about the worsening affordability problem and the growing demand to restore subsidised homeownership, even some property developers are now openly supporting the resumption of such a scheme as well as supporting the expansion of public rental housing.

The social wages thesis of Castells et al. (1990) has also encountered the criticism of not being supported by empirical evidence as well as its conceptual vagueness. Not only is it difficult to isolate and quantify the social wage effect of public housing, but also it is inconceivable that employers could pay different wages to their employees who were in public housing and those who were not. There simply did not exist an institutional mechanism that could translate the low rent regime in public housing into lower wages in industries (Wong, 1998). In addition, illegal squatter settlements, in which housing costs were even cheaper, could be seen as an equally effective method of reproducing cheap labour and hence there was no need for public housing (Kim, 2012; Smart, 2006, in this special issue).

Yet, the work of Castells et al. (1990) on the role of public housing in Hong Kong has to be seen in terms of the broader conception of reproduction—one in which the sector is understood as being shaped by both conflicting and coalescing sets of economic, social and political interests over time—in other words, as an important part of the glue which both transforms and reproduces social relations. The pressures and priorities inevitably change over time. Institutional changes from one period shape and limit transformative possibilities in the next. With a restructured economy and worsening income inequality, the social wage mechanism, at least in theory, now works better than ever. With the absence of a minimum wage (until 2011) and an abundant supply of low-skilled labourers, who are either new immigrants or casualties of economic restructuring and deindustrialisation, wages have seen considerable downward pressure. The low rent regime in the public sector has worked very effectively as a social wage in keeping the low-paid work force in employment who would otherwise fall back on the social security safety net. As Hong Kong has progressed towards a globalised as well as a polarised economy, a low-rent public housing regime has been instrumental in reproducing a labour force to meet the low-paid demands of the expanding service sector. This partly explains the increasing concentration of low-income workers in the public rental sector. Likewise, heavily subsidised public housing also compensates for the long-term neglect of retirement protection in allowing poor elderly people to live on a meagre savings. This is particularly relevant for those elderly who do not want to claim the highly stigmatised social assistance.

As noted earlier, the need to reclaim land occupied by squatter settlements has been promoted as an explanation for the origin and early development of public housing (Drakakis-Smith, 1979) as most of the land recovered was not used for the resettling of displaced squatters. It has also been observed that the squatter sites that were cleared were not necessarily those with the most urgent needs in terms of fire safety or hygiene but the land that was more valuable in development terms. However, the need for clearance does not have to be associated with rehousing as squatter dwellers were illegally occupying ‘crown’ land and it was quite legitimate for the government to reclaim such land (Smart, 2006). Hence, this only offers a partial explanation for the origin of public housing. The connection between squatter clearance and public housing development was irrelevant after the 1960s, as agricultural land became the main source for new public housing construction. However, the political economic insights of Drakakis-Smith (1979) and Cuthbert (1991) on land and housing policy have been sustained. Squatter clearance was evidently largely dictated by whether land was required for development. Consequently, there are still 40 000 people living in temporary squatter structures that were constructed before the 1970s but most of them are in remote suburban areas where development values are low (LegCo, 2006). Moreover, they are tolerated, while new squatter erections will be immediately demolished.

The maximisation of revenue from land development has been and remains the Holy Grail of Hong Kong's public finances in both the colonial and post-colonial eras. Revenue from land sales, though not comparable to the high proportion of one quarter to one-third of total revenue which it represented in the 1980s, still constituted a significant proportion of government revenue in ‘good’ years (for instance 17 per cent in 2007 and 2010). The government's reliance on revenue generated from land development also has to be set within the context of the dominance of a few major property developers (Fung & Forrest, 2002) whose business interests span a variety of key economic sectors like retailing, public transport and telecommunications. This perceived cosy relationship between government and real estate developers has begun to provoke an increasingly vocal popular condemnation of ‘property hegemony’. A recent survey, for example, reveals that an overwhelming majority of respondents (85 per cent) had heard of the term ‘hegemony of land power’ in relation to the dominance of the big developers and three quarters (73 per cent) of respondents thought this dominance was a serious issue (Hong Kong Institute of Asia-pacific Studies, 2011).

‘Government-developer collusion’ has been framed as a populist appeal by mass media and politicians in expressing public frustration about the powerlessness of the government in checking the expansion of land power and taming the escalating housing costs. In this context, the government's defence of the supply level of public housing appears to be a forceful political gesture to demonstrate its determination to protect housing for the grass roots. Likewise, for the business elites and neoliberal advocates, public housing is less threatening compared with major interventions in income transfer and health. Public housing construction and management also offer economic benefits to the business sector—or their support to public housing is at least a free demonstration of their social responsibility.

The emphasis of Smart (2006) on explicitly political considerations in the genesis of public housing of Hong Kong is also relevant to its subsequent development. This is well supported by archival evidence on policy-making at the time which highlights the significance of contingent political features. In fact, successive waves of policy change in housing are believed to have been politically motivated by the need to maintain social stability and, more importantly, to enhance the legitimacy of the government. This was particularly important for the colonial government in confronting political challenges to its mandate to rule. The bold reforms of Murray MacLehose in the 1970s, in compulsory education and social assistance, as well as the ambitious 10-year housing programme in public housing construction, can be perceived as a plan to restore political legitimacy in the aftermath of two serious social disorders in the mid-1960s and to prepare for the negotiation on the future of Hong Kong (Jones, 1990; Scott, 1989). Ironically, a similar legitimacy crisis also posed a challenge to the first Special Administrative Region (SAR) administration after Hong Kong was returned to China in 1997. In the context of a widespread doubts about governing capability and political independence from the influence of Beijing, Tung Chee-hwa, also embarked on education reform and an even more ambitious housing programme. The aim was to build 85 000 flats a year, 25 000 of which were to be public rental flats, to boost the political image of the new SAR government (Cheung, 2000). With a political system which is only partially open, in which the Chief Executive is only elected on a very thin electoral basis under strong Beijing influence, there is practically no competition for government offices. However, a significant minority of legislators are now elected by universal suffrage. Competition around collective consumption goods is thus a key political battlefield in which the political parties have to engage (Cheung, 2000). Ostensibly, public housing is a very convenient and effective political tool in these battles.

Conclusion—Into the Future

Over the last few decades, state housing sectors in other parts of the world have generally experienced turbulent times. The dominant neoliberal policy orthodoxy has regarded public housing provision as anachronistic, unpopular and inherently unsatisfactory. In such a pervasively hostile policy context, it is striking that the state monopolised, highly subsidised public rental sector in Hong Kong has more than survived. New investment has continued to flow in, and the sector has continued to expand in absolute terms. At the same time, notwithstanding an increased concentration of poor and disadvantaged tenants in the sector, the public rental sector is not marginalised and still commands a high level of public support from across the class and political spectrum. This is in sharp contrast to some popular animosity towards state health care and income transfer policies.

The emergence and expansion of a state housing sector to a size that surpasses that of ‘welfare state’ societies appears to be inconsistent with the assumed market-oriented and laissez faire policy orthodoxy of Hong Kong. Yet, closer scrutiny reveals a history of intense government intervention in social policy areas. Indeed, the strong popular perception of a free market orientation across all policy areas may be more a product of rhetoric than reality—more an amplification of Hong Kong's economic and trade policies. However, housing is still exceptional. Not only was it developed much earlier than other social policy interventions but also its scale and the breadth of its support needs special analysis.

It is clear that the emergence of a large-scale public housing programme in Hong Kong was not, as popularly conceived, the product of a major fire in Shek Kip Mei in 1953. Its development was embedded in structural and functional factors which at the same time underpinned the socio-economic development of colonial Hong Kong. None of the specific theories discussed offer a comprehensive explanation of the factors which generated and continue to sustain a large public rental sector. This is partly because the different theories are to an extent a product of their times, of a set of particular socio-economic conditions. Inevitably, over time, these conditions have changed. Taken together, however, these theories do explain the survival and popularity of the public rental sector in Hong Kong.

Popular support for public housing across a wide social spectrum can be understood from the perspective of the productivist state or the reluctant welfarism paradigm. Housing, particularly public housing, plays a distinct role in a productivist welfare regime, both materially and symbolically. It is indisputably an investment that stimulates economic development while at the same time it is a symbol of wealth accumulation and an effective motivator for hard work. This may also explain why cash transfers for housing, such as housing vouchers, have never been on the policy agenda.

The ideological underpinning for public housing is further reinforced by the political economy of housing in Hong Kong. As has been shown, real estate is a key pillar of Hong Kong's economy and a major source of government revenue. This has given increasing prominence to major property developers and their perceived influence on government policy. This was well reflected in the recent election of the Chief Executive who was picked an the electoral college consisting of only 1200 members from among the elitist class. All three candidates put a strong emphasis on increasing the production of public rental housing. Indeed, the main difference between them was on how much to produce. Ironically, such pledges attracted little if any attention from the mass media and the general public. Instead, media concern concentrated on whom the big developers supported illustrating their prominence as kingmakers. This state-developer nexus has also increasingly fuelled populist appeals against the dominance of ‘land-powers’. In such a context, the high profile presence of the government in the direct housing provision shows its apparent determination to improve the welfare of the grass roots and offers a strong defence against accusations of a ‘developer bias’ in policy formulation. Thus, with deeply entrenched and growing affordability problems in the private market, a highly subsidised public housing sector helps the government to win back popular support. Moreover, the continuing demand for public rental housing is evident in the size of the waiting list. In 2012/2013, there were 117 000 names on the general waiting list, leaving aside the almost equal number on the ‘non-elderly, single person’ list (HKHA, 2013).

Also, as was argued earlier, the social wage function of public housing has perhaps become more relevant with the transformation of Hong Kong from a manufacturing to a service sector economy. Low-income households are more concentrated in public housing, than in the1980s when Castells et al. (1990) developed their analysis. Only a small proportion of households within this group could be regarded as prospective ‘marginal owners’—certainly in relation to any market-based forms of access to homeownership. Without the low rent regime in public housing, the low-paid workers of the service sector economy would represent a much more substantial burden on social security. In 2013, the average monthly rent per square meter in the public sector was $50 HKD, compared to $323 HKD in the private sector (HKHA, 2013). In other words, the gulf between market rents and public sector rents remains substantial. The sector also acts as a substitute for income transfer to the growing poor elderly-casualties of the underdevelopment of retirement protection.

Minimising the risk of social unrest and enhancing political legitimacy were perceived as key motivators in pursuing public housing programmes in the colonial era. Although such considerations seem much less relevant now, political factors are still very much at work. The government, elected with only ‘limited-suffrage’, is engaged in a constant struggle for popular support. Elite ‘functional constituencies’ dominate and there are only a minority of universally elected legislators. Collective consumption has been continually at the centre of the political battlefield. Public rental housing enters periodically into the scene in relation to the ups and downs of the economy as well as the booms and busts of the housing market. In other words, there are many reasons for different groups at different times to be seen to be friends and supporters of public housing. For the foreseeable future, barring any dramatic political transformations, these distinctive features of Hong Kong's political economy will continue to support a significant public rental sector.

Additional information

Funding

The work described in this paper was fully supported by a grant from the Central Policy Unit of the Government of Hong Kong Special Administrative Region and the Research Grants Council of the Special Administrative Region, China [project number CityU 1003-PPR-09].

Notes

This article was originally published with an error. This version has been corrected. Please see Corrigendum (http://dx.doi.org/10.1080/02673037.2014.931012)