Economic liberty under threat from affordable housing

The South China Morning Post declares a conflict between free-market principles and the need for affordable homes. This implies a new definition of a free market: government ownership of all land; an official policy of keeping living space in artificially short supply in order to push prices up; and a rent-seeking cartel in which just two developers currently produce 70% of the supply of new apartments. But it is a mark, not only of the economic illiteracy of headline-writers but of how people in Hong Kong have essentially become brainwashed over the years to consider this tightly rigged property market as normal. It is only now, with a zero-interest-rate bubble forming at a time of an unprecedented wealth gap and disaffection that citizens are tracing problems back to root causes. The Chinese translation of Alice Poon’s Land and the Ruling Class in Hong Kong couldn’t have come out at a better time.

The Post article is a reminder of how the Big Lychee, like Macau, is effectively being prostituted to the crooks and parasites who plunder China and need somewhere to stash their loot.  More than a third of new Hong Kong luxury properties went to Mainland buyers in the first half of the year, as did a smaller but rising share of cheaper homes. And what do they get in return for buying grotesquely overpriced living space from the tycoons? Hong Kong ID cards, courtesy of our government!

Perhaps this all just fell together by accident, but it happens to serve the Chinese Communist Party leadership ideally, giving their cronies and relatives and other elements that prop up the regime a convenient and understanding Monte Carlo. A local clampdown on Mainland buyers would help put such scurrilous thoughts to rest.

One obvious solution to Hong Kong’s housing mismatch is to ignore it until the bubble bursts. But our politicians are under pressure. When Chief Executive Donald Tsang launched a public consultation exercise on subsidized housing, it was fairly clear he had a pre-determined outcome firmly in mind. But it now looks increasingly likely that he will have to do something he hates to do and take some action.

One alternative to direct subsidy is to attach conditions to sites being auctioned to require developers to supply the local market with the housing it needs. This is considered normal in many parts of the world, but the idea will have officials throwing their hands up in horror here. First, they will say with a straight face, it interferes with market forces – as if the whole pile of intervention, collusion and other price and supply distortions is a free and natural state of affairs. Second, also with a straight face, they will say how important it is to maximize government revenues – when there’s half a trillion bucks sitting pointlessly in the reserves.

The readiness of our local leaders to confront the interests of property tycoons and money-laundering Mainlanders could give an indication of who’s really calling the shots. But maybe they’re just cretins.

Down at the bottom of the Mid-Levels Escalator, just a few yards up from Queens Road, lies an interesting little patch of real estate: the site of the Stanley Street dai pai dongs. A few days ago, this alleyway was covered in grimy green canvas awnings, beneath which sat hungry diners slurping cheap noodles al fresco, as they have for decades or more.

A bit of historic heritage passes away. Except the place is being renovated. A real gas line will be installed, and someone will possibly introduce a more hygienic arrangement for washing all the plates (currently done by a lady in wellington boots squatting in a dark sub-sub-sub alleyway). This is the result of government listening to public opinion and not eradicating things local people like and can afford and replacing them with overpriced crap for tourists. At least that’s the theory. We will see in a few months when they re-open the Stanley Street Outdoor Dining Dai Pai Dong Experience Themed Amusement Zone.