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SPECIAL REPORT

Leung Chun Ying's controversial housing project in Hong Kong's New Territories

Hong Kong's unpopular Chief Executive Leung Chun Ying is caught in a controversy over a housing project in the New Territories - a factor that could hurt his chances of re-election. Hong Kong Correspondent Joyce Lim looks at the project, the larger land issue in the New Territories and the government's problematic land policy.

A rural leader, who is said to have made close to HK$8 million (S$1.5 million) a month operating a carpark business in the New Territories, is among a group of rural leaders who have blocked the government's plans to build public housing in Yuen Long district where he operates his business.

Although Mr Tsang Shu Wo owns just 0.017ha of land - slightly smaller than two four-room Housing Board flats - his carpark business spans 17ha, almost the size of 20 football fields. And he is not only operating his carpark business partly on a brownfield site (broadly defined as idle farmland) in Wang Chau industrial estate that belongs to the government. He is also subletting some of the land to recycling, car-washing and shipping container storage businesses, reported local media.

If the government recovers the brownfield site - large enough for thousands of flats - for public housing, Mr Tsang's estimated HK$100 million a year business would be affected. And clearly the compensation for the small plot of land that he owns will not make up for his loss.

  • 1,192

    Total land area (in hectares) occupied by brownfield sites in the New Territories.

  • 1 million

    Number of people who can be accommodated if all brownfield sites are developed.

But the government, for various reasons - political, historical and economic - is finding it hard to recover brownfield sites like Mr Tsang's and other types of land in the largely undeveloped New Territories which, spanning 95,200ha, make up 85 per cent of Hong Kong's land. Hong Kong has a land area of about 1 11,000 ha.

This is despite the fact that, except for the St John's Cathedral in Central district, the government owns all the land in Hong Kong, which it leases to private developers for housing and other uses.

Meanwhile, there is a shortage of public housing while private housing is prohibitively expensive and unaffordable to many Hong Kongers, particularly the young.

Indeed, despite a sluggish economy which has seen prices dipping last year, housing in Hong Kong remains the least affordable in the world, resulting in many of its people living in small apartments and overcrowded conditions.

POWER OF THE HEUNG YEE KUK

Rural folk like Mr Tsang are represented by a statutory advisory board called the Heung Yee Kuk (Kuk), a powerful pro-establishment political body, taking up 26 seats in the 1,200-member Election Committee that is tasked to choose Hong Kong's chief executive.

Many of its leaders are big landlords and the Kuk also has strong political influence over the close-knit communities of the New Territories and hence, influence over Legislative Council (Legco) polls.

Thus, when the government months before the Sept 4 Legco elections reduced the 17,000 flats it was planning to build in Wang Chau to 4,000, it invited accusations from activists that it was bowing to pressure from the Kuk ahead of the polls. The development area was also reduced from 33ha to 5.6ha, leaving brownfield sites, including Mr Tsang's, untouched.

In September, responding to the allegations, Chief Executive Leung Chun Ying denied putting his political interest over the housing needs of Hong Kongers. He explained that the government is still aiming to build 17,000 flats and that 4,000 will be built in the first phase. But there is no clear plan as to when the other phases will be developed.

Since Mr Leung took office in 2012, he has been seeking land in the New Territories to increase the supply of public housing. Currently, applicants need to wait about 4.5 years for public housing.

Chairman of the Housing Authority's subsidised housing committee Stanley Wong Yuen Fai said last month that the government has land to provide 97,000 subsidised flats in the next five years, just 35 per cent of the 10-year target of 280,000 units.

This target will remain a pipe dream, said analysts, given that the task of recovering government land occupied by rural strongmen has proven to be a tough challenge.

BROWNFIELD BUGBEAR

Last year, Independent think-tank Liber Research Community found that there are 1,192ha of brownfield sites in the New Territories and they are used mainly as open carparks, storage and recycling yards.

Should these sites be developed, they can house over one million people, said Professor Edward Yiu, a newly elected lawmaker.

But the lax enforcement of regulations on usage of these sites by the government after Hong Kong's return to China from British rule in 1997, has created problems, said Liber researcher Yeung Ha Chi. "Some people abused the use of the land and possessed them illegally. After so many years, it will be hard for the government to try to move these people. Hence, it's not just about compensating them, but the government needs to provide solutions for the existing industries and occupiers," he told The Straits Times.

Apart from brownfield sites, the government also faces the challenge of acquiring land from the indigenous villagers - descendants of those who lived in the New Territories when it was leased to Britain in 1898 - whose land rights are protected under the Basic Law, Hong Kong's mini Constitution.

SMALL HOUSES, BIG PROFITS

Under a "small house" policy introduced in 1972, male descendants from one of the 600 indigenous villages can apply for permission to build a three-storey house, limited to 700 sq ft per storey, on his own or government land. Ming Pao Daily News estimated that it costs about HK$4 million to build a three-storey house under the "small house" policy, which could be sold for HK$10 million. More than half of the 10,888 permits granted between 2012 and 2014 for small houses were resold.

It is not surprising that these indigenous Hong Kongers are resistant to the government acquiring their land for public housing.

PROBLEMATIC LAND POLICY

Compounding the problem of land acquisition for public housing is the government's own land policy, a legacy of British rule, of raising revenue through the leasing of land.

It has been estimated that about 45 per cent of government revenue comes from land, including land leases, premiums on land use conversion (for example, from agriculture to commercial), stamp duties, property tax and tax on developers' profits. It is in part because of this policy that, despite the ample land in places like the New Territories, many Hong Kongers live in small, rental flats.

Building more public home-ownership flats or selling more land for private housing will bring down property prices that will affect the government's revenue.

Government data showed only half of Hong Kong's population owns a home, compared with 90 per cent in Singapore. As at the end of September, there were about 286,500 people on the waiting list for public housing.

In the meantime, the property tycoons, who unofficially control Hong Kong's real estate market, have been pushing up property prices. The sky-high prices have seen many private residential units sitting empty, while the number of homeless people on the streets has risen, noted Professor Tang Wing Shing, professor in geography at Hong Kong Baptist University.

What the government needs, therefore, is an overhaul of its land policy and taxation system to reduce its reliance on land sales and property taxes for its revenue, said Prof Tang.

It also needs the will to place public housing as a priority in its management of land, said analysts.

A version of this article appeared in the print edition of The Straits Times on November 22, 2016, with the headline 'Land, land everywhere in HK but...'. Print Edition | Subscribe