Hong Kong's Carrie Lam to target housing crisis in policy address

Hong Kong's Chief Executive Carrie Lam is expected to propose streamlining the city's land-development process to speed up development, among other things. PHOTO: AFP

HONG KONG (BLOOMBERG) - Chief Executive Carrie Lam is expected to answer Beijing's call to ease Hong Kong's housing crisis and deepen integration with mainland China in the final policy address of her current term.

Lam's speech, set to be delivered to the Legislative Council at 11am on Wednesday (Oct 6), will serve as a coda to a tumultuous term that saw huge anti-government protests, a national security law met by widespread international criticism, and the Covid-19 pandemic that worsened a recession and led to unprecedented border controls in the top Asian financial hub.

The chief executive's annual policy presentation comes as Beijing exerts increasing control over the former British colony, pushes for its greater integration with nearby mainland cities, and repeatedly demands reforms to the world's least-affordable housing market - a social ill seen as a catalyst for the 2019 unrest.

Lam hasn't said whether she'll run again after her five-year term expires next June.

"Housing will always remain front and centre, so whoever's the chief executive will need to tackle this issue," said Bernard Chan, a financier and convener of Lam's advisory Executive Council. "I'm pretty sure the central government has a strong desire for the next administration to address all these long-standing issues that divide Hong Kong."

Lam told a news briefing on Tuesday that she would use the policy address "to take stock on the government's work" over her term in what she acknowledged "may be" her last such speech.

Still, she declined to discuss the specifics of what she said would be a two-hour presentation, saying only that housing and land supply were the top issues of concern highlighted by government surveys.

Among other things, Lam will propose streamlining the city's land-development process to speed up development, the Sing Tao Daily newspaper reported on Wednesday, citing unidentified people. Using the government's power to take privately owned land was inevitable, the report said.

Other proposals reported by local media in recent days include:

- Steps to boost land supply and ease restrictions on redeveloping old buildings

- Plans to develop 8,100 hectares (20,000 acres) of land in the city's northern reaches to build as many as 500,000 units of mostly public housing

- A new rail project linking the city with Shenzhen's Qianhai economic zone

Lam has also hinted at a government restructuring to establish bureaus coordinating land use and cultural policies.

The head of China's top agency overseeing Hong Kong, Xia Baolong, set a goal in July for the city's next leader to tackle the city's housing crisis, and create "a more harmonious and peaceful society".

In September, Reuters reported that Chinese officials told Hong Kong developers to redirect resources to help solve a housing shortage. Last week, Luo Huining, Xia's deputy and the head of China's Liaison Office in Hong Kong, called on officials to "intensify efforts to solve the housing problem".

That's spurred speculation that President Xi Jinping's "common prosperity" policy to close the mainland's yawning wealth gap, which has swept through large swathes of industries over the border, would be extended to the city's property market - the source of its powerful tycoons' wealth.

The families behind the city's four top property giants saw US$6.7 billion (S$9.1 billion) wiped off the value of their assets in a single day last month amid investor fears Beijing would order housing price controls and contagion concerns surrounding indebted mainland developer China Evergrande Group. The Hang Seng Property Index had slumped some 17 per cent from its most recent high at the end of March, as of close of trading on Monday.

Many believe the city's next chief executive has little choice but to act quickly to satisfy mainland demands after years of a more hands-off approach, although experts remain sceptical of the tools available to the city's leaders.

"Housing will be the main topic, but I don't think there is a quick fix on this issue," said Iris Pang, chief economist for greater China with ING Bank NV.

She added that, while deeper integration within a so-called Greater Bay Area including Shenzhen and Guangzhou, will be another political priority, those policies are "mainly controlled" by the Chinese government.

Lam may be emboldened to take more aggressive action given Beijing's greater regulatory push this year as she "has the common prosperity mandate now," said Alicia Garcia Herrero, chief Asia Pacific economist with Natixis SA. "I think she will basically flood the market with supply" and force developers to build as many units as fast as possible, she said.

The pandemic is another focus for Lam's administration. Restrictive measures have largely closed Hong Kong off from the world and devastated its tourism, consumer and services industries, key employers of the working class.

That's underscored the city's widening wealth gap - another key concern of mainland officials overseeing Hong Kong - with the number of low-income households in the city almost doubling in the past two years to 149,700 as of March, according to a government report.

"In this policy address, we will not spend too much coverage on relief measures in areas relating to the epidemic," Lam said on Tuesday. "However, as necessary, secretaries of bureaus and relevant government departments will implement initiatives, as and when needed."

Efforts to set up travel bubbles with close neighbours such as Singapore have so far failed, with Lam now concentrating on reopening the mainland border. But she likely has little influence on this front with Beijing controlling the timetable.

"This is the PRC government's decision, the Hong Kong government can only try to fulfil the requirements," Pang said, referring to China's formal name.

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