Rented Housing Should Replace Purchased Housing
China Times editorial (Taipei, Taiwan, ROC)
September 7, 2010
Taiwan's housing market and housing policy has never been so chaotic. On the one hand, the price of residential units offered by private sector construction firms in the most desirable parts of the city have skyrocketed. Regional price differences have increased and are in chaos. On the other hand, the government is responding to social problems caused by soaring prices. It is once again offering government housing. The Taipei City Government has announced that it will construct new public rental units in some of the city's most desirable districts. But the government must do far more. Now is the time for the government to promote social housing.
The Ministry of Finance National Property Administration recently announced its intention to make three plots of land available. The plots are located in highly desirable parts of Taipei City's Neihu and Da An Districts. In order to establish surface rights, it is holding public auctions for the right to construct rental housing for senior citizens, student dormitories and ordinary residences. Rents will be temporarily set at less than the prevailing market rate. We enthusiastically endorse the Ministry of Finance's policy of providing rental housing. This however must not be the full extent of the government's housing policy.
For the past six decades, the government had no housing policy. The government did nothing. Nearly all domestic residential housing units were built and sold by private builders. At most the government had a half-baked policy for government housing. But its policy, which called for the government to obtain the land, build the units, then sell them to qualified buyers, was riddled with problems. The quality of the buildings built by the government was poor. The outright sale of low cost housing may benefit the buyers of government housing units. But they put the government in the difficult position of having to endlessly obtain land and build units with ever diminishing resources. Such a policy is ultimately untenable. Such a form of government housing is a thing of the past.
Over the past twenty years, housing prices have risen. To help people purchase housing, to salvage the economic boom, and boost the real estate market, the government launched first time home buyers loans, discount mortgages, and Youth Home Loan policies. These however did not constitute a housing policy. This was merely a bunch of quick fixes in the absence of any housing policy,
Let us examine the housing policies of other governments. Singapore, like Taiwan, is predominantly Chinese society. It too subscribes to the notion that "land equals wealth." But Singapore has not experienced the same social problems as Taiwan, where high property prices have generated social problems. The main reason is Singapore's Housing & Development Board, which provides housing to almost 90 percent of the public. It rents government housing to low income citizens. Hong Kong is another region that is predominantly Chinese. Everyone assumes that housing in Hong Kong is continually hitting new highs, and that the general public has a hard time finding a place to live. But in fact the Hong Kong government has a long standing public housing policy. Nearly half the population lives in public housing. Lower income citizens live in housing leased to them by the government.
The United Kingdom survived the financial tsunami. The impression outsiders have is that British housing prices have skyrocketed due to speculation in the housing market. But in fact the British government still provides public housing to low income citizens. Nearly 20 percent of the population lives in public housing units leased to them by the government. Germany has so-called welfare housing. These are high-quality residential units built by the government and rented to those in need at low rates. If one's income exceeds a certain level however, one must vacate these units, or else rent them from the government at prevailing market rates. Sweden provides direct government investment in housing construction. Japan has its "residential parks" which provide new housing units for those in need.
As we have seen from the example of other countries, no matter how capitalistic and no matter how market oriented they might be, other governments intervene in the housing market to a greater or lesser degree. That is because housing is not a commodity that can be provided entirely by the private sector, or whose price can be determined by the market place. Treating housing purely as a market commodity, and allowing private capital to engage in speculation, will eventually lead to skyrocketing housing prices and social problems. After all, society has certain expectations of the government. It hopes that hard-working lower income people will at least have a place they can settle into. That is why so many governments have housing policies, and why the government directly intervenes in the marketplace. Depending on a nation's circumstances, it will rent or sell housing to the public.
Housing prices are soaring. The government would like to make government housing units available once again. It would like to introduce public rental housing. We hope the government will provide a more comprehensive, longer-term housing policy. The government needs a phased strategy to gradually increase the supply of public housing. In the past, housing was sold to the public. Once the units were sold, the government no longer possessed the means by which it could meet society's needs. Therefore, in the future public housing should be leased to the public rather than sold outright. The Executive Yuan plans to build a mass transit line to the airport, as well as 4000 units of affordable housing. These, for the most part, should be rented rather than sold. The government can set certain standards, allowing low income tenants to pay low rents. Tenants whose incomes exceed the standard will be required to relocate. Or else they will be required to pay the market rate, then move within a certain number of years.
The government's current response to the high price of housing is to impose aggressive controls on housing prices. This "kill them all" approach is both laborious and ineffective. It can easily lead to collateral damage. Young people, general office workers, and other ordinary people, are having trouble finding places to live. If the government had more public housing at its disposal, people who could not afford high prices could at least afford low-rent public housing. Current social grievances and social problems could be moderated. If on the other hand, the price of luxury housing skyrockets to two or five million NT per Ping, the government need not be too concerned.