It is roughly a month before Chief Executive John Lee Ka-chiu delivers his annual Policy Address. Let me summarize some key policy proposals that I have discussed in this column over the past year.
Housing: It is important that all Hong Kong residents have affordable housing. At the same time, however, we should make sure that our policy is sustainable. This means that publicly subsidized rental housing should be reserved for those who cannot afford to buy a basic but decent flat. In general, we would preserve the motive for people to improve their living conditions through their own effort. Thus, Home Ownership Scheme (HOS) housing should be of noticeably better quality than public rental housing (PRH), while private flats should be of noticeably better quality than HOS housing. One important first step is to preserve prime land with good locations and vistas for private developments.
The recent initiative to improve the living environment of public housing estates shows the Hong Kong Special Administrative Region government’s concern for the well-being of residents. This is great. However, the government must not forget that there are many residents paying higher rent in the private market whose living conditions are far worse than those living in PRH flats. It is advisable not to reduce the relative attractiveness of private flats as we improve the quality of PRH and HOS flats.
I have proposed a new form of HOS housing that is modeled after the Housing and Development Board housing in Singapore. By offering these flats to married couples intending to have children, we will raise the fertility rate in Hong Kong. Instead of using a means test or drawing lots to decide who can buy these flats, I propose to use a “self-selection” approach by ensuring that these flats are basic and smallish and, while served by public transportation, they are not located on prime land and do not enjoy excellent views. These flats should be priced at an average of eight times the annual income of economically active households, with some variation based on location and other factors. Those who want bigger and better located flats will have to buy them on the private market.
Housing mortgages: The burden of repayment of traditional mortgages is “front-loaded”. This means that the real burden of repayment is hardest in the beginning but will ease as time passes. Amortization over 20 years provides that the nominal amount in the first year and after 19 years are the same. This makes a home purchase very difficult for young people starting their careers. With inflation and career advancement, the earnings profile in nominal terms will certainly rise. A simple innovation is the “variable-term mortgage”. The government can propose to our banks that a loan to be fully repaid in 20 years can follow a variable-term structure. In the first year, amortization is over 40 years. In the second year, with 39 years for repayment under the original amortization plan, the amortization term is changed to over 38 years. In the third year, the amortization term is changed to 36 years, and so on. This way, it will be much easier to be a first-time homebuyer.
Healthcare: My proposal is “excessive burden protection” for a list of “eligible basic and essential healthcare services”. These services are provided at listed prices that reflect direct cost and annual expenses that are capped at a “ceiling” beyond which the government will take up the excess. Because beyond some ages, such as 50, healthcare expenses typically will rise, so the ceiling should also rise. The ceiling is like the “excess” that some insurance policies require the insured person to pay before the insurance company will take over the rest. This arrangement will remind young people that preventive care will help them save money when they are old. I would include essential dental care as eligible basic and essential care. This way, the government can reduce waiting time and expand the range of services covered.
Mandatory Provident Fund: I propose that the government offers a rate of return protection to MPF account holders. It works like this. Suppose the rate of return protection is at 2 percent. If a fund in a particular year has achieved a higher rate of return than 2 percent, the government will take away 50 percent of the excess returns and use the proceeds from this “tax” to bring the returns up to 2 percent if a fund fails to get 2 percent or if there is a loss. This arrangement will make MPF account holders feel much more secure since their savings in the MPF account will always rise by at least at 2 percent per year.
Finally, LIFE (love, insight, fortitude, engagement). Sexuality and parenting education should be part of the compulsory curriculum in secondary schools. The subjects covered should include respect for life, understanding love as caring for both the physical and mental well-being of people that we love; learning to love with wisdom or insight so we know the difference between means and ends and have a sense of proportion and balance; learning to acquire fortitude, or resilience, by gaining strength through difficulties; and how to actively engage in school and societal activities as a responsible citizen. Exposing schoolchildren to parenting education will help them communicate better with their parents and potentially prepare them to be good parents in the future.
The author is an adjunct research professor at Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute and the Economics Department, Lingnan University.
The views do not necessarily reflect those of China Daily.
