Chief Executive John Lee Ka-chiu in his latest Policy Address made a laudable proposal to regulate Hong Kong’s subdivided-housing units, which must be converted into Basic Housing Units.

Previously, Part IVA of the Landlord and Tenant (Consolidation) Ordinance (Cap 7), which came into effect in January 2022, had instituted better security of tenure for tenants, and had at the same time regulated the rate of rent increase and prohibited landlords from overcharging tenants on utility and services. The new proposal takes that initiative many steps forward, requiring operators of such rental units to obtain certification for meeting specified quality requirements or face criminal charges.

Whereas the 2022 ordinance specified that how utility bills are to be apportioned must be transparent and fair, the proposed Basic Housing Units are required to install a separate meter for each unit. This is not difficult to do and is quite reasonable. Many requirements under the Basic Housing Unit proposal have to do with safety issues and are all well-justified. Having qualified professionals certify that the requirements are met is not asking too much. The requirement that each room must have a window or a ventilation fan sounds reasonable enough. However, I would argue that in some situations, some windows are not operational. For example, a window may need to be closed to shield against smell or noise. Having a working ventilation fan can be better than having a window. Whether a particular unit satisfies the ventilation requirement should be left to the professionals to decide.

I am more concerned about the 8-square-meter space requirement and the “one room, one toilet” requirement. These requirements may not really be necessary for tenants’ well-being, while making them mandatory may carry unjustifiable social costs.

First, although the size requirement of 8 square meters may seem reasonable, we should note that there are different kinds of tenants. Some tenants rent a room only so that they can take a shower and have a place to sleep. They go out early and return late at night. They may not mind at all if the room is a bit smaller. A somewhat smaller room at a lower cost may be exactly what these people need. Mandating 8 square meters may undermine their well-being.

Other people may need, apart from a bed, no more than a desk space so they can write or work on a computer. Now that the government has already introduced community living rooms; tenants can visit a nearby community living room to socialize. They would also be deprived of the option of paying less for a smaller room.

If people really do not like a room that is smaller than 8 square meters, the demand for these will fall. Owners who run the business would of their own accord convert them into bigger rooms. A minimum size of 7 square meters will give a bit more room for the market to accommodate the needs of different people.

The separate-toilet requirement is very strange to me. While pursuing my doctoral studies at the University of Toronto, I shared a room with another student in a campus cooperative house, and it had no separate toilet. I also rented rooms elsewhere, and they did not have their own toilets. Sharing toilets was not at all an issue for me. Having one toilet in each room is wasteful both of space and of building materials. Too many toilets inevitably imply fewer rooms supplied, and that will translate into higher rents, hurting the well-being of the people that the government wants to help.

When we introduce a policy, we should examine each aspect of the policy in turn and weigh the social benefit against the social cost

Not mandating a toilet in each room does not mean that the market will not respond to the need if there is a need. Hong Kong is a free-market economy. If there is no health concern over toilet sharing, why not let the market decide if tenants want them? If there are any concerns, we may still tackle that by introducing appropriate standards to the shared toilets and their maintenance.

In general, when we introduce a policy, we should examine each aspect of the policy in turn and weigh the social benefit against the social cost. When we mandate “one toilet for one room”, we must first identify the benefit if the idea turns into reality. We can readily identify the cost: the floor space taken up, the materials used, the implications for lower supply of room numbers, and the resulting higher rents for tenants. But what is the social benefit? Only if the benefit is greater than the cost should we mandate it.

The government announced the suspension of municipal solid-waste charging on May 27 after multiple delays. Discussion over how to go ahead with waste-collection charges had begun as early as 2004, which was 20 years ago. The government then faced a choice: Either following the Singapore model of charging each household a flat fee (according to the type of accommodation), which is not precise at all; or adopting a “pay as you throw” model, which would be more precise. The government decided to opt for the more-precise and theoretically superior method. However, that decision proved very costly because we could have implemented charging a flat fee for a household (perhaps based on number of members of the household) 20 years ago. Sometimes, given human nature as it is, an apparently less-ideal policy option works better.

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.