What Are the Pros and Cons of This Scheme Essay Example

in Hong Kong. Since a fire sparked off in Shek Kip Mei squatter area in 1953, the government needed to implement a resettlement policy in order to rehouse the affected people who had lost their home in a short period of time. This actually is the starting point of government intervention of the housing policy in Hong Kong. The government changed the laissez-faire policy in housing and began to produce the subsidized flats directly for the lower income group who cannot afford to buy a living unit from the private market (Chiu, 1994).

The government intervention in the housing policy was no longer a short-run action since 1973 and it has become a continuous program. There was a Ten Year Program which aimed at housing 1.8 million with self-constrained units. The quality of living then became a concern for the housing development.

In 1976, the Home Ownership Scheme which gives people a chance to buy or rent their own flats in lower price was announced. It is managed by the Housing Authority and financed by the government, which implies a start of the privatization of public housing. In August 1991, the Sales of Flats to Sitting Tenants Scheme was introduced. Although this scheme was not so attractive and was failed since the tenants need to pay a higher monthly cost to purchase the same property, it intensified the trend of the privatization of the public housing (Chan, 1995).

The proposal of building 85,000 units of living flats which announced by Mr Tung Chee Wah (the former Chief Executive) in 1997 to made 70% homeownership of people within 10 years was put to a halt

in 2001. The construction of the Home Ownership Scheme was then postponed since 2003 due to the drop of the property value in the private sector. Moreover, there is a launch of the LINK after some legal disputes put up by the tenants in 2005. This launch, in fact, raises the social concern towards the privatization of public housing in Hong Kong in recent time.

Functions of public housing According to the Hong Kong Housing Authority, Public rental housing (PRH) is provided to families in genuine need who cannot afford to pay for the adequate private accommodation. It is the first step for the people up the housing ladder towards self-owned accommodation. It plays an important role in the society. First of all, it serves as a shelter for people. Public housing is a mean to fulfill the basic need of a reasonable shelter of people (Yeung, 2008). In a marketing economy like Hong Kong, it is hard for people to meet their housing need from market. Therefore, public housing provides a basic shelter to people and enable them to set up family and carry out family function (Yeung, 2008).

Secondly, public housing also serves as a kind of social wage. This is because it helps to redistribute resources from the rich to those low- income groups in an indirect manner (Yeung, 2008). Low- income families can enjoy low rent and therefore having more disposable income to improve their standard of living. So, public housing can actually narrow the gap between the rich and the poor. Thirdly, it also serves as a mean to promote community building and to stabilize the society (Yeung, 2008). The sense

of community can be promoted in public housing estates as tenants have a kind of network built among them as they have lived there for years.

Last but not least, public housing also helps to contribute to the economic development (Yeung, 2008). As low- income groups need to pay a lower rent only, more income can be spend on consumption and investment. Moreover, it also provides shelter for people to raise family members and it actually reproducing labours for the society in future. Privatization of public housing in Hong Kong Privatization is the process in which the government will increase the use of partnership and variety of other relationships with the private sectors for the delivery of public services (Poon, 2004). It is also referred to the reduction of the roles of the government in welfare provision (Robinson, 1986). According to Paul Wilding, the privatization of public housing is the denationalization and liberalization of public enterprises. Whenever privatization takes place, the provision of goods and services is based on the principle of ‘small government, big market’, with the government being the monitor and the private sector being the provider in delivering services to the public. The privatization of public housing also implies that it is the price mechanism (invisible hand) to determine the allocation of the housing resources, but not the government’s intervention (visible hand).

Privatization is regarded as a remedy to solve the problem of overloading and the administrative inefficiency (Poon, 2004). This is because through privatization, the coordination between public and private interests and resources can be enhanced. The ultimate aim of privatization is to contract out the production operation and shed

off state responsibility for public goods and services so that the redefinition of the role of public bureaucracy is possible (Kemp, 1991).

There are several reasons for the Hong Kong government to put a step forward to privatization of public housing. First of all, it is the budget deficit that the Housing Authority has borne for years. It is believed that by contracting it out to private enterprises, it will help to reduce the financial and administrative burden of the Housing Authority.

Secondly, the management cost of the public housing estates can be dropped by privatization. According to the Housing Department, the professional fee for average management cost for these renal estates which were run by public sectors are $ 269 while in the private sector were $148 per flat per month only (Poon, 2004). Therefore, since 1980s, day- to- day management services like cleansing, car parking and security have been contracted out in order to cut down the costs. Only co-ordination and monitoring services are left to the housing staff (Poon, 2004).

Though it is clearly shown that privatization can bring benefits to the government and help to cut down expenses, there is still a controversial debate of the privatization of public housing. For example, citizens may think that after privatization, the former welfare provided by the government may aim at profit maximization now. They also fear that the private enterprises may ignore the social responsibility and the actual need of people. In order to examine the pros and cons of privatization, in the following part, the Link REIT will be used as an example to demonstrate these.