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However, this was not actually the case in the early stages of the
public housing programme. The market-adjusted land premium did not
exist and early occupiers of HOS units in the two said HOS estates, were in
essence, bona fide homeowners. It was only after 1982 that HOS units were
subjected to restrictions stipulating that owners must first pay the land
premium before the unit could be sold in the open market.

Linked to the fluctuations of property prices in the open market,
owners of HOS units are not free to sell the units they ostensibly “own”
unless they have repaid the land premium to the government. For the vast
majority of HOS occupants, this is simply not affordable. The household in
question becomes effectively a permanent occupant of the unit. Having
paid for the development costs of the structure, the occupant household
can remain in the unit for “free” but, because it cannot afford to pay the
land premium, it is restricted to these premises. Even when the unit is no
longer suitable due to the changing aspirations of household members
over their life cycle, there is no choice but to stay there.

In fact, to the knowledge of the research team, no other developed
economies with sales of public housing have an alienation restriction that
requires owners to pay a market-adjusted land premium before resales on
the open market (see Table 4).

Table 4. Resale restrictions of public housing flats in selected economies

Note : (*) The Ethnic Integration Policy and Singapore Permanent Resident Quota are a set of
proportion for the block / neighbourhood to ensure a balanced mix of ethnic groups and
integration into the Singapore community.
Source: Government of South Australia, Housing Bureau (Macau), Housing and Development
Board (Singapore), and GOV.UK.

There are two other problems associated with the public housing
programme in Hong Kong especially regarding to the redevelopment of
older HOS and TPS units. The situation is immensely convoluted with the
current public housing mechanism. By the time redevelopment is called
for, the amount of unsettled premium will probably reach an astronomical
level. These owners would have very little incentive to sell their units for
redevelopment since after settling the premium with the government,
they would be highly unlike to be able to afford another unit in the private
market. The city will then be left with numerous run-down HOS and TPS
estates with shared ownership between the quasi homeowners and the
government.

1. Amount of discount to be repaid will be a percentage of the resale value of the property. If the household sells within the
first year of purchase, the whole discount will have to be repaid. 80% must be repaid if the household sells in the second
year, 60% in the third year, 40% in the fourth year and 20% in the fifth year. After five years, the household can sell without
repaying any discount.
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