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the ensuing chapters.

2.4 Unsustainability

Furthermore, the public housing system is unsustainable. The
average rent per PRH unit is about $1,700 per month. This figure falls
significantly short of the market value, which was put at $14,000 per month
for an average 500-sf private housing unit. On top of this, the government is
subsidising on average $158 per flat per month on maintenance and other
operational services.

Assuming a discount rate of 4% and assuming that each PRH unit
has an estimated useful life of 50 years, the government is actually, in
present value terms, subsidising around $3.2 million for each unit.

Likewise, to meet the 10-year public housing supply target, the
government has set aside its investment returns in 2015 and 2016 into the
Housing Reserve which now stands at $74 billion. This is a tremendous
fiscal burden the government has to carry on its shoulders, and reveals
that the current public housing regime imposes financial pressures for the
government to deliver year after year.

2.5 Need for Change

Housing i s not merely shelter. For most households,
homeownership is the most important form of their savings and therefore
a means of wealth accumulation and upward social mobility. This is
especially true in Hong Kong, where land values are high and rising. For
some households it can be a form of ready financing if the property can be
re-mortgaged, especially for those who otherwise would have poor access
to banks or financial help form relatives and friends. It could play a pivotal
role as a source of social security for old age. Its effects span more than a
single generation, because it can also be used as a bequest.

At the aggregate macroeconomic level, homeownership is an
important form of fixed investment and directly affects consumption,
savings, and aggregate output over the business cycle. It is also affected
by these cycles. Most important of all, land and housing are valuable
scarce resources, and whether they are efficiently deployed has important
consequences for the growth and prosperity of a city and nation.

Nonetheless, amid the backdrop of such a lugubrious picture, the
vital question to consider is: Given the current predicament, how does a
housing strategy fit into the socioeconomic and political wellbeing of Hong
Kong in the future?

To provide an answer to the question posed, the Report provides
a unique perspective through which the need for the implementation of
the SHS can be viewed. Furthermore, it is not simply a matter of satisfying
demand for homeownership, but rather for the betterment of the economy
and the society as a whole in light of the high costs and inefficiency of
the existing system. The Report hence provides an additional layer of

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