Hong Kong people’s living space has declined sharply to a level that borders on the ridiculous. After the launch of the special stamp duty (SSD) in November 2010, which was further increased in October 2012, there was a proliferation of tiny units referred to as “nano-flats”. This was a market response to a sharp rise in the price of entry-level flats because owners became less willing to trade up to bigger apartments, fearing that in the event that they had to resell, they would have to pay the hefty SSD. Data from the Rating and Valuation Department clearly shows that prices of Class A flats (the smallest) indeed outpaced the bigger, Class D and E flats after November 2010 and especially after October 2012.
Professor Michael Wong of the University of Hong Kong recently noted that the average area of Hong Kong new homes was 50.4 square meters in 1995. By 2024, this had fallen to a mere 37.2 sq m. The SSD was finally abolished in February 2024. With that, there is hope that bigger flats will be favored again, as more owners of entry-level flats trade their small flats for bigger flats, and developers will likely increase supply accordingly.
While the prospect of Hong Kong having bigger flats from now on is positive, an important policy question is: Should the Hong Kong Special Administrative Region government build bigger public housing flats? The answer clearly depends on costs versus benefits.
According to Housing in Figures published by the Housing Authority, the average living space per person in public rental housing (PRH) has increased in recent years, from 13.1 sq m in 2015 to 14.1 sq m in 2025. While 14.1 sq m is not terrific, the benefit from building bigger PRH flats is probably smaller than the cost.
I proposed that PRH flats should be somewhat smaller and should not occupy highly desirable locations. Moreover, PRH tenants with a monthly income exceeding twice the stipulated income limit should vacate their flats. This way, the government will be able to quickly offer a PRH flat to those who really need one. Anyone who wants to live somewhere more commodious should seek it out in the private market
The cost is not just in terms of construction and maintenance costs, but also in terms of a longer wait for eligible applicants. Bigger PRH flats will also discourage tenants from seeking better housing in the private sector and will attract more applicants, some of whom will be drawn from those who had intended to pay their way to better housing. This attraction would be even greater if PRH flats were sold at a deep discount and if sitting tenants could thereby pocket a handsome profit.
In answer to a question raised in the Legislative Council in 2023, the secretary for development, Bernadette Linn Hon-ho, pointed out that the salable area of subsidized sale flats due to be completed by the Housing Authority from 2026-27 onward will be no less than 26 sq m in general. For PRH units other than those for single-person and two-person applicants, the internal floor area will be no less than 21 sq m. She also said that, having considered the situation in cities like Shanghai, Shenzhen, Singapore, and Tokyo, she looked forward to a future when the average sizes of new flats for public housing units will be 55 to 60 sq m, while those of private housing units will be 83 to 90 sq m.
These visions are no doubt attractive, but we need to be more cautious. Presently, Home Ownership Scheme (HOS) flats are still heavily oversubscribed, and we continue to rely on a lottery to decide the winners. Moreover, the queues for PRH are still long, even though after the government introduced Light Public Housing projects, the average waiting time for a PRH flat has fallen to 4.7 years. We must ensure that public housing is fiscally sustainable over the long term, and that the pathway to the vision of much bigger living space for all residents will not destabilize the Hong Kong economy.
Today some 45 percent of the private flats built in recent years are smaller than 40 sq m. But they could cost as much as HK$10 million ($1.28 million) or more at good locations. Middle-class buyers who have spent their life savings investing in their homes could suffer huge capital losses and might even face negative equity, should bigger HOS flats become available at much lower prices. Bigger HOS flats will also translate to lower chances to get a ticket to buy one, lower demand for private flats, and lower land sales, which will adversely affect the government’s fiscal position.
In my view, any flat smaller than 28 sq m is not fit for raising a family. I had proposed that all permanent residents intending to raise a family should be able to buy an HOS flat of 37 sq m at eight times their annual household income. These flats should be accessible but not located in prime areas. I called the proposal an “HOS II” program, which would require owners to live there and not to own another property in Hong Kong. I proposed that PRH flats should be somewhat smaller and should not occupy highly desirable locations. Moreover, PRH tenants with a monthly income exceeding twice the stipulated income limit should vacate their flats. This way, the government will be able to quickly offer a PRH flat to those who really need one. Anyone who wants to live somewhere more commodious should seek it out in the private market.
The author is an honorary research fellow at the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University, and an adjunct professor at the Academy for Applied Policy Studies and Education Futures, the Education University of Hong Kong.
The views do not necessarily reflect those of China Daily.
