ULI Special Report: Cities Worldwide Grapple with Affordable Housing Issues
Urban centers globally, such as Hong Kong and London, are also grappling with affordable housing shortages.
By Keat Foong, Finance Editor
New York City and San Francisco are not the only gateway cities experiencing affordable housing shortages. Urban centers globally, such as Hong Kong and London, are also pondering over the same types of issues. A panel at the recent 2014 Urban Land Institute (ULI) Fall Meeting included discussion about the housing situation in other countries.
According to Andy Martin, ULI UK chairman and senior partner at Strutt and Parker, London, the population of London is increasing by 1.2 percent annually, and it is projected to reach 9 million by 2019. In response to the need for affordable housing, Boris Johnson, the mayor of London, has proposed a plan to double housing production to 42,000 units annually. However, only a portion of this production may constitute below market-rate housing.
The government in London began to move people out of the city, which was predominantly occupied by renters, to new towns after World War II, explained Martin. The city’s population fell through the 1970s and began increasing only in the 1980s. Unlike the situation in U.S. cities, apartment rentals in London are owned mostly by private individuals, who lease them to renters.
Institutional investors also want a hand in the rental game, but have been unable to get involved. In fact, major investors are “desperate” to be able to acquire income-producing rental housing in London, but there is currently no government policy to support the necessary changes to make that type of investment possible, said Martin.
London is pretty much a global economy today, and like New York, it is viewed as a desirable location for second homes and a safe haven for capital. A number of new developments in London have even been marketed in, and sold out to, buyers in China and Singapore before residents of London. Indeed, there have been questions raised about whether it is right for so much of real estate in the city to be owned, often in the form of “black buildings,” by overseas investors.
In Hong Kong, public housing started in the 1950s after the [Shek Kip Mei] fire, said Sujata Govada, managing director, UDP Consultants Ltd., Hong Kong. Faced with creating housing overnight to house those who have lost their homes, the government built high rises seven stories and higher with common bathrooms and kitchens. The British government also placed infrastructure in the new towns that they developed– much density was created around the transit nodes– and today, Hong Kong has world-class transportation accessible to 95 percent of the population.
In Hong Kong, a 600-sq.-ft. apartment costs $2 million, while $150,000 would purchase a small unit in public housing, said Govada. It is not surprising, then, that there are over 200,000 people on the waiting list for public housing in Hong Kong. With young people placing themselves in line for public housing as soon as they graduate, the government is restarting a homeownership program. However, the reality remains that in Hong Kong, market-rate housing, said Govada, is not affordable even to middle-income wage earners.
