The Misallocation Problem of Subsidized Housing: A Lesson from Hong Kong

Sustainability, 13(4), 1855. https://doi.org/10.3390/su13041855

The University of Auckland Business School Research Paper Series

Posted: 30 Nov 2021

See all articles by William Ka Shing Cheung

William Ka Shing Cheung

University of Auckland Business School

Siu Kei Wong

University of Hong Kong

K.W. Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics

Edward Chung Yim Yiu

University of Auckland Business School

Date Written: 2021

Abstract

Providing affordable housing has become one of China’s key national policy agenda items. The shared-equity model in Hong Kong, implemented since the late 1970s, has assisted many families in owning a home in the public housing market. However, little attention has been paid to their welfare after acquiring their subsidized units. This study aims to examine how shared-equity homeownership distorts residential mobility through in-kind subsidies. Panel data analysis reveals that the more in-kind subsidies owners receive, the longer they would hold on to their units in spite of spatial mismatches. Private owners, on the other hand, would trade their units without such distortion. Conceptually, the lower mobility of assisted owners could be interpreted as a new source of misallocation in Glaeser and Luttmer’s welfare analysis. Practically, this throws into question the sustainability of a subsidizing homeownership policy: does the government ultimately want assisted homeowners to move from public housing to private housing in the future (for which high mobility would be intended)? If so, new thinking on how to make in-kind subsidies transferable is needed. Full paper available at https://doi.org/10.3390/su13041855

Keywords: subsidized homeownership, residential mobility, misallocation, spatial mismatch, panel data estimation

Suggested Citation

Cheung, William Ka Shing and Wong, Siu Kei and Chau, Kwong Wing and Yiu, Edward Chung Yim, The Misallocation Problem of Subsidized Housing: A Lesson from Hong Kong (2021). Sustainability, 13(4), 1855. https://doi.org/10.3390/su13041855, The University of Auckland Business School Research Paper Series, Available at SSRN: https://ssrn.com/abstract=3973203

William Ka Shing Cheung (Contact Author)

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Siu Kei Wong

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

Kwong Wing Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics ( email )

Ronald Coase Centre for Property Rights Research
Pokfulam Road
Hong Kong
Hong Kong
(852)39172128 (Phone)
(852)25599457 (Fax)

Edward Chung Yim Yiu

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

HOME PAGE: http://https://unidirectory.auckland.ac.nz/people/profile/edward-yiu

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