Next Magazine (Second opinion A002, 2013.07.25)

Property rights are a cornerstone of our free market system. Although we have an unusual system of leasehold, rather than freehold property, for most of our history leaseholders have had substantive rights over the land and improved space above land that they have occupied. Land “owners” have largely been able to assume that leases would be extended without interrupting their occupation.

Our Basic Law says surprisingly little about property, though it does validate the legal and customary practices on which our approach to property has been founded. Rights of indigenous villagers are protected. Hong Kong retains the practices from common law jurisdictions of “adverse possession”, which can grant property to very long standing occupiers, if no owner asserts their rights.It is vital that the laws, customs and practices around property that offer people the certainty to invest, improve and enjoy the fruits of their labor are preserved. Without certainty, conflicts and disputes will be heightened, the costs of litigation will rise and disputed premises suffer blight. Property seems under threat like never before.How so? The resumption of land by the government using eminent domain like powers is a regular occurrence. The impacts on villages in the corridor of the Guangzhou-Hong Kong high-speed rail link and proposals in the north-east New Territories are just recent examples. This type of conflict is less common in countries where land rights are well defined. Experience shows development need not be hindered in systems where property rights are recognized and traded.

We are now having vigorous disputes about the extension of public use leases, many of which have been in place for decades and renewed regularly. The substance of what can be done under leases is also increasingly subject to bureaucratic whim. Approvals that in the past have been almost automatic, can increasingly be caught by arbitrary interpretations at a departmental level, conflicting views between government agencies and limited transparency. Zealous pursuit of illegal modifications started with concerns about safety. It has transformed into rules that do not permit the ability to modify property reasonably. Arbitrary bureaucratic interference with enjoying the use of property is more common, for example with fire and sanitation officials preying on restaurants that offer al fresco dining.Selective taxes (the infamous stamp duties) are having a chilling impact on the transfer of property and treat non-permanent resident owners differently.

The problem Hong Kong has is simply that too much land is in public ownership and control. This means decisions about land use are in political and not in private hands. When conflict occurs about land use, as it inevitably will, public ownership means political outcomes. By contrast private ownership would result in commercial, hence mutually beneficial, outcomes, where at a price legitimate interests can be accommodated.Markets would work better than politics to resolve current controversies. If the once remote Fan Ling golf course had been privately owned under more conventional title, club members could have contemplated the substantial value of the land to developers and gains that could be used to buy alternative facilities. They could have sold part of the land, to build new amenities for club members. We would have vigorous pursuit of many options, rather than the zero sum game of winners and losers now contemplated.

The politicized proposals that now dominate land use debates have taken the wrong direction. Rather than expand the realm of private property and the rights of individuals, they propose more public housing or housing reliant on government subsidy. When a landowner proposes low cost private housing on his land, the government struggles to find a solution. This is dysfunctional.Reform of the land system in Hong Kong is urgently needed. This should simplify and standardize lease terms, using freehold systems as a model. The system of titles should be modernized and overhauled, defining title across the New Territories. Rights to make modifications should be standardized with approvals based solely on safety and the rights of other residents. Public housing should be sold to long -term renters, allowing the renewal of the public housing stock and refocusing on genuine need.

Bill Stacey is in his 10th year as a resident of Hong Kong and is Chairman of the Lion Rock Institute.

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