Hong Kong’s Leung Tackles Wealth Gap With Aid to Poor, Housing

Hong Kong Chief Executive Leung Chun-ying pledged to give assistance to poorer families and overcome the challenge of building more homes as he seeks to quell popular discontent over a record wealth gap.

The government will spend about HK$3 billion ($387 million) a year in subsidies to about 200,000 low-income working families, Leung told lawmakers in his second policy address. The housing shortage is serious, and it will be a “tall order” to meet a raised housing target of 470,000 homes over the next 10 years, he said.

“Many grassroots workers, as the sole breadwinners of families, still bear a heavy financial burden,” Leung said. “Providing them with suitable assistance and encouraging them to remain employed will help keep them from falling into the” social security safety net.

Leung is putting more focus on addressing a record wealth gap after a government-commissioned report last September said one in five residents, or about 1.3 million people, live under the poverty line. Leung, who has made the least popular start as leader of Hong Kong since the 1997 handover, is looking to shore up support ahead of debates over reforms needed to bring in universal suffrage in 2017.

“Poverty alleviation is a way to keep Hong Kong competitive, because a continuous stream of low-income hardships will harm the city’s stability,” said Marcella Chow, a Hong Kong-based economist at Bank of America Merrill Lynch. “Lots of the general public may not actually feel it except the group distinguished as below the poverty line.”

Health-Care Vouchers

The benchmark for the subsidy to low-income families will be set at half of the city’s median household income, Leung said. At least one family member must be working, he said. Other measures to help the poor included doubling the value of health-care vouchers for the elderly to HK$2,000 and assisting with education costs for the children of welfare recipients.

Hong Kong’s Gini coefficient, a measure of income inequality, rose to 0.537 in 2011 from 0.525 a decade earlier, according to government data. The measure is the highest since records were kept in 1971, and is above the 0.4 level used by analysts as a gauge of potential social unrest.

Leung said the new public housing housing target, first proposed in September by the city’s Long Term Housing Strategy Steering Committee, was dependent on greater land supply. Targets for public housing are 36 percent higher than that Leung set last year, when he made tackling soaring property prices one of his main goals.

Property Market

Property transactions slowed to 50,676 last year, the lowest since 1996, according to Land Registry data. Secondary market home prices fell after reaching a record in March, according to an index compiled by Centaline Property Agency.

Leung pledged to increase plot ratios in some districts to enable more housing units. He also promised more land supply for commercial development in the central business district and nearby Wan Chai.

“This deviates from what the previous government was trying to do,” said Simon Lo, Hong Kong-based executive director for Asia research at realtor Colliers International. “But the problem is there are very few sites that can be converted into commercial use.”

China Ties

Hong Kong will work with the neighboring Chinese province of Guangdong on trade liberalization and set up more economic and trade offices in China to increase cooperation with the mainland. Hong Kong’s economy probably grew 3 percent in 2013 compared to a year earlier, the government said in November.

“Hong Kong needs sustained growth to tackle issues such as poverty, housing, an aging society, environmental protection and the upward mobility of young people,” Leung said.

Leung unveiled plans to focus on high-value tourism and build hotels on the western island of Lantau to expand its capacity. The government will conduct studies to develop Lantau, home to Hong Kong Disneyland and the city’s international airport, which will become a key transport hub between Hong Kong and China, Leung said.

Hong Kong is conducting a five-month public consultation on democratic reforms, over the details of implementing universal suffrage for choosing the city’s leader in 2017. China has said candidates for the top job must be vetted by a committee before the public votes in an election.

Occupy Central

Opposition groups have demanded an open nomination process and that the reforms be in line with international standards. Pro-democracy group Occupy Central said China shouldn’t vet candidates for Hong Kong’s next leader and vowed to take protests to the city’s streets if it isn’t satisfied with the plans. That’s prompted warnings from tycoons including Li Ka-shing, Asia’s richest man, that demonstrations may damage the economy and Hong Kong’s reputation as a financial center.

Leung is the last chief executive picked by a committee of billionaires, professionals and lawmakers as China has pledged to allow for elections in 2017. Leung’s popularity during his first 18 months in office has trailed his two predecessors. His approval rating stands at 45.6 on a scale of 0 to 100, according to a poll of 1,018 people by the University of Hong Kong Public Opinion Programme conducted from Jan. 2 to Jan. 6.

Before it's here, it's on the Bloomberg Terminal.