A Broken System: Hong Kong Property development
The victory by Chief Executive Donald Tsang in late May to override all opposition, even from business interests, to build a HK$5.1 billion government center on one of the last pieces of open-space land on Victoria Harbor, highlights why Hong Kong's addiction to development has made the city the world's most densely populated urban core, a smog-ridden, concrete-covered conurbation in which even the football pitches have no grass.
Despite a widespread perception, particularly on the part of conservatives in the United States, that the city's famed 15 percent flat tax on personal income for all residents runs the city, the income tax in fact produces only a small part of revenues. Government revenue literally runs on property.
As an example of how this need for property-driven revenues drives city planning, government officials now are almost certain to sell the current government headquarters on Lower Albert Road and the adjacent Murray Building to developers for a complex of three 70-storey buildings -- or larger -- to fund the government complex, to be built on what used to be known as the Tamar Basin, the filled-in site of the British government's onetime colonial harbor. These development plans threaten to turn the city's central business district, already so crowded that much of its walkways are double-decked to allow pedestrians to be able to jostle their way along, into a nightmare of gridlocked congestion both for those who walk and those who drive.
"Have we lost?" asked Paul Zimmerman, a former property development company planner turned activist. "Yes, in the sense that there is no justification for using that particular (harbor) site and using that land to build that complex."
Nobody owns land in Hong Kong. It is leased to developers, who have to turn it back to the government when their leases expire. And, although the system of land sales served the territory well for 150 years and helped it mature into a world financial center with thriving commercial enterprises, from the start it has benefited this hugely rich oligarchy rather than its residents, delivering profit margins as high as 400 percent annually to the developers.
The result is that, although the government boasts that as much as 72 percent of Hong Kong is in parkland or remains undeveloped, its urban areas mostly feature only a handful of "sitting out areas" and patches of concrete for sports rather than any real parks or other public amenities.
The urban areas, according to the website demographia.com, occupy about half the area of the Denver International Airport in the United States. The rest of the territory is comprised of precipitously steep hills that force 90 percent of the population to live on about 15 percent of the land, much of it reclaimed. The city's 7 million residents live on about 220 square kilometers, making it among the most densely populated urbanized areas in the world. Nonetheless, in Mongkok, where population density reaches 130,000 per square mile, government planners ripped out a large segment in which redevelopment was completed last year.
Emboldened by Tsang's victory for his government headquarters, the Urban Redevelopment Authority is pushing ahead as well with the impending destruction of much of what is left of old parts of Wan Chai, particularly Lei Tung Street, also known as Wedding Card Street, a formerly vibrant area of residences shops specializing in wedding invitations and other print jobs. In its place will rise a HK$3.5 billion commercial and residential development despite a 2003 promise to lawmakers by the government's planning department to protect the street. Five- and six-storey residential buildings, with wide, attractive windows across their fronts that could be rehabilitated into an attractive bohemian area of shops and residences are to be ripped out, to be replaced with 40-storey high-rises, adding to density already so thick that it is virtually impossible to walk through the nearby wet market during commute rush hours.
Both the Urban Redevelopment Administration and its predecessor, the Land Development Corporation, have been out of control from the start with little oversight from the government, according to Alice Poon, the author of "Land and the Ruling Class in Hong Kong." Poon, an executive for 17 years with two of Hong Kong's biggest land developers, writes how developers stifle competition in a careful dance with government to maintain some of the highest property prices in the world.
''As long as Hong Kong has an administration bent on relying on land sales revenue for its fiscal health, this entrenched land market structure will remain,'' Poon says. ''So far, I don't see any chance of breaking the status quo under the leadership of (chief executive) Donald Tsang." Official decisions on how to price and allocate land are largely made behind closed doors with no public discussion, she says.
The government did suffer a rare defeat earlier this year, when public resistance stalled a 40-hectare, HK$24 billion project in West Kowloon across Victoria Harbor from the city's glistening central district. That emboldened local civic groups to grind out harbor alternatives and aspirations for green parks and family-oriented spaces in the Central district space to be occupied by Tsang's government. In particular, for the first time growing opposition arose from business interests themselves including some property developers until Tsang dragooned them into shutting up about his development plans through a series of unpublicized meetings to tell the city's most prominent developers to fall in line – which they did.
Swire chairman Gordon Ongley, for instance, said several months ago that said development of the harbor had been like a competition to build as much as quickly as possible, and now it was time for a different approach.
"It's very much an `I win and he loses' [situation], but the harbor is for everybody," he said at that time. "The last thing we need is the harbor surrounded by barren wasteland, enclosed by fences." Ongley's comments were endorsed by other members of the Harbor Business Forum, a group spun off from the Business Environment Council, a pro-business NGO. Ongley now refuses to talk to the press about his earlier vision for the harbor and indeed the Harbor Business Forum itself has been cowed into submission. None of its members are speaking to the press on the record.
Paul Zimmerman, formerly a planner with a property development company, left the Harbor Business Forum because, he says, it ignores issues that he feels must be addressed. Because business in the debate will have private financial interests in the Tamar site, he says, nobody is saying anything in public that might be considered as a rebuke to Tsang.
Hong Kong's civil service bureaucracy, which in other countries could be expected to provide a regulatory bulwark against rampant development, is largely either aligned with the Urban Redevelopment Authority or is toothless, Zimmerman says. Civil servants, he continues, are largely generalists who remain in their posts from three to five years before moving on to other jobs. Any new briefs that might come across a bureaucrat's desk are often left for the next placeholder.
For example, Sarah Liao, erstwhile chief in charge of the Environment, Transport and Works Bureau, is on her way out to take on a new role soon. Rafael Hui, the chief secretary and second highest ranking official in government, is helping his friend Tsang plan his 2007 campaign for a new term as chief executive. Neither is in a position to make decisions to re-direct Hong Kong's design future even if they chose to do so.
Another developer turned critic is Nicholas Brooke, who once designed and helped build Taikoo Shing, a cluster of 61 residential buildings built over an old dockyard on the eastern side of Hong Kong Island. He also worked for the Town Planning Board and was deputy managing director of Swire Properties. He believes many problems must be fixed in a system geared for quick turnover and profit.
''It's a bloody nightmare,'' says Brooke. ''Property is treated as if it is a commodity. If they see (a 20 percent profit,) they'll take it and move in,'' says Brooke.
Allen Choate, Director of Program Development for The Asia Foundation in China, says Tsang and Co. run the risk of ruining the city for egotistical gain. If the land system is going to change, Hong Kong needs a new form of taxation to replace land sales, Choate says. But instead the government is held hostage by the property developers, who have made Hong Kong the world’s most expensive city in terms of occupancy costs.
The property barons "are such a power that they literally and figuratively profit from this system,'' says Choate. ''They basically own the government. And the government's very apprehensive about doing anything to upset that.''