The recent spate of announcements on government real estate policies has stirred up great social debate. Everyone—from rich businessmen living in that symbol of luxury, The Palace, to young couples hoping to buy a home—is calculating the impact of these changes in taxes, preferential loans and the regulatory framework for real estate transactions.
President Ma Ying-jeou’s call for housing justice should be applauded. As Ma put it in April, real estate has become “a very scary business,” with speculators making tens of millions on one transaction, and the dream of owning a home receding further beyond the reach of the ordinary person.
Ma’s support for the luxury tax, enacted despite great pressure from several quarters, stimulated a range of policy recommendations: the Council of Economic Planning and Development’s proposal to build “modern housing” on state-owned land, the Ministry of the Interior’s “social housing,” “affordable housing” and plan to expand preferential loans to young people, as well as another public housing project being mapped out by the Ministry of Finance’s National Property Administration.
Naysayers have cited the large number of houses lying idle as a reason not to support the modern housing proposal, arguing that the government should not provide limited public land free for the construction of unneeded residences.
In fact, under this program developers would bid for the right to build on state-owned land, in locations where supply is short, especially in metropolitan areas of Taipei and New Taipei cities along mass rapid transit lines.
This free use of land would greatly reduce unit costs, and well-built, inexpensive homes would result from the competition among construction companies. If the government can deliver these apartments to young, first-time purchasers, the policy has a great chance of succeeding.
Using idle properties to stand in for public housing, on the other hand, would mean taking taxpayers’ money to buy up residences that should not have been built in the first place, to the profit of the developers responsible for the mistake.
Moreover, since most of such unoccupied residences are inconveniently located in mountainous or seaside areas without access to rapid transportation, first-time homebuyers would be forced to spend hours commuting every day.
Since real estate policies are so important to the nation as a whole, there can be no single, simple cure; instead, a cocktail of policies tailored to different markets, social classes and regions is called for.
The real value of a key ingredient, the luxury tax, is the suppression of short-term real estate speculation—as long as the purchaser of a luxury residence maintains ownership for two years, the luxury tax does not apply, but even inexpensive apartments bought and quickly resold are subject to the tax. With the reduction of false high demand, normal market demand will surface, and real estate prices will conform to overall economic trends.
Other elements in the mix such as modern and social housing are designed to provide high quality, low threshold homes to first-time purchasers and the working class, especially in the economically vibrant Greater Taipei area.
These plans do not require huge government outlays, but would allow builders to make reasonable profits, and make homes with convenient transportation affordable to ordinary citizens.
Taiwan is a progressive, diverse and rapidly changing society. Housing justice can only be achieved through rational public debate on concrete policy proposals—a one-size-fits-all approach will never work. The country needs forward-looking real estate policies that will result in more equitable distribution of wealth and stimulate economic growth, thereby benefiting everyone. (THN)
(This commentary originally appeared in the Commercial Times May 10.)
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