Hong Kong Has a $64 Billion Plan to Build Islands for New Homes
(Bloomberg) -- Hong Kong, the world’s least affordable property market, has a plan to tackle its housing crisis: build four artificial islands equal to about a fifth the size of Manhattan that could house more than a million people.
The government-backed plan to create a gleaming property and commercial hub has been tried before—Palm Jumeirah, the palm-shaped archipelago in Dubai filled with luxury developments; Forest City, a housing project for 700,000 people in Malaysia; and Jurong Island in Singapore, which houses chemical and energy facilities.
Yet building artificial islands in Hong Kong has a number of vexing complications, starting with the price tag. It’ll cost at least an eye-popping $500 billion in Hong Kong dollars ($63.8 billion), the South China Morning Post reported, and the tab could double. There are also technical and political challenges—a November poll showed 49 percent of the public opposes the plan—as well as massive environmental costs, though the government says it has chosen a less ecologically sensitive area for development.
Hong Kong’s plan to create islands in open waters shows the length governments will go to add housing in expensive, space-starved cities. The rising threat from climate change is also giving governments reason to create “smart and low-carbon” cities, which Hong Kong’s government is planning to achieve for the new islands with renewable energy, green transport and a higher greening ratio.
Yet with unpredictable weather events, as highlighted in the National Climate Assessment report in November, there’s a debate over whether potential energy efficiencies are enough to compensate for the massive environmental disruption caused.
“The entire environment would be disrupted,” said Patrick Yeung, ocean conservation manager for the Hong Kong chapter of the World Wildlife Fund, citing potential damage to the marine food chain when microorganisms and other fishes are uprooted as a result of reclamation. “Is there really no other option than to reclaim land? That should be our first consideration.”
Hong Kong Chief Executive Carrie Lam pitched the plan—called the Lantau Tomorrow Vision—as part of her annual policy address last year and it’s core to her efforts to increase the city’s land supply. The plan for 1,700 hectare (4,201 acres) islands in the city’s central waters, between Lantau Island and Hong Kong Island, would be slated to add up to 400,000 housing units for an estimated 1.1 million people starting in 2032.
The plan is running into some early public opposition. Nearly 6,000 people took to the streets in protest three days after Lam announced the proposal, and it also became one of the key themes of an annual New Year’s Day protest.
The concept has clear benefits for China’s government, which controls Hong Kong under the “one country, two systems” doctrine. Lam envisions Lantau, the city’s biggest outlying island, becoming the third core business district and an “aerotropolis,” given its proximity to the international airport and the recently opened Hong Kong-Zhuhai-Macau Bridge serving as a key link to the Greater Bay Area. That’s part of a plan by Chinese President Xi Jinping to transform the region into a trillion-dollar economy rivaling Silicon Valley.
“It may be going in the right direction for China, but that’s not going in the right direction for Hong Kong,” Steve Tsang, director of SOAS China Institute at the University of London, said of the plan. “Simply getting Hong Kong into an integral part of a wider PRC development project diminishes Hong Kong in terms of its special character and special contributions to China, and does not enhance it.”
As the public continues to be disenchanted by out-of-reach home prices, the supply of public housing has lagged behind targets and has driven up the average waiting time for housing to 5.5 years, the most since 2000.
A steady inflow of Mainland migrants is increasing the demand, and the islands are the “most efficient and fastest way” to accommodate them, said Sonny Lo, a politics professor at the University of Hong Kong. Nearly one-fifth of public housing applications in the first quarter of 2018 came from new arrivals from the Mainland, and this remains a contentious topic in local politics.
The government argues that one possible solution mentioned for development, so-called brownfield sites—barren farmland, open-air parking lots and cargo terminals in the northern part of Hong Kong that can be converted for residential use—are insufficient to relieve the land shortage in the long term.
Financial Secretary Paul Chan suggested that the government may issue bonds to finance the project, amid concerns that the city could run small fiscal deficits in the coming years.
Tommy Wu, a Hong Kong-based senior economist at Oxford Economics Ltd., said the government could set up a project-specific company to manage more profitable projects upon the islands’ completion to attract funding from banks, insurers or pension funds.
Chan Ka-keung, former secretary for financial services and the treasury, said the project is fiscally defensible because the government could eventually recover costs as the created land would have significant commercial value.
“We have to think about what kind of economy we will have in the 2030s and 2040s. It should be a technology economy, a green economy, a digital economy with smart infrastructure. Where in Hong Kong can you build that kind of place?” Chan said.
A group of 38 economics professors led by HKU’s Richard Wong Yue-chim echoed that view in a joint statement, suggesting that the government could reap profits from selling land and society could benefit from hidden economic value from infrastructure and community facilities. Many of the professors, including Wong who is on the board of major developers, have served as consultants to the government and pro-Beijing think tanks.
Yet critics like Albert Lai, founding vice-chairman of the pro-democracy Civic Party, say the project would sacrifice Hong Kong’s more urgent needs to this expensive and environmentally questionable undertaking.
“The government doesn’t care about the people’s livelihood and well-being at all,” he said. “If they cared, resources would be spent on projects that could bring more immediate improvement to livelihood.”
©2019 Bloomberg L.P.