Hong Kong Millennials Graduate From University to Public Housing

(Bloomberg) -- When it comes to affording Hong Kong’s stratospheric rents, a university degree isn’t quite what it used to be.

Almost half of applicants for public rental housing aged under 30 have degrees, according to government data for the year through March 2018. That’s almost double the proportion six years earlier.

“The expensive housing market has prompted a trend where well-educated young people -- who didn’t have to apply for public housing in the past -- may be descending the social ladder,” said Anthony Chiu, an executive director at the Federation of Public Housing Estates, an organization representing public housing residents. “It is worrisome,” he said.

Millennials getting squeezed out of property markets is a global theme, after years of loose monetary policy pushed prices higher from Melbourne to Vancouver. But Hong Kong’s case is extreme because the city has the world’s least affordable housing. The squeeze on millennials sees some living illegally in industrial buildings, while others share dormitory style “co-living” spaces.

Hong Kong Millennials Graduate From University to Public Housing

The cut-off for public rental housing in Hong Kong is a wage of HK$11,540 ($1,475) per month for a single applicant. That compares to a median monthly income as of June 2017 of $16,800, Census and Statistics Department data show.

In a bizarre twist, some young people turn down promotions or salary increases to stay within monthly maximum incomes to remain eligible for public housing.

Lee Yin, a 22-year-old with a hotel management degree, said he wants a job with prospects but one that doesn’t pay “too much” as he waits for a public rental unit to share with his unemployed father. He expects another two-to-three year delay after four years of waiting so far. Once in public housing, he plans to save for a home.

When a news website reported last month on an IT worker who had rejected promotions and raises for five years, readers called him “worthless” and “lazy.” The young man said he would rather dump his money in the sea than contribute to developers’ profits.

The number of applications outstanding for young graduates seeking public housing reached as high as about 32,000 in the year to March 2015, according to Bloomberg calculations based on government data. The most recent number was about 27,000.

Hong Kong Millennials Graduate From University to Public Housing

The average monthly rent for a public housing apartment was HK$1,880 in 2017, according to the government, a sum that would get you next to nothing in the private market. A capsule bed space in Sham Shui Po, one of Hong Kong’s poorest districts, costs HK$2,000.

“It’s hard to buy a home,” said Lee. “For someone living in public housing earning around HK$17,000 a month, they need seven to eight years to save up for the down payment. It is impossible if they are renting in the private market.”

©2018 Bloomberg L.P.