108.07台灣銀行家雜誌第115期 / By Hank Huang (黃崇哲)
Financial Growth Requires Housing JusticeEditor’s note
With the help of the government, urban renewal is finally back in the spotlight. The “three urban renewal laws” (the Urban Renewal Act, Statute for Expediting Reconstruction of Urban Unsafe and Old Buildings, and Act for the Establishment of the National Housing and Urban Regeneration Center), implemented at the end of last year, simplified procedures, greatly accelerated the reconstruction of old, dangerous constructions, and re-ignited hopes for the business based on the renewal of over 4 million homes over 30 years old. Effective upgrade and renovation would not only support domestic demand, but also improve urban environments and people’s living standards.Taiwan has an 80% homeownership rate – much higher than the 60% of the US, UK, and Japan. Nevertheless, in terms of quality, older complexes and illegal constructions are less earthquake-resistant, and lack aesthetics and forward-looking urban planning – much less conforming to requirements like barrier-free facilities and prevention of heat island effects.Moreover, serious housing injustices threaten the outlook of the next generation. In the past, real estate prices matched economic growth, allowing most Taiwanese young adults with reasonable savings to buy houses. In recent years, though, prices have risen rapidly, while salaries have stagnated. Not only have “snails without shells” become the norm, but high rents have made it difficult for those without extensive resources to rent dignified living spaces. In contrast, investors with 2 or 3 units can continue making more purchases, making real state the best way to generate wealth, and hampering social mobility. If this trend cannot be stopped, it will be difficult for current non-owners and the next generation to turn their fortunes around. Once classes become rigid, Taiwan’s hard-earned social equality will be lost, turning success into matter of property ownership. Therefore, as we reconsider urban policy, we should also consider “housing justice” – which will likely fall on the shoulders of the financial industry. In the past, homebuilders operated using high leverage from the land being developed, turning the sustained increase in real estate prices into industry profit; mortgages became financial institutions’ main source of profit. The basis of this model, however, was private ownership. Banks can’t serve demand for social housing, which is rented, not sold – and which encompasses most young adults who can’t afford their own property.Although the social housing being heavily promoted by the government has reached 40,000 units, this is still far below the levels of advanced Western countries. The rental concession rate is also far below the UK’s 1/3 of market price. These countries have relatively complete systems of social housing providers, which include local governments and non-profit housing associations. All of these institutions build and operate housing, under the guidance of the higher government, to meet social needs.With reference to these experiences, we will have the opportunity to dispel builders’ current thinking, and develop a complete social housing market through medium- to long-term funding from the financial industry, working together with social housing providers. Of course, the key lies in clear policy guidance. Looking at the governments of the Netherlands, UK, and Japan, for instance, the answer is not far away. Taiwan must provide secure, stable housing for all of the those who do not wish to, or are unable to buy their own real estate, thereby creating a more sustainable urban environment.