The rush of investments into real estate in Hong Kong throughout the past century has led to extensive urbanisation. In December 1972, following an era of rapid new-town development in the previously neglected New Territories, the government implemented the Small House Policy as a temporary measure to raise the standard of living of villagers indigenous to these New Territories. The Small House Policy allows any indigenous villager to apply for building a three-storey house in his village. According to a government-issued pamphlet, an ‘indigenous villager’ is “a male person at least 18 years old who is descended through the male line from a resident in 1898 of a recognised village”. This right is non-transferable, and it is illegal to sell the right. The nature of the policy is to recognise and institutionalise villagers’ customary rights to build houses for better living conditions.
The villager has to pay for the construction of the house, and it has been argued that the policy helps to retain the traditional character of rural villages. However, there are many issues with the Small House Policy which far outweigh its benefits. These include problems related to the unsustainable nature of the policy itself, the discriminatory nature of the policy, and the abuse of the policy by indigenous villagers.
The unsustainable nature of the policy stems from the fact that demand for small houses is unlimited, because it is tied to a right rather than a need — every male born to an indigenous family has the right, which only gets more lucrative as property prices rise. The right is also tied to Hong Kong permanent residency, so even villagers who move overseas and retain their permanent residency can apply for a house, as can their male children. This exacerbates the basic economic problem — unlimited demand and limited supply. The policy also encourages inefficient land use by promoting the construction of low-density housing.
In addition, the Small House Policy is discriminatory towards female indigenous villagers, as well as to non-indigenous Hong Kong people (who comprise the majority of Hong Kong society). The right of a male indigenous villager in his lifetime to apply for building a three-storey house in his village is referred to as a ding right (ding meaning an adult male). Referring to Article 1 of the Hong Kong Bill of Rights Ordinance, there is no doubt that the policy violates the human rights principle of sexual equality. The United Nations Committee on Economic, Social and Cultural Rights pointed out in 1994 that the policy is discriminatory towards women. Part 2 Schedule 5 of the SDO, passed two years later in 1996, exempts the policy from its provisions.
There is the possibility of a female villager asking the Court to declare the refusal of her small house application to be illegal on the grounds of sex discrimination. If such a claim were to succeed, it would exacerbate the sustainability problems generated by the policy. Therefore, if the principle of sexual equality was applied and the entitlement to a small house under the policy was extended to female villagers, the number of applicants could potentially double immediately, increasing the demand for government land on an unprecedented scale.
Furthermore, the possession of ding rights is abused by villagers, who have profited by illegally selling their ding rights. Collusion between indigenous villagers and property developers is more common now than ever before due to a combination of factors: the increasing scarcity of land, the rising cost of building small houses, and the profit incentive provided by the developers. Furthermore, a huge number of villagers claim their ding rights while living overseas, with the sole purpose of selling them for profit. The collaboration between indigenous villagers and developers is illegal; this means there is no ‘standard’ price for the sale of a ding right. The market for dingrights can be used for money laundering purposes. The market is also rife with misinformation; the consultation procedure between developers and villagers is not transparent, creating a problem of asymmetric information.
The abolition of the policy would result in a strong reaction from the villagers. This would force the government to grant compensation, which could be prohibitively expensive if villagers are compensated in cash. A slightly more realistic option would be to offer villagers the right to apply for public housing on a priority basis rather than a small house grant, but this would still be difficult given the already-excessive demand for such housing in Hong Kong. Although this would reduce the pressure on rural land, it is likely to be seen by villagers as the removal of their dingrights without sufficient compensation.
Therefore, amending the policy seems like the clear choice. The government should encourage villagers to expand their existing small houses vertically, rather than to build new houses outwardly. Some villagers have already extended the height of their small houses to more than three storeys (albeit illegally). This is clearly a more efficient way to use Hong Kong’s scarce land resources. Instead of granting ding rights to the villagers’ offspring, they should instead be granted the opportunity to add one new storey to the existing familial home, regardless of their gender. This would preserve the small house through generations and discourage its sale to developers. Furthermore, eligibility for ding rights should be revised; if the purpose of the policy is indeed to improve the housing situation of villagers indigenous to the New Territories, then villagers living overseas should be stripped of the right as they do not live in their small houses. This will reduce the number of applications, and mitigate the economic, environmental, planning and legal implications of the policy.
