The Chief Executive said that resolving Hong Kong's housing problem is the most important item on the government's agenda. But what is Hong Kong's housing problem? The key lies in assisting Hong Kong people to meet their housing needs. There is not much point in suppressing housing prices per se, unless doing so helps Hong Kong people meet their housing needs.

Unfortunately, too many people think high housing prices have given rise to the problem. Actually high housing prices are only a symptom of the problem of the housing shortage. That is really not the problem. If anything, high housing prices and high rentals help resolve Hong Kong's housing problems - by encouraging greater supply, and by promoting efficiency in the utilization of our housing resources.

For example, with high rents, owners have a greater incentive to rent out their second homes or third homes, while households could share an apartment. Having two or more households sharing an apartment and the rent is not ideal. But unless there is sufficient supply, this is something we have to live with. It is the lesser of two evils: one being living in a tighter space; the other being having the lucky one occupying the flat and the unlucky one sleeping out in the street.

Because of a slowdown of building activities over the past ten years - a result that emerges largely from misguided policy - we are facing a housing shortage. To resolve the housing shortage problem, the only way is to increase supply while tolerating the higher prices and higher rentals in the short to medium term. From the policy standpoint, different kinds of needs should be subject to different priorities. Favoring first-time home buyers at the expense of other buyers makes sense, and favoring home buyers at the expense of investors makes sense.

With very low interest rates these days, mortgage payments are relatively affordable, but most first-time buyers have difficulty coming up with the down-payment. Thus, it does make sense to allow first-time home buyers a bigger loan ratio compared to other buyers. But it does not make any sense to impose a "mortgage tax" to make mortgage payments unaffordable. After all, we want to help Hong Kong people meet their housing needs. Killing off genuine demand from home buyers by making housing unaffordable cannot make sense.

Some may object that homebuyers need to know that low interest rates will not be low forever. For this reason, it is fine for lenders to require buyers to face some kind of stress test, so that they will still be in their "comfort zone" and able to service their loan payments, even when interest rates jump by, say, two full percentage points.

If we remember that our housing problem lies in how to help Hong Kong people meet their housing needs, then we will realize that raising and extending the Special Stamp Duty will not address the problem at all. Figures show that there have been very few short term purchases and sales since the government imposed the Special Stamp Duty the first time. If we have no evidence whatsoever that speculative demand is preempting genuine homeowner demand, what then is the purpose of raising it further? It will only cause hardship to those who have to sell their homes for different reasons.

If we are earnest in attracting talents to come to Hong Kong and make Hong Kong their home, there is no reason to discriminate against homebuyers who work here and are not permanent Hong Kong citizens yet. There have been several reports of expatriates intending to buy a home and forced into renting after the Buyers Stamp Duty was imposed. This tarnishes the image of Hong Kong as a city that welcomes talents from around the world.

If we are earnest in helping those who have to face the high rents in the private sector, we can offer those in the queue, not yet assigned a public rental flat, an allowance within three years, say HK$1,500 per month, until they are finally given a flat. After all, the first problem besetting these people is high rents. The cash allowance will not cost too much if it is given only to those who are not assigned flats after the pledged three years of waiting time. Assuming that 20,000 households qualify, the cost is only HK$30,000,000 per month and HK$360 million per year. This is entirely affordable and if and when the government is able to honor its pledge, it can be dispensed with. It will indicate the strong commitment of the government to honoring its pledge.

Now that the Commission on Poverty has been reinstated, it is up to the commission to work out a family allowance that is fair and sustainable. After all, the housing problem boils down to an economic problem. Whatever policy we come up with, its task must be to help our target group cope with high housing costs. An allowance for those who have waited three years and are still waiting, is the least that the government can and should do.

The author is director of the Center for Public Policy Studies, Lingnan University.