28 MAR 2013
Affordability of deprived households should be considered when incorporating housing benefits into poverty line calculation, says Oxfam
The average housing market value for the past three years should be used and the market value of public housing should be capped
The Commission on Poverty reached an initial consensus on the method for setting the poverty line today. Oxfam is pleased that the Commission has adopted our suggestion for drawing the poverty line at or below 50% of the median income. Oxfam also agrees that in calculating the size of the poor population, we should compare the characteristics of the poor population before and after the implementation of poverty alleviation policies so as to evaluate their effectiveness. We share the government’s view that education and medical benefits should not be included in determining the poor population. We have no in-principle objection to incorporating housing benefits in calculating household income, but the affordability of deprived households should be taken into account, and the details should be further discussed.
“There is no specific income and asset test for education and medical benefits, and their beneficiaries are not limited to poor families. Thus, it is appropriate to exclude these two types of in-kind benefits from household income. On the other hand, there is a specific income and asset test for public housing which limits eligible recipients to low income groups. Therefore, we agree in principle to include housing benefits in the household income, but the key is how they are to be calculated,” said Stephen Fisher, Director General of Oxfam Hong Kong.
Valuating public housing with market value might underestimate the severity of poverty
The government initially suggests that the market value of public housing units should be determined using the existing method by the Rating and Valuation Department. The housing benefit of each household should be calculated by deducting the actual rent from the market value of the public housing unit, and the subsidy should then be counted in the household income.
Oxfam agrees that the calculation of housing benefits helps to evaluate the effectiveness of the housing policy. However, it is important to note that in assessing the value of public housing, the market value of the public rental unit may be distorted by the short term fluctuations of the rental market.
“The market value of public housing would be overestimated when the rent is soaring in the property market. If the housing benefit derived is included in the household income, the nominal income of poor household would be drastically increased, but in fact their actual disposable income would remain unchanged or even be offset by inflation. As a result, the severity of poverty would be underestimated,” said Fisher.
Fisher also said that when the rental market is blazing, low income families could not afford to rent in the private market. Hence, including this market valuation of public housing in the household income of poor families is unfair and also fails to reflect the actual situation.
Cap should be set for the valuation of public housing benefits
In light of the above, Oxfam puts forward two proposals for assessing the market value of public housing. First, we suggest that the valuation of public housing should be based on the average market value for the past three years, so as to avoid the impact of short-term fluctuations of the poverty market. Secondly, the government should make reference to overseas practices and set a ceiling for the market value of public housing, taking into account the affordability of deprived families.
For example, the United Nations Centre for Human Settlements uses the affordability of the households with the lowest 40% overall income as the benchmark and defines the affordable rental ceiling as 30% of the household income. The Department of Housing and Urban Development of the United States also uses the rent-to-income ratio of 30% to determine the affordable rental level of a household. Oxfam believes that by using the rent-to-income ratio to cap the market value of public rental housing, the affordability of poor households to rent private housing units could be truly reflected.
Oxfam is dedicated to fighting poverty and inequity worldwide. The international and independent development and humanitarian organisation tackles poverty in four main ways: sustainable development in poor communities, disaster relief, local, national and global advocacy, and education with Hong Kong youth. Established in Hong Kong in 1976, Oxfam Hong Kong is a founding member of Oxfam, an international confederation that has assisted poor people in 94 countries. Oxfam Hong Kong alone has supported poor people in over 70 countries/regions.
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