20100414 Home ownership rate is misleading

Home ownership rate is misleading

By Hua Chang-i 華昌宜
Wednesday, Apr 14, 2010, Page 8

The recent controversy over housing prices began with a public opinion poll by the Research, Development and Evaluation Commission showing surging housing prices topping the list of public complaints. The Cabinet’s attempts to address the issue were criticized as harming property prices, however, with critics branding the moves an unwise political move that would undermine the assets of most home owners and hurt the local economy.

Premier Wu Den-yih (吳敦義), who has promised to listen to public opinion, was at a loss as to how to deal with the complaints, and government policy kept swinging back and forth. Wu’s wavering is a reflection of how a dearth of information on the real-estate sector has made decision-making difficult. The “home ownership rate” is one of the most distorted and misunderstood data points, and this has directly affected the administration’s judgment.

The official home ownership rate refers to homes registered as “self-owned.” That rate is currently about 88 percent. However, given that some individuals own more than one property, the home ownership rate does not directly translate into the number of households owning a home. Equating the two is either an honest mistake or a deliberate distortion. To investigate the source of the complaints, we need to know the real home ownership rate based on the number of households that own a house. Unfortunately, no such data exist, so one can only make estimates.

The total number of households in the country — registered households — is about the same as the total housing stock, which is about 7.8 million. What does Taiwan’s home ownership distribution look like? Following are my estimates based on a national census conducted 10 years ago, an Academia Sinica survey involving home ownership from many years ago and the semi-annual telephone surveys on housing demand conducted by the Institute for Physical Planning and Information that I work for.

For every 100 registered households, about 30 do not own a home. Among these 30, 12 households either rent or stay in dormitories, and 18 either share a home with other households or individuals such as relatives and friends, mainly parents or children. The other 70 households own a total of 88 houses, and this is the source of the government’s home ownership rate. Among those 70, 60 households own one home each, seven households own two homes each, and three households own three or even more homes each.

Assuming these estimates are correct, how do high housing prices affect the public? For the 30 households that do not own a house, one-third are likely part of the socially and economically disadvantaged group who have long lost hope of owning their own home and are indifferent to politics. The remaining two-thirds want to, but have given up hope of ever owning a home — these make up the most angry group. At the other end of the spectrum are the 10 households who own two or more homes: Rising home prices mean a continued expansion of their assets.

The situation for the rest — those in between these two extremes — is more complicated. Although their wealth increases in value on paper, it is difficult for them to make use of this wealth since they still live there. Rising home prices also make it difficult for them to raise their standard of living by moving to a bigger or better place. Generally speaking then, they are also victims. Surging housing prices are also squeezing out small investors, leaving the wealth concentrated in the hands of the rich.

In short, there is reason for the public complaints. This evaluation looks at the overall situation in Taiwan, so there is likely to be even more and stronger complaints in urban Taipei.

How can we make the government aware of this issue? Those who have the ability to influence government policy are mainly business lobbying groups and the minority who own two or more houses. Still, democratic politics is based on individual votes, and this is still a good way to express public discontent. The housing issue looks set to be a contentious issue in the five special municipality elections in November and the 2012 presidential election. Instead of a chaotic political battle between the ruling and opposition camps, we should rationally discuss the situation and public opinion to formulate a clearer and more decisive housing policy.

Hua Chang-i is a research fellow at the Institute of Physical Planning and Information.