Willingness to Pay for Better Housing in Hong Kong: Theory and Evidence (of Dwelling Space)

Summary. The standards of Hong Kong ’ s public housing have been widely criticise d and today housing improvem ent is a major on-going concern. The cost of redevelop ing early public housing presses hard on the territory, and the task is complicated by the fact that the households have diverse demands and preferen ces, am id their dissatisfa ction. Although improved housing gives tenants a better living environment, the Hong Kong Housing Authority seem s to have been reluctant to raise housing standards because of high costs. One way of recovering these costs is to charge higher ren tsÐ that is, to let tenants pay a greater share of the cost of public housing. But how much are households willing to pay for better housing? This paper addresses these problems by investigat ing the willingness to pay for housing amongst the tenants of existing early housing estates in Hong Kong, given their dissatisfa ction with the current standards. First, we presen t the background of this study. Section two then provides an analytical framework which spells out the notion of willingness to pay in the con text of demand for better housing; and speci ® es the willingness to pay model and its assumptions for demand analysis. Section three presen ts empirical evidence on satisfac tion and willingness to pay for more dwelling space among tenants, and tests the relation ship between willingness to pay and independent variab les. Finally, the concluding part looks at the supply-side questions: if the tenants are willing to pay more, what is the housing authority ’ s capacity to supply, having regard to the cost of provision? This ® nal section also makes recommendations