glamorous homes interiors
it's more expensive to live in hong kongthan anywhere in the world. hong kong has been ranked the least affordable housingmarket in the world eight years in a row and by a long shot. housing prices are now almost 20 times more than annual income. that means thata household making $50,000 usd would on average be looking fora house that cost $980,000 usd. and it's getting really bad. hundreds of thousands of
residents now squeeze into incrediblysmall apartments, most of them no bigger than a parking space. so these are cagehomes, which basically fit one person and their belongings. and they basicallystack these in a room in order to fit as many people as they can in the room.and yet the price per square foot for these smaller houses just keeps shootingup. i visited these homes to try to piece together an explanation for this trendand to meet the people who are being squeezed by the world's least affordablereal estate market. there are now tens of thousands ofpeople in this city who live in spaces
that are between 75 and 140 square feet.for some perspective a typical parking space in the us is 120 square feet. one of the most common strategies for small space living is this subdivided house model. this big space that's been divided up into a bunch of tiny littleliving spaces. these people basically have room for a bed and a table and afew belongings. what makes this model work is that they have a biggercommunal space where they're able to have their cooking and their washing andthe bathroom open to everyone, so that
they can save space and save money intheir actual living quarters. so this is the kitchen for this space which isshared by four families. the temptingexplanation here for why the prices are so high is land scarcity. you know, seven and a half million people crammed into this series of islands, it's gonna drive upthe prices. the same story in a lot of places that have run out of land thatare in high demand — in san francisco or new york city. okay this might be thestory in new york city and san francisco,
but is hong kong actually running out ofland? let's see what the drone says about this. flying over hong kong you start tosee that, while yes, there's a very dense urban landscape, there's also a whole lotof green space. government land-use data says that 75 percent of the land in hongkong is not developed. now some of that is mountainous and rocky and not easy tobuild on, but certainly not all of it. so i posed this question about densityto two experts, one is a hong kong citizen and the other is a 30-plus yearresident. both are advocates for better
urban design. are high prices primarilythe result of land scarcity? no. there's a land-use issue, because alsoland is being inefficiently used or conserved. the problem isn't the shortageof land the problem is bad land management. land use, land management, whatthese experts are referring to is that of all the land in hong kong only 3.7% is zoned for urban housing. but it's not because ofmountains, it's because of policy and
this gets to the heart of theexplanation of why more and more people are living in homes the size of parkingspaces. the first thing to note if you want to understand the real explanation,is that the government owns all of the land in hong kong. well, all except forthis one church that the british built here when they ruled it back in the 1800sand it kind of just escaped the whole government-owns-all-the-land thing. so the government owns all the land and it leases it out to developers, usually for50 years in an auction process where the
highest bidder gets the contract. withsuch scarce and valuable land zoned for housing, real estate companies more andmore of them coming from mainland china with lots of money, will duke it out inthese auctions. and will end up at an astronomically high price. like this plot of land that was just leased out for 2.2 billion dollars, whichset an all-time record for the most expensive land of ever leased by the hongkong government to a developer. so the way the government zones and leasesland is the first part of this. the other
part of this explanation has a lot to dowith taxes. if you're the type of person who navigates away from this video whenyou hear the word tax policy, stay with me here. this place loves lowtaxes. it's a great place to do business, because the corporate tax is lowno value-added tax, no sales tax, free market economics, low taxes. that'sembedded into the fabric of this place. look at all those low taxes doing theirwork, building up those skyscrapers, slapping on those bank logos all overtown. so if the government isn't getting revenue
from taxes, it really needs it fromanother source and in the case of hong kong that source is land sales. a lot of the government revenues here driven by land revenues and it's about 30% of government public financing income. the government of hong kong canlease out this land to developers at astronomical prices, make a ton ofrevenue from that and not have to raise taxes on the people or the corporationsthat reside here and they still proudly retain their rankingas the freest economy on earth. what this
means is that the hong kong governmentdoesn't have a huge incentive to free up more land and lower prices, but whilethis current arrangement of bidding and auctions is really good for revenue forthe government and good for the market generally, it's not super good for thepeople of hong kong. of all the small spaces, this is easily the most cramped. these arecoffin homes. could i ask you just a quick question about your living space? the government is slowly working on thisproblem.
year after year new policies come inthat are meant to fix this, but they're slow to change, mainly because they havean incentive to keep the status quo as it is. out here at this industrialcomplex in hong kong, i met with a guy named eric wong, a local inventor andbusinessman who has seen a business opportunity in the midst of this spacecrisis. eric grew up in hong kong and has beenthinking about small-space living for a long time. oh it has wifi.
these capsules come in one or two-person sizes and are meant to provide a moreefficient and hygienic version of the cage and coffin homes, all at arelatively low price. down here there's a little box where you can put all yourvaluables and so there's mirror lights, there's reading lights. but these capsules,innovative as they are, really just put a band-aid on this housing problem.they don't serve as a real solution. a real solution would need to come fromsomething that's much less profitable
and fun to look at: government policy andzoning reform that will free up more land and put the interests of the peopleabove the interests of the market, but until the government can make thathappen people in hong kong will continue to squeeze into smaller and smallerspaces.