The Ministry of Finance’s National Property Bureau is planning to ease the ban on the sale of public land in Taipei and New Taipei City (新北市) by allowing the sale of plots smaller than 500 ping (1,652m2). While the ministry’s recent series of measures to utilize national property might boost the national coffers, the negative consequences could outweigh the positive effects. The latest proposal is a shortsighted policy that could have disastrous results, and the government must pull back before it is too late.
Government data show that such a policy change would affect more than 100 plots of land, covering about 15 hectares in total. The government introduced the ban in 2010, on the recommendation of the legislature, because house prices in the two cities were skyrocketing, with real-estate developers driving up prices as they fought for state-owned land.
However, after a mere two years, the government is considering changing its tune to improve its finances. Doing so would be a grave mistake.
According to the bureau, the ban on the sale of plots of land smaller than 1,652m2 has not pushed down house prices, which instead have kept climbing. The ban seems to have had no effect in cooling down prices, and the government is now thinking of abandoning the policy, cheered on by property developers and brokers. However, once the ban is relaxed, home prices may shoot up again. As it is, the government’s land and housing policies appear to be contradictory: While its stated aim is to drive down home prices, selling public land would only drive up land prices — and house prices along with them. All attempts to achieve fairness and justice will collapse.
While selling state-owned land would increase public income and help fill the deficit, it would be just a drop in the ocean. Historical data show that income from the sale of public land makes up less than 1 percent of government income. While the positive effects of such a minuscule sum on the government’s financial situation would be limited, the negative effects will be huge. The government has been cutting taxes over the past dozen years because it thought this would attract more investment. However, not only has investment failed to improve, but the ministry is once again hoping to solve the fiscal crisis by going about it the wrong way — by selling state-owned land.
Taipei and New Taipei City cover a relatively small and very densely populated area, and the main reason home prices are high is because of the limited access to land for development. Developers say the only way to improve housing supply is for the government to release more land. However, even if the government auctions off public land, developers will buy that land at a high cost, building houses that will still be too expensive for the average person. This will do nothing to alleviate the demand for housing; instead, it will drive home prices even higher and create a housing bubble.
If the land is properly used for housing for rent instead of for sale, communities could be built to provide the young, the elderly and disadvantaged groups with housing. Not only would that increase government income, it would also help promote housing justice.
The government is working to improve the economy and government finances. To do so requires long-term planning and comprehensive consideration of society as a whole. Short-term solutions to isolated problems will only cause the situation to deteriorate further.