Taipei might be the nation’s capital, but with the exception of its most recently developed area, Xinyi District (信義), it is full of old, dilapidated and illegal buildings. Not only are these homes structurally unsound and a fire hazard, but if a magnitude 6 earthquake were to strike, most of them would be leveled.
Because undeveloped land is scarce and there is limited access to land for Type 3 housing (floor area ratio of 225 percent), the volume of new housing built per year is limited. As supply drops while demand remains unchanged, housing prices will continue to rise. This is simple market economics. In a democratic economy, lowering housing prices requires increasing supply and reducing demand.
While the floor area ratio of extant four and five-story residential buildings is high, the ratio for urban renewal buildings might be smaller. This means less floor space for owners. As many of these older houses tend to be owned by elderly people, asking them to finance reconstruction is not likely to work, which is the main reason so few four and five-story buildings in Taipei are being replaced.
In addition, the sharp housing tax increase for construction permits issued after July 1, 2014, is unfavorable to reconstruction.
A post-reconstruction housing tax increase, in addition to monthly management fees, represents a substantial additional expenditure for owners.
Data from the Ministry of the Interior show that Taipei is experiencing the greatest exodus in Taiwan. The connection to high housing prices cannot be ignored. As many young people in Taipei move to New Taipei City or even Taoyuan, the capital is becoming an area of old people living in old homes.
High housing prices lead to high commodity prices and high rent. Alongside low wages, this means that most young people cannot buy a house, causing them to lose hope. This is why housing prices must fall before residents can work and live in peace.
The practical experience of rebuilding old houses reveals two key factors for successful reconstruction: Housing prices must reach a certain level and regulations governing floor area ratios must be relaxed.
Taipei housing prices are the highest in the nation and for owners to get the same floor space after reconstruction, the standard 225 percent ratio means that even if the ratio is increased by 30 percent or more, the price per ping (3.3m2) might be as high as NT$1 million (US$32,415) or more. This is why developers set such high prices.
In addition to increasing ratios for Type 3 housing, it is necessary to address the issues of a few owners holding up projects and to lower post-reconstruction housing taxes.
Implementation of these measures is the only way to successfully rebuild old homes.
William Hu is chairman of the associations for the reconstruction and development of old buildings in Taipei and New Taipei City.
Translated by Perry Svensson
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