The effect of Taiwan’s high housing prices to cash-strapped families is bordering on violating the basic human rights as guaranteed in the Universal Declaration of Human Rights, in which, according to Article 25, “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services.”
High housing prices pose a threat to housing rights, but capping rising prices is not necessarily the solution.
It is necessary to make sure that the effects of redistributive justice are felt by those it is aimed at helping, alleviating the problem of excessive housing expenditure through the government support system for those in need.
The rapid rise in housing prices means that rents would also rise. Taiwan’s gross rental yield is only about 2.5 percent, which has fallen to rock bottom, and it is only a matter of time before rents rise.
Households around Taiwan are struggling to make ends meet after basic living expenses have been accounted for. Benefiting from Taiwan’s health insurance system, plentiful commodities, food and medical care might ease the burden, but many people find transportation and education costs unaffordable.
Those who aspire to live in nicer accommodation are often consigned to long commutes, spending two or three hours every day on crowded public transport. Proximity to the workplace often means having to pay a premium on rent, with a considerable drop in quality of living conditions.
Shortcuts are often made when it comes to expenditure on education. UK and South Korean studies have found that high-housing expenditure correlates with less spending on educational resources, reducing the ability to secure a high salary and thereby leading to the cycle of poverty.
When housing prices are so high that the basic well-being of the housing disadvantaged cannot be maintained, one option might be to cap rising housing prices.
However, the issue is that given the current banking system spends more than NT$13 trillion (US$406.58 billion) on housing loans and construction financing, if we really want to make housing prices reasonably affordable and greatly reduce housing prices, the construction and financial industries that lend a lot of real estate loans would be the first to collapse, resulting in a serious economic crisis in Taiwan.
Therefore, another choice for the government is to establish a system to support the housing disadvantaged and reduce their burden of living expenses. The government chose instead to build social housing and provide rent subsidies.
The past seven years have proved that more social housing still needs to be built to meet demands, despite the government’s best efforts.
Due to concerns of the rental housing black market, wherein landlords may increase rent or even cancel leases to avoid taxation, many tenants do not dare to apply for housing subsidies.
To resolve the current predicament, the social housing sector should increase incentives for the private sector to build social housing and even issue real estate securities to obtain resources from the abundant capital market.
The government has to face the problem of the rental housing black market and implement rental registration, or provide landlords tax relief or even subsidies. Or, as is the practice in Scotland, the government could impose heavy fines on landlords who do not register. Through these measures, all the subsidies and help for the tenants would be truly effective.
No matter how good the government’s intentions are, if it is only a castle in the sky, it will never resolve Taiwan’s housing dilemma.
Chang Ding-hsuan is an associate professor at Jinwen University of Science and Technology’s Department of Finance.
Translated by Lin Lee-kai
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