Addressing Challenges

 

Unaffordable Housing

 

In the 2023 Housing Affordability Index, Taiwan is ranked 16th globally

 

The housing affordability in Taiwan imposes a significant pressure on its citizens. According to Internet Database Numbeo "Global Property Price to Income Ratio Ranking 2023," Taiwan ranks 16th with a house price-to-income ratio of 20.1. This means that, under the assumption of zero expenditures and saving every penny, it would take an individual 20 years to afford a house. It is noteworthy that this figure stands as the second-highest in record.

 

Numbeo's comprehensive statistical analysis encompasses 107 countries, with a noteworthy presence of 14 Asian nations among the top 20 rankings. Of particular interest, the top two nations in this ranking are Syria from Asia and Ghana from Africa, showcasing exceptionally high property price-to-income ratios of 86.7 and 78.6 respectively. This translates to an astounding 80% of an individual's income being allocated to cover housing costs. Neighboring city such as Populated Hong Kong records a ratio of 44.9, while first tier cities in China reach 34.6. South Korea holds the 11th position globally with a ratio of 26. Superficially, Taiwan's housing prices are comparatively more reasonable than those in South Korea and China, a more in-depth comparison reveals a substantial disparity in Taiwan. In contrast to nations like Japan, known for its comfortable living environment and Singapore, characterized by a narrow area, Taiwan's property price-to-income ratio appears notably high. Japan, the world’s third-largest economy, has a ratio of approximately 10.3, which is merely half of Taiwan's. Singapore, a city-state, ranks 36th globally with a ratio of 15.5.

 

The Democratic Progressive Party (DPP) government's commitment to "Residential Justice," a prominent slogan upon taking office, has not yielded significant improvements. Obviously the DPP government has failed in stabilizing housing prices. In fact, in comparison to 2013 when Taiwan's property-price-to-income ratio was 15.5, we have now surpassed Japan and South Korea. The average age of first-time homebuyers has increased by five years, from mid-thirties to forties. This predicament has become a substantial burden for people in Taiwan who grapple with monthly mortgage payments, leading to restless nightmares.

 

High-rent Housing

 

People are unable to buy or to rent houses, even affordable tenants are often exploited, constituting another nightmare for them.

 

People’s wallets continue to shrink due to low wages and the impact of inflation. In September 2023, Taiwan witnessed a seven-month high in the Consumer Price Index (CPI) annual growth rate. Wage increases struggle to keep pace with rising prices. According to a survey by the job-search website Yes123, 49.2% of the workforce, in assessing their financial situation, reveal that their monthly incomes are almost depleted by the end of the month, leading to a situation where they become 'barely making ends meet'. 28.1% of them need to borrow money to survive, trapped in a cycle of negative savings.

 

An analysis of the 2022 real estate registration reveals that skyrocketing property prices are no longer existed to Taipei alone. In the range of residential properties spanning from 20 to 70 ping (one ping equal to 35.5 square feet) in Taiwan's six municipalities, a total of 11 districts have experienced price increases exceeding 15%. The most remarkable of these is Taoyuan's Dayuan District, which witnessed a staggering 41.87% increase.

 

Other notable areas experiencing significant price surges include Jiali District (28.36%) and South District (27.68%) in Tainan City, and Fengyuan District (26.07%) in Taichung City. Additionally, Renwu District (24.83%) and Linyuan District (24.18%) in Kaohsiung City, as well as Dali District (20.9%) in Taichung City, have observed substantial price increases.

 

The exorbitant property prices have a ripple effect on the rental market, forcing many laborers to allocate a substantial portion of their incomes to landlords. While the government provides rental subsidies, Taiwan's rental black market remains a pressing concern. The government struggles to effectively track rental information, leading landlords to continue evading taxes. Despite the presence of rental subsidies, many landlords refuse to provide receipts to tenants and even raise rents to compensate for tax obligations. Consequently, numerous tenants lament that they can 'see' the rental subsidies but can't actually 'benefit' from them."

 

Perpetual Waiting

 

When President Tsai took office in 2016, she set an ambitious goal of constructing 200,000 units of social housing within 8 years. The Tsai administration proudly reported that by the end of August 2023, over 85,000 units of social housing had been built, with more than 58,000 units managed under a rental program.

 

However, data from the Social Housing Promotion Alliance paints a different picture. As of August 2023, the total inventory of "rent-only" social housing in Taiwan stood at a mere 21,528 units. This figure is alarmingly low, especially when considering that Taiwan had a total of 91.2 million housing units by the fourth quarter of 2021. This means that social housing accounts for only 0.23% of the nation's housing stock, highlighting a considerable shortfall in reaching the government's targets.

 

Regarding the direct construction of social housing, a significant portion of these efforts occurred during the tenure of former Taipei Mayor Ko Wen-je, with Taipei City now having 21,000 existing, newly completed, and in-progress social housing units. In contrast, the central government has only managed to establish a mere six units of social housing within Taipei City.

 

Kaohsiung City has been rapidly catching up in the last two years, but as of 2023, only 1,152 units are available for moving in, while the remaining 90% are either under construction or have not yet commenced. Tainan City's locally managed social housing program has a count of zero, ranking at the bottom among the six municipalities. New Taipei City has approximately 6,946 units of social housing, Taoyuan City boasts 3,995 units, and Taichung City follows with 2,912 units.

 

By the end of August 2023, the Ministry of the Interior announced a total of 80,079 units managed under a "rental program." However, it was later revealed that these figures were calculated based on the cumulative number of service recipients, leading to issues of double counting and misrepresentation. The actual number of units managed under this program stands at 58,954. The initial policy objective of this program was to address the issue of vacant housing. Unfortunately, the vast majority of these managed units were pre-existing rentals within the regular housing market, with very few truly vacant properties being transitioned into the program. Moreover, the purpose of the rental program was to prioritize assisting vulnerable households in the rental market. However, it has come to light that many program managers, in collaboration with landlords, have been sidelining these vulnerable tenants and have even been shifting regular rentals into the social housing program, undermining the intended purpose.

 

Solutions

Ko's Threefold Strategy: More Building, Vigorous Reform, and Heavy Subsidy

Building with Vigor (Social Housing)

 

Reducing the Sale of State-Owned Land: Until the social housing inventory reaches 5%, the sale of state-owned land will be decreased to prevent "government-led land speculation."

 

Long-term Lease Housing: Through Transit-Oriented Development (TOD) incentives and tax benefits, developers are encouraged to allocate a certain percentage of their projects to "long-term lease housing," thereby increasing access to social housing for young individuals, vulnerable groups, and the elderly.

 

Incentives for Youth and Seniors Housing Exchange: Developers who operate rental housing for senior citizens will receive government commitments within the welfare system and with the intervention of a rental program, collectively establishing an "exchange program" for youth and seniors.

 

Revitalization of Old Properties: Central government agencies will release idle or old properties and local governments will allocate budget to renovate and repurpose for a certain period of time. These repurposed buildings will be open for application by young individuals, vulnerable groups, and senior citizens. Local governments, in return, promise to grant land-use changes and volume incentives upon expiration, thereby expanding the virtuous cycle of affordable housing.

 

 

Establishment of a Nationwide Unified Waiting List System.

 

Vigorous Reforming (Taxation)

 

Tax Breaks for Owner-Occupiers: Lowering tax rates for single-family homeowners from 1.2% to a minimum of 0.6%.

 

Heavy Taxation for Property Speculators: Enacting national legislation to significantly increase progressive tax rates.

 

Tax Deductions for Landlords: Providing incentives to landlords to prevent rent increases due to taxe rising and encourage the release of more vacant properties.

 

Separate Taxation of Rental Income (reducing the shadow rental market and enabling government oversight of private housing).

 

Landlord Amnesty Clause (No tax arrears for landlords who honestly filing tax report and lower tax rates particularly under the category of public interest rentals).

 

Implementing a tenant reporting incentive mechanism to reduce the percentage of the shadow rental market.

 

Real Floor Area to Public Facilities Ratio: Transitioning from the "virtual floor area" system to the "real floor area" system to improve transparency and fairness in the public facilities ratio, safeguarding the rights of homebuyers.

 

Heavy Subsidies (Tenants)

 

Rent Subsidies for Tenants: Benefiting tenants by shifting tax deductions for rental expenses from general items to special deductions, increasing the deductible amount, thereby effectively reducing the burden on tenants.