According to a recent survey by the Directorate-General of Budget, Accounting and Statistics, more than 7.3 million of the 8.6 million households in Taiwan owned their home in 2017, representing a home ownership rate of almost 85 percent.
Taiwan has one of the highest home ownership rates in the world, while social housing accounts for 5 percent, and the trend toward home ownership is increasing. Because of this, Taiwan’s rental market is quite small, about 10 percent.
The high home ownership rate reflects the fact that Taiwanese have not valued renting as a housing choice in the past, and that city governments have not invested enough in rental housing through policy frameworks that generate the belief that owning a house is better than renting one.
It is time for Taiwan to consider increasing the amount of rental housing available.
Generally, there are four myths associated with home ownership:
The first is that in a market economy, real estate is generally a great investment option; it can generate passive income and can be an excellent way to accrue wealth if the value increases over time.
This might be true for some housing investors that bought a home at the right time, in the right place and at the right price.
Investing in hosing is actually much riskier than having a term deposit in a bank.
A study titled “Problems of Home Ownership” published in the Taiwan Review on May 1, 2007, said that house prices fell by 20 percent in Taipei and 50 percent in southern Taiwan following the collapse of the stock market in the spring of 1990.
Only in 2005 did the market begin to move again.
Sinyi Real Estate’s planning and research division said that house prices once again decreased substantially in 2009 and 2016, due to the global financial crisis that began in 2008.
The second myth is that if you want a family you need to buy a home as early as possible.
A recent survey of young women found that the majority of them would like to get married to men who own houses. Being good looking is no longer important. This reflects the real value of home ownership. Many Europeans and Americans share the same idea: Buying a home is considered a cultural rite of passage.
As mentioned before, renting is not valued as a housing choice in Taiwan, so access to more high-quality, affordable rental homes is limited, reinforcing the belief that owning a home is better than renting.
The third myth is that for many people home ownership equals stability, which drives people to buy their own home, even if it creates a precarious financial situation for the household.
Many people regard renting as transitional housing, so buying a home is their ultimate goal, along with graduating from a university or finding work, and they try to buy a home as early as possible.
The final myth is that buying a home provides greater security, more freedom, a financial advantage and therefore more satisfaction.
However, Switzerland offers a counterpoint.
Switzerland has one of the world’s lowest home ownership rates. Statistics from Business Fondue show that the home ownership rate in Switzerland was only 42 percent in 2017, compared with 97 percent for Romania, 91 percent for Singapore, 77 percent for Spain, 65 percent for France, 63 percent for the UK, 58 percent for South Korea and 52 percent for Germany.
In several Swiss cities, the vast majority of homes are rentals.
A Swiss Federal Statistical Office report published in March last year said that in Geneva about 91 percent of residents were tenants, in Lausanne 90 percent and in Zurich 89 percent.
It is said that Romania is a nation of home owners, while Switzerland is a nation of tenants.
Despite Switzerland having the lowest home ownership rate in the Western world, it has a much higher housing satisfaction rate than the European average.
The same is true in Germany, which has one of the lowest home ownership rates in Europe at 52 percent, but one of the highest housing satisfaction rates at 93 percent.
This is because most people in Switzerland and Germany live in a home that has been purposefully built as rental housing: high quality, well designed and well-maintained housing in excellent neighborhoods that a person can rent for their lifetime.
We need more housing in Taiwan, but city governments no longer need to promote ownership to those who cannot afford it. Instead, they should be creating policies that will allow for more affordable housing.
The housing market needs to be reoriented toward high-quality, well-designed rental homes by dispelling the myths that have created Taiwan’s skewed housing market.
To have affordable rental homes, city governments need to provide appropriate sites in nice areas for high-quality rental housing and zone them specifically for renting. As in Germany, Switzerland and Canada, city governments must offer construction and financing for purpose-built rental property.
To establish an affordable rental housing market, Taiwan should learn from the experiences of countries with high-quality, well-designed rental housing.
A regulatory agency must be created, similar to the Landlord and Tenant Board in Ontario, Canada, to specify rental rules and laws to protect private residential rental units, including those in single and semi-detached houses, apartments and condominiums.
The agency would be entitled to have legal authority over certain matters.
It would provide a standard, easy-to-understand lease for the landlord and tenant to use. The lease would include information such as the rental fee and when it is due, what is included in the rent, and rules or terms about the rental unit or building.
It would also specify the tenant’s and landlord’s rights and responsibilities, including who is responsible for maintenance and repairs.
It would also provide rent increase limits every year. For most tenants, the rent would not go up by more than stated in the rent increase guidelines. This would apply to most tenants living in rented houses, apartments and condos.
In most cases, landlords could only raise the rent once a year and would have to give tenants 90 days written notice.
The agency would provide eviction rules for landlords to follow. A landlord could only evict tenants in a specific situation and must give tenants written notice using a form provided by the agency. The form would provide the reason for the eviction.
The agency would be equipped with tribunals for landlords and tenants to settle their disputes at a minimum administrative expense. The agency would issue a decision right the way.
If rental housing units are purpose-built and under the protection of the law, people would likely be willing to rent houses or apartments for their lifetime, without a large impulse to move unless they choose to do so.
Also, those in the rental industry could earn a decent rate of return on their investments. The rental housing industry in Taiwan should be sustainable.
Lee Po-chih is professor emeritus of economics and former vice president of National University of Kaohsiung.
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