Imagine living in one of the world’s most expensive cities, where median home prices are 23.3 times median annual wages, yet nearly half the population resides in government-subsidized housing. Now consider this: every single household—whether in a luxury private apartment or a modest public rental unit—pays the same property rates. Welcome to Hong Kong’s unique approach to housing taxation, where property rates play a surprisingly limited role in the city’s affordable housing strategy. This article explores why Hong Kong maintains uniform property rates across all housing types, how this contrasts with international practices, and what this reveals about the city’s broader housing policy priorities.

Understanding Hong Kong’s Property Rating System

Property rates in Hong Kong are a recurrent tax levied quarterly on all properties, both residential and non-residential. The revenue collected forms part of the Government’s general revenue. Rates are charged as a percentage of the property’s rateable value, which represents the estimated annual rental value in the open market at a designated valuation reference date, assuming the property was vacant and available to let.

The Progressive Rating System (Effective 2025)

Hong Kong introduced a progressive rating system for domestic properties effective January 1, 2025, marking a significant shift from the previous flat-rate structure. This reform targets luxury properties while maintaining affordability for the vast majority of residents.

Temporary Rates Concessions

The Hong Kong government periodically provides rates concessions as part of its annual budget to ease financial burdens on residents. These are universal benefits applied to all rateable properties.

These concessions offset the rates payable for the first quarter only. If the quarterly rates payable do not exceed the concession ceiling, no payment is required for that quarter. Any unused portion cannot be carried forward to subsequent quarters.

Property Rates and Public Housing: The Hong Kong Reality

Hong Kong’s public housing system is one of the world’s most extensive, with nearly 50% of the population living in some form of public housing. Yet, despite this massive scale, there are no property rates exemptions for affordable housing.

Public Rental Housing (PRH): Tenants Pay Rates

Despite being subsidized housing for low-income families, PRH tenants are responsible for paying property rates on their units. Here’s how the system works:

• Average Monthly Rent: HK$2,297 (as of March 2024)
• Recent Adjustment: 10% rent increase effective October 1, 2024 (average increase of HK$230 per household)
• Rates Payment: Tenants pay property rates in addition to rent
• Concession Mechanism: The Housing Authority passes rates concessions to PRH tenants monthly by offsetting equivalent amounts from rent
• No Exemptions: There is no exemption from property rates for PRH units

Home Ownership Scheme (HOS): Owners Pay Like Private Owners

The Home Ownership Scheme provides subsidized home ownership opportunities for families who cannot afford private market prices. HOS flats are typically offered at approximately 70% of assessed market value (a 30% discount).

HOS owners pay property rates exactly like private property owners:

• Subject to the same rating structure (5% for RV ≤ HK$550,000; progressive rates for higher values)
• Eligible for the same rates concessions as all other property owners
• No special exemptions or reduced rates for subsidized housing status

International Comparison: Hong Kong’s Unique Approach

Hong Kong’s approach to taxing affordable housing through property rates is notably different from many OECD countries, where social housing often receives preferential tax treatment.

Unlike many OECD countries that use property tax exemptions as a tool to support affordable housing, Hong Kong maintains a uniform rate structure across all housing types. This reflects a policy choice to use other mechanisms—primarily land supply, direct subsidies through low rents, and land premium concessions—rather than property tax exemptions to address housing affordability.

The Real Levers of Housing Affordability in Hong Kong

While property rates apply to all housing in Hong Kong, they represent a minor component of the government’s housing affordability toolkit. The real policy levers lie elsewhere in much more impactful areas.

Land Premium: The Primary Government Lever

Land premiums—the charges levied by the government for land grants and lease modifications—are far more significant than property rates in determining housing affordability and government revenue:

• Land premium charges make up 50% of total development project costs
• Housing-related revenue (land premiums plus stamp duty) accounts for 27.4% to 42.0% of total government revenue in recent years
• For subsidized housing, the government can grant land at concessionary premiums, significantly reducing development costs

Stamp Duty Removal: A More Significant Policy Change

On February 28, 2024, Finance Secretary Paul Chan announced the immediate removal of all demand-side management stamp duties, a far more impactful policy change than rates concessions:

This stamp duty removal, designed to revive Hong Kong’s housing market after prices declined, represents a policy intervention orders of magnitude larger than annual rates concessions of HK$500-1,000 per property.

Direct Rental Subsidies: The Real Affordable Housing Tool

The Housing Authority’s primary affordability tool for PRH tenants is not rates relief, but exceptionally low rents:

• Average PRH rent: HK$2,297 per month (far below market rates)
• Even after the October 2024 10% increase, PRH rents remain a fraction of private market rents
• This direct subsidy through below-market rents dwarfs any potential benefit from property rates exemptions

1. Land Premium Policy: Most significant financial lever (27-42% of government revenue)
2. Direct Rent Subsidies: PRH rents far below market rates (~HK$2,300 vs. HK$15,000+ for comparable private units)
3. Land Supply and Housing Production: Fundamental to long-term affordability
4. Stamp Duty Policy: Major impact on transaction costs and market activity
5. HOS Purchase Price Discounts: 30-38% below market value
6. Property Rates: Minor lever; universal application with small concessions

The Policy Debate: Should Rates Support Affordable Housing?

While Hong Kong has introduced progressive rates for luxury properties (effective January 2025), there is ongoing debate about whether the rating system should do more to support affordable housing.

Arguments for Affordable Housing Exemptions

• International Precedent: Many OECD countries exempt or reduce property taxes for social housing
• Equity Concerns: PRH tenants with average monthly incomes far below market standards still pay property rates
• Progressive Taxation Principle: The 2025 introduction of progressive rates for luxury properties demonstrates policy appetite for using rates as a redistributive tool
• Symbolic Value: Exempting public housing from rates would signal government commitment to affordable housing as a social priority

Arguments Against Exemptions (Current Government Position)

• Minor Financial Impact: Rates represent a small fraction of housing costs compared to rent/mortgage payments
• More Effective Tools Available: Direct rent subsidies provide far greater benefit than rates exemptions
• Administrative Complexity: Creating exemptions would complicate the rating system
• Revenue Implications: With nearly 50% of the population in public housing, exemptions would significantly reduce government revenue
• Universal Benefit Approach: Current rates concessions benefit all property types without creating administrative burdens

Property rates in Hong Kong are applied uniformly across all housing types, with no exemptions or special treatment for affordable housing. This stands in notable contrast to many international jurisdictions where social housing receives preferential property tax treatment. While the 2025 progressive rates reform targets luxury properties, it provides no direct relief to affordable housing residents. The government’s decision not to use property rates as an affordable housing tool reflects a calculated policy choice: with direct rent subsidies saving PRH tenants HK$144,000-180,000 annually per household, the potential HK$1,500-2,000 annual benefit from rates exemptions is marginal by comparison. Ultimately, property rates remain a minor component of Hong Kong’s housing affordability challenge, with real solutions lying in increased land supply, accelerated housing construction, and robust direct subsidy programs.