Under laissez faire free economy, the Hong Kong government has applied different measures to ensure affordability in Public Rental Housing (PRH), in rent setting as well as various subsidised-ownership programmes. The Hong Kong Housing Authority (HKHA) is responsible for carrying out the supply-side subsidy approach by providing heavily subsidized public rental housing for the lower end populace, which is the main subsidy prevailing for the lower end tenants. Therefore, the public housing rent setting and affordability issue are closely related in Hong Kong context. To ensure the affordability among households, the HKHA has adopted the "median rent-to-income ratio" (MRIR). However, the MRIR measurement has drawbacks both in setting rent and to ensure affordability. It is difficult to address the demands of needy tenants under MRIR measurement. The influence of economic factors such as the GDP, inflation rate, and unemployment rate on the PRH rent has not been clearly addressed in the current rent setting policy. There is a strong demand for affordable housing in the lower end of the market. In addition, the construction of public housing by HKHA may pose a huge burden on the government in the long run. Economic and market factors could assist as a financial safeguard for the lower end tenants based on the tenants' affordability and also help to reduce the financial burden on the HKHA. Most of housing affordability research has been focused on the micro-level which link housing affordability of an individual household with their housing and household circumstances. The attempts to link housing affordability and rent with economic and market factors, at the macro-level, have been largely under researched. However, the dynamic movements of economic indicators like economic growth, inflation, unemployment rate have direct impacts on the income and rent of the lower end tenants. Therefore those economic indicators need to be considered in rent setting to ensure affordable rent for the lower end populace. The top down practice of the rent setting policy based on the HKHA's assessment of rent affordability, does not incorporate the tenants own prioritization of the micro level factors, which could be considered to impact rent and affordability.;This study intends to identify the major factors that influence PRH rent and affordability. The major considerations in this regard are macro-level factors such as the economic and market movements and also the micro-level factors such as household characteristics, consumption patterns, and tenants' preferences regarding their affordability. The economic and market factors are evaluated based on analysis over time. The regression analysis over time is carried out for reasoning and predicting the current trend of the PRH rent as influenced by the market and economic factors. The micro-level factors based on tenants' preferences and conditions are evaluated based on cross-sectional analysis. The cross-sectional analysis helps to identify the tenants' own view regarding their rental affordability factors. The findings of regression analysis over time suggest that economic and market factors, for example, unemployment rate, median household income, market rent and property price have a significant impact on PRH rent that consequently influence the affordability of the lower end tenants. The findings of the cross-sectional analysis suggest that rent, housing expenditure, non-housing expenditure, location, space consumption and maintaining a quality housing environment have major impacts on the housing affordability of tenants.
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