The Inefficiency of Shared Equity Homeownership : Evidence from a Natural Experiment in Hong Kong

Shared equity homeownership is a housing finance model that uses public investments to subsidise families with modest incomes to purchase homes. However, the shared equity model is argued to constrain homeowners from moving because of its resale period and price restrictions. While many studies illustrated the association between housing subsidies and residential immobility, the causality has not been established due to endogeneity and self-selection biases. This study exploits a resales restriction waiver policy in the Hong Kong Home Ownership Scheme as a natural experiment to confirm that when the subsidised homeowners can resell their properties at market value without repaying the initial subsidies to the government, they are willing to sell their homes with the in-kind subsidy at a premium of 27.7% compared to the market price from prospective buyers