LegCo Paper No. CB(1) 1317/96-97
(These minutes have been seen
by the Administration)
Ref : CB1/PS/10/95/1

LegCo Panel on Housing
Subcommittee on Long Term Housing Strategy Review

Minutes of meeting held on Thursday, 20 February 1997, at 8:30 am in Conference Room A of the Legislative Council Building

Members present :

    Hon LEE Wing-tat (Chairman)
    Hon Albert CHAN Wai-yip
    Hon Frederick FUNG Kin-kee
    Hon CHAN Yuen-han

Members attending:

    Hon CHAN Kam-lam (Non-Subcommittee Member)
    Hon SIN Chung-kai (Non-Subcommittee Member)

Members absent :

    Hon Mrs Selina CHOW, OBE, JP
    Hon Ronald ARCULLI, OBE, JP
    Hon LEUNG Yiu-ching
    Hon LO Suk-ching
Public officers attending :
    Housing Branch

    Mr Andrew R Wells
    Deputy Secretary for Housing
    Miss Sandy CHAN
    Principal Assistant Secretary for Housing
    Miss L K LAM
    Chief Assistant Secretary for Housing

    Housing Department

    Mr Y L CHAN
    Senior Assistant Director/Housing Administration
Clerk in attendance :
    Miss Odelia LEUNG
    Chief Assistant Secretary (1)1
Staff in attendance :
    Miss Becky YU
    Senior Assistant Secretary (1)3

I Confirmation of minutes of previous meeting

(LegCo Paper No. CB(1) 465/96-97)

The minutes of the meeting held on 29 October 1996 were confirmed.

II Chapter 6 - Providing public rental housing for those in genuine need

2. The Chairman advised that this meeting was the first of a series of meetings scheduled for the examination of recommendations in the Consultative Document (CD) on Long Term Housing Strategy Review (LTHSR).

3. At the invitation of the Chairman, the Deputy Secretary for Housing (DS for H) highlighted salient points in the Chapter. He said that despite the considerable and growing amount of resources which had been committed each year to providing public rental housing (PRH), there still remained a substantial number of inadequately housed families who were in genuine need of PRH. On the other hand, many PRH tenants who were no longer in genuine need of housing subsidy were paying a relatively smaller proportion of household income in rent for better accommodation in the public sector than those needy families living in sub-standard accommodation in the private sector. The objective of the Chapter was to identify the means by which public housing resources could be effectively mobilized to help those in genuine need for housing assistance. Subject to public opinions collated during the consultation period which would run until the end of May 1997, the Administration would make final decisions on the LTHSR.

Common eligibility criteria

4. Some members expressed disappointment at the absence of specific housing policies on legal immigrants from China as opposed to the availability of education and other social services by relevant government departments. DS for H emphasized that the Administration had taken into account the projected number of new immigrants from China in forecasting the overall housing demand. Nevertheless, legal immigrants were required to satisfy the seven-year residence rule before they would become eligible for public housing. The Chief Assistant Secretary for Housing (CAS for H) supplemented that based on an analysis of past statistics, it was estimated that 9,000 of the 55,000 legal immigrants entering Hong Kong each year would become heads of unextended nuclear families upon arrival. Of these, about 5,000 households would enrol in the General Waiting List (WL). A member considered the present residence requirement for public housing too stringent as compared with overseas countries; he urged the Administration to provide more housing assistance such as interim housing to those immigrants in need before they became eligible for PRH. Another member was of the view that the existing majority rule might encourage legal immigrants to give birth to more children upon entering Hong Kong in order to qualify for PRH which would have serious implications on educational and medical resources in the long term. The situation would be aggravated after 1 July 1997. He considered it necessary for the Administration to relax the eligibility criteria for PRH so that only heads of households were required to satisfy the seven-year residence rule. While acknowledging members’ concerns, DS for H advised that divergent views had been received on the merits of relaxing the residence rule on legal immigrants. The important point was to strike a balance between the interests of permanent residents and legal immigrants. The Senior Assistant Director/Housing Administration (SAD/HA) supplemented that the prevailing residential requirement for PRH had been generally accepted by the public.

5. As to whether the Administration would consider shortening the average waiting time for PRH further by the year 2006, DS for H advised that the Administration had to take account of the results of public consultation on the recommendations in the CD including, inter alia, the provision of sufficient land to meet flat requirements, and the promotion of home ownership amongst PRH tenants to release more PRH flats for re-allocation before reaching a more meaningful average target waiting time. The Chairman remarked that a further pledge on the waiting time would be a driving force for the Administration to speed up production targets for PRH.

6. While agreeing that all prospective tenants should be required to undergo a comprehensive means test covering both income and net assets before allocation of PRH, and that better-off tenants should be encouraged to move out of PRH, a member considered that drastic changes to the existing housing policy such as means-testing the adult family members of a deceased principal tenant before the grant of a new tenancy and forcing out sitting tenants to recover more PRH flats for re-allocation should be avoided. The long-term solution would be for the Administration to increase flat supply to meet housing demand. Another member however took a different view and was opposed to the means test as the restrictions on income and possession of domestic properties under the current eligibility criteria for PRH were already sufficient. He also questioned the lack of recommendations on rent assistance for WL applicants in the CD. In response, DS for H assured members that the Administration would adopt a progressive approach to narrow the gap between the indigent and the better-off tenants, and that the effect of the means test would be carefully assessed. As regards rent assistance, DS for H said that the Administration had clearly explained at the motion debate on 22 January 1997 the reasons for opposing such a proposition.

Affordable rent

7. Some members considered the proposal under paragraph 6.21 for increasing the median rent-to-income ratio (MRIR) for PRH from the current average of 9% to 15% or 18.5% a drastic change to the existing housing policy. They sought clarification on the basis upon which these MRIRs had been arrived at and the reasons for such an increase. DS for H emphasized that the MRIRs referred to were the prevailing criteria adopted by the Housing Authority (HA) in determining the levels of rents for different types of PRH estates. These had been devised having regard to the rent levels for comparable flats in the private sector and in other developing countries where the average MRIR was 20%. The objective of paragraph 6.21 was to ensure that rents for PRH would be maintained at realistic and yet affordable levels. SAD/HA supplemented that as the rent increases in PRH over the past years had not kept pace with the rise in real incomes, the current MRIR of 9% could no longer reflect tenants’ ability to pay. Furthermore, low rents coupled with the rising standards of PRH were major disincentives for better-off tenants to move out of PRH. To ensure a more equitable allocation of the limited housing resources, the Administration had proposed to gradually increase public housing rents to achieve the MRIRs of 15% and 18.5% for the relevant space allocation standard over the period to 2006. A Central Investigation Team had also been formed to step up investigation into abusive use of PRH flats. CAS for H added that the appropriateness of the MRIRs for setting rent would be reviewed having regard to public opinions collated during the consultation period.

8. The Chairman was not convinced of the Administration’s response and was of the view that the high recurrent costs incurred in maintaining and managing PRH estates was the main reason for rent increases. He considered the proposal for increasing rents for existing PRH estates to achieve the MRIRs of 15% or 18.5% at variance with paragraph 6.1 of the Report of the Ad Hoc Committee to Review Domestic Rent Policy and Allocation Standards (the Report) which stated that it would be unfair to suggest that tenants who had been allocated PRH flats according to the prevailing standards should be required to pay rent at a MRIR of 18.5%. Another member pointed out that the Report proposed that domestic rents should be set at a level not exceeding MRIRs of 15% and 18.5%; these were not the target ratios. He was worried that PRH tenants, in particular those in older estates, would suffer from exorbitant rent increases upon implementation of proposals in the CD. By way of illustration, the average domestic rent for a PRH flat would be increased from $1,200 to $2,400 were MRIR to rise from the current average of 9% to 18.5% in 2006, and to an aggregate of $4,800 to take account of inflation over the period. This would mean a total rent increase of $3,600. On the basis of a biennial rent review system, tenants would have to cope with an increase of $720 in every two years over the period to 2006.

9. SAD/HA considered that there was no inconsistency between the CD and the Report as the 15% and 18.5% were the ceiling MRIRs for the allocation standards of 5.5 and 7 square metres per person respectively. DS for H reiterated the Director of Housing’s recent remarks that the MRIRs referred to were long-term objectives to be achieved over a period of ten years. Apart from tenants’ affordability which was the prime consideration in determining the levels of rents, other factors such as the comparable values and the location of estates would also be taken into consideration. He said that domestic rents in many older estates would be unlikely to reach the MRIR of 15% even in ten years having regard to their relative low estate values. Furthermore, the impact of rent increases would become less significant as most of these old estates would be demolished by the year 2006. CAS for H considered the rent increases projected by the member in the preceding paragraph unrealistic as these failed to take account of the increase in average household income which would rise to about $30,000 under the circumstances suggested by the member.

10. A member was worried that the Administration would adjust the allocation standards in order to achieve the target MRIRs. For example, PRH tenants receiving rent assistance for two years would be transferred to smaller units so that they could pay less rent. DS for H stressed that the Administration had no intention of changing the allocation standards as this would in turn affect the average waiting time for PRH. SAD/HA clarified that tenants under the Rent Assistance Scheme for two years would only be required to take up cheaper but self-contained accommodation in the same district upon transfer, and that the minimum space allocation standard of 5.5 square metres per person would be strictly adhered to.Admin

11. In reply to members on the anticipated rent increases up to 2006 in different types of PRH estates, DS for H advised that it would be premature to give indicative rent increases for individual estates or group of estates at the present stage. Furthermore, the CD was intended to be strategic in nature and many operational details had yet to be worked out. He reiterated that tenants’ affordability would remain the prime consideration in determining the levels of rents, and there was also the upper ceiling that rent should not exceed 25% of the household income. Some members considered it imprudent for the Administration to come to a conclusion on rent increases in the absence of statistical support. They emphasized a need for the Administration to review the roles of both private and public housing including PRH, Home Ownership Scheme and Sandwich Class Housing Scheme and to undertake a comprehensive social impact study to ascertain the implications of rent increases on the socio-economic situation of Hong Kong. To facilitate members’ understanding, the Administration was requested to provide the MRIRs of all PRH households according to the results of the 1996 Population By-census.

12. As to whether the Administration would consider leaving the subject of public housing rent for HA to decide, DS for H advised that the CD aimed at providing a broad housing framework within which HA could devise its own operational practices. SAD/HA supplemented that HA would carefully study the feasibility and impact of the recommendations in the CD and would revert back to the Administration during the consultation period.

III Any other business

13. There being no other business, the meeting closed at 10:40 am.

Legislative Council Secretariat
17 April 1997

Last Updated on 20 August 1998