Subcommittee on Long Term Housing Strategy Review (Minutes) 22 April 1997

LegCo Paper No. CB(1) 1829/96-97
(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 Tuesday, 22 April 1997, at 4:30 pm in Conference Room B of the Legislative Council Building

Members present :

    Hon LEE Wing-tat (Chairman)
    Hon Albert CHAN Wai-yip
    Hon LEUNG Yiu-ching

Member attending :

    Hon CHAN Kam-lam (Non-Subcommittee Member)

Members absent :

    Hon Mrs Selina CHOW, OBE, JP
    Hon Ronald ARCULLI, OBE, JP
    Hon Frederick FUNG Kin-kee
    Hon CHAN Yuen-han

Public officers attending :

    Housing Branch

    Mr David K Gibson,
    Principal Assistant Secretary for Housing (Housing

    Miss Sandy CHAN,
    Principal Assistant Secretary for Housing (Consultation)

    Miss L K LAM,
    Chief Assistant Secretary for Housing

    Housing Department

    Mr Y C CHENG,
    Assistant Director (Policy)

    Mr Y K CHENG,
    Chief Housing Manager (Applications)

Clerk in attendance :

    Mrs Vivian KAM,
    Assistant Secretary General 1 (Acting)

Staff in attendance :

    Miss Becky YU,
    Senior Assistant Secretary (1)3

I.Confirmation of minutes of previous meetings

(LegCo Papers No. CB(1) 1317 and 1318/96-97)

The minutes of the meetings held on 20 February and 10 March 1997 were confirmed.

II.Chapter 5 -- Encouraging wider home ownership

(LegCo Paper No. CB(1) 1126/96-97)

2. In response to the Chairman, the Principal Assistant Secretary for Housing (Housing Strategy) (PAS for H (HS)) said that the objective of the Chapter was to identify the means by which home ownership in the community could be enhanced. A key priority would be to encourage more public rental housing (PRH) tenants to become home owners as this would help to release rental flats for re-allocation to families in greater need for PRH. To this end, the Administration had proposed to: allow PRH tenants to buy Sandwich Class Housing (SCH) flats on equal terms as households in private housing; sell existing rental flats to PRH tenants at affordable prices; extend the "transfer block" scheme to increase the opportunities for home purchase among public and qualified prospective PRH tenants; and offer a monthly mortgage subsidy in the first three years to Comprehensive Redevelopment Programme (CRP) tenants who chose to buy new rental flats in reception estates. Furthermore, the proposed establishment of the Mortgage Corporation (MC) would provide an additional source of finance for the growing property sector and would help to boost the overall home ownership rate in the community. Subject to public views collected during the consultation period which would run until the end of May 1997, the Administration would take final decisions on the Long Term Housing Strategy Review (LTHSR).

Expanding the Home Ownership Scheme (HOS)

3. As regards the pledge in paragraph 5.12 to build 175,000 flats for sale during the period from April 1995 to March 2001, the Chief Assistant Secretary for Housing (CAS for H) and the Chief Housing Manager (Applications) (CHM(A)) advised that only 36,000 HOS and PSPS flats had so far been produced over the past two years. However, the Administration was confident that the pledge could be achieved as production was scheduled to increase substantially towards the end of the period. CAS for H suggested that the subject of flat supply could be further examined when Chapter 3 was discussed at the next meeting on 24 April 1997. She nevertheless undertook to provide as far as possible a breakdown of the number of flats already produced and to be produced during the period.

4. Some members expressed reservations at the proposed mortgage subsidy arrangement for CRP tenants in the purchase of flats in "transfer blocks" as outlined in paragraph 5.15. They considered the total subsidy of $162,000 too substantial as this represented almost the construction cost of a PRH flat. They also noted that tenants concerned were not required to repay the Housing Authority (HA) should they re-sell their flats after the three-year period. CHM(A) clarified that endorsement had yet to be obtained for implementation of the mortgage subsidy arrangement. CAS for H supplemented that the objective of the proposal was to reduce the demand for PRH flats among eligible CRP tenants by encouraging them to purchase flats in reception estates. Based on past statistics, 22% of CRP tenants had indicated interest in buying flats in "transfer blocks" if financial incentives were available, or HOS flats if these were offered in the same district. The proposed mortgage subsidy arrangement would help to facilitate the allocation of public housing resources to those in genuine need.

5. A member suggested increasing the cash allowance for one and two-person households under the CRP so that they could take up other forms of accommodation, thus alleviating the pressure on demand for PRH flats. CHM(A) welcomed the member’s suggestion and advised that the Administration would take account of the new Portable Comprehensive Social Security Assistance Scheme in considering the cash allowance in question.

6. As to whether the Administration would consider adjusting the ratio between Green Form (GF) and White Form (WF) applications in order to meet the unsatisfied demand for home ownership amongst WF applicants, CHM(A) explained that the current ratio of 80% GF : 20% WF had been arrived at having regard to the shortfall in PRH supply over the past few years. This would be reviewed in 1998 in the light of sales in HOS Phase 20B. Unsuccessful applicants had been given an extra number from HOS Phase 18C onwards with a view to increasing their chances at the next sales exercise. Some members were concerned about the abuse of GF priority status by sitting tenants taking into account the low take-up rate of 56%. CHM(A) acknowledged members’ concern but advised that as PRH tenants aimed at improving their living conditions, they would prefer to wait should the size and location of the HOS flats failed to meet their expectation.

Providing new opportunities for public housing tenants

Sale of Sandwich Class Housing flats

7. As for the target production of 30,000 SCH flats by 2003, CAS for H advised that this figure had regard to both the estimated demand and administrative capacity of the Housing Society; sites for 24,000 flats had so far been granted or earmarked. The Administration would take account of the results of the 1996 By-census and the Survey on Housing Aspirations to be released in mid-1997 in reviewing the demand for the remaining balance of 6,000 SCH flats.

8. Referring to paragraph 5.20, a member expressed reservations at the proposal of allowing PRH tenants to apply for the purchase of SCH flats on equal terms as families living in private housing as this would reduce opportunities for the latter. CAS for H explained that based on past statistics, demand for both SCH and HOS flats exceeded supply by four and 36 times respectively. The long-term solution would be to increase flat supply to meet demand. The proposal in question aimed at encouraging better-off PRH tenants to move out of subsidized housing, thus releasing flats for re-allocation to other families in greater need. This would also increase the opportunity of other applicants, including WF applicants, for HOS flats. The member considered the Administration’s response unconvincing and suggested that one possible solution to encourage home ownership amongst WF applicants would be to lower the income limit for SCH. To facilitate members’ understanding of the situation, the Administration undertook to provide information on the number of eligible applicants under the scheme and the prevailing income level of SCH flat owners.

9. Some members sought clarification on the criteria adopted by the Hong Kong Housing Society (HKHS) in setting prices for flats under the SCH, Flats for Sale and Urban Improvement (UI) Schemes, in particular those UI flats which were pegged to market prices as was the case with the Jubilant Garden. They were not convinced that as one of the Government’s major housing delivery agents, HKHS should make reference to market value in setting prices for flats. A member asked if the Administration would consider making up the difference in land premium for UI projects so that these could be converted to SCH flats to meet outstanding demand. CAS for H stressed that HKHS was a private organization running on prudent commercial principles; it had to ensure that sufficient funding was available to finance its future housing projects. She nevertheless undertook to provide a copy of the HKHS Annual Report so that members could have a better understanding of the operation of HKHS.

10. As to whether the Administration would consider providing mortgage subsidy to SCH flat owners facing temporary financial hardship, PAS for H (C) emphasized that applicants’ affordability had been taken into account in determining the sale prices for SCH flats; the current guideline was that mortgage repayment should not exceed 50% of the median income of SCH applicants. Until the end of last year, there had been two default cases under SCH. CAS for H undertook to provide information on the basis upon which guideline had been arrived at, but cautioned that the proposed subsidy if implemented would have a significant financial implication as this would not be restricted to SCH flat owners only.

(Post-meeting note: The Administration has clarified that there had been no default cases under SCH so far; the two default cases mentioned at the meeting referred to the flat-for-sale scheme also operated by the Housing Society.)

Sale of rental flats to tenants

11. Having regard to the construction cost of about $200,000 for an average PRH flat, members questioned the rationale for setting the sale price of PRH flats at $600,000 as reported by the media. The Assistant Director (Policy) clarified that the sale prices had yet to be worked out by HA. Some members considered it necessary for the Administration to advise the weightings of the replacement cost, depreciation and the relative value in determining the sale price of flats as these were essential in facilitating the public’s understanding of the scheme. They also sought clarification on the anticipated sale price of flats in a number of selected PRH estates of different types and years of completion. PAS for H (HS) stressed that the Consultative Document on LTHSR was intended to be strategic in nature and the recommendations contained therein were only preliminary proposals which would require further discussions with all parties concerned. The objective of paragraphs 5.21 to 5.24 aimed at reaching an agreement in the community on the principle of the proposal as PRH flats were public assets. Although the Administration was of the view that replacement cost which included the costs of land development, construction and overheads should be adopted in determining the sale price of PRH flats, the precise formula for depreciation and relative value had yet to be worked out. He cautioned that it would be both dangerous and inappropriate to give indicative prices at the present stage as the success of the scheme would hinge on a number of factors such as the investment potential of the flats concerned, tenants’ affordability and ability to borrow. PAS for H (HS) assured members that HA would take account of public views collected during the consultation period before working out the details to ensure that these were both acceptable and workable. At the Chairman’s request, the Administration undertook to provide a breakdown of charges including management, maintenance, crown rent and rates payable for an average PRH flat.

12. As regards resale restrictions, PAS for H (HS) agreed that these would have a significant bearing on the attractiveness of the scheme as tenants were concerned about the future value of their assets. He assured members that the Administration would take into consideration all views expressed before taking a final decision.

Mortgage Corporation

13. Some members were of the view that the Administration should encourage MC to promote mortgage loans to owners of older buildings by relaxing mortgage restrictions on these buildings. PAS for H (HS) explained that MC had to operate on prudent commercial principle on the purchase of mortgage loans from authorized banks and deposit taking companies for onward sale to long-term investors such as retirement funds. PAS for H (HS) nevertheless undertook to relay members’ concern to the MC for consideration. Members remarked that as owners of older buildings had difficulties in obtaining mortgage for their properties at present, they might be willing to bear a higher interest rate.

III.Any other business

14. The Chairman reminded members of the next meeting on Thursday, 24 April 1997, at 12:30 pm.

15. The meeting ended at 6:05 pm.

Legislative Council Secretariat

11 June 1997

Last Updated on 20 August 1998