Legislative Council

LC Paper No. CB(1) 915/98-99
(These minutes have been seen
by the Administration)

Ref: CB1/PL/HG/1

Panel on Housing

Minutes of meeting
held on Monday, 7 December 1998, at 4:30 pm
in Conference Room A of the Legislative Council Building

Members present :

Hon LEE Wing-tat (Chairman)
Hon Gary CHENG Kai-nam (Deputy Chairman)
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon LEE Cheuk-yan
Hon Fred LI Wah-ming
Hon NG Leung-sing
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon Ronald ARCULLI, JP
Hon James TO Kun-sun
Hon Christine LOH
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon Andrew WONG Wang-fat, JP
Dr Hon YEUNG Sum
Hon LAU Kong-wah
Hon Andrew CHENG Kar-foo
Hon TAM Yiu-chung, JP

Members absent :

Hon Edward HO Sing-tin, JP
Hon Albert HO Chun-yan
Hon LEUNG Yiu-chung
Hon Timothy FOK Tsun-ting, JP

Public officers attending :

For item IV

Housing Bureau

Deputy Secretary

Miss Sandy CHAN,
Principal Assistant Secretary

Housing Department

Business Director/Allocation and Marketing

Mr LEE Chu-yin,
Chief Housing Manager (Redevelopment)

Lands Department

Mr Bernard CHAN,
Chief Estate Surveyor (Estate Management)

For item V

Housing Bureau

Deputy Secretary

Miss Sandy CHAN,
Principal Assistant Secretary

Housing Department

Business Director/Commercial & Services

Mr Deryk YIM,
Chief Estate Surveyor/Commercial Properties

For item VI

Housing Bureau

Deputy Secretary

Miss Sandy CHAN,
Principal Assistant Secretary

Housing Department

Business Director/Allocation and Marketing

Mr C P Roberts,
Assistant Director/Tenants Purchase Scheme

Clerk in attendance :

Ms LEUNG Siu-kum,
Chief Assistant Secretary (1)2

Staff in attendance :

Miss Becky YU,
Senior Assistant Secretary (1)3

I Confirmation of minutes of previous meeting
(LC Paper No. CB(1) 505/98-99)

The minutes of the special meeting held on 13 October 1998 were confirmed.

II Information paper issued since last meeting

2. Members took note of a submission from the Coalition of Owners of Problematic PRC Uncompleted Properties and a letter from the Concern Group on the Rights of Owners of Park Belvedere to the Housing Society circulated vide LC Paper Nos. CB(1) 529 and 561/98-99 respectively.

III Date of next meeting and items for discussion

3. Members agreed that the next meeting would be held on Monday, 4 January 1999, at 4:30 pm to discuss the following:

    - Rehousing policy for clearees of Temporary Housing Areas;

    - Rehousing arrangements for elderly households affected by redevelopment of public housing estates; and

    - Contracting out of the management of public rental housing estates.

IV Funding support for clearance of Temporary Housing Areas and Cottage Areas
(LC Paper No. CB(1) 562/98-99(01))

Clearance of Temporary Housing Areas

4. Mr Fred LI enquired about the clearance time-table for the six Temporary Housing Areas (THAs) referred to in the funding proposal and the names of the reception estates. In reply, the Chief Housing Manager (Redevelopment) stressed that the pace of clearance would hinge on the availability of re-housing resources. It was therefore not appropriate to disclose details of the clearance programme prematurely as this might create false hopes among the residents in the event of slippage. He assured members that residents concerned would be notified 15 months prior to the actual clearance so that they could make necessary arrangements. As to whether the Housing Department (HD) could clear all THAs by the end of 2000, Business Director/Allocation and Marketing (BD/A&M) advised that the Administration was confident that all THAs could be cleared as pledged given the significant decrease in the number of THA residents. Mr LAU Kong-wah and Dr YEUNG Sum however requested the Administration to state in the paper submitted to Finance Committee that all THAs would be demolished by 2000/01.Admin

Clearance of Cottage Areas

5. As residents in some Cottage Areas (CAs) were negotiating with HD on compensation upon clearance of their CAs, members expressed concern that any decision which the Panel might have on the funding proposal now would affect the bargaining position of these residents. In response, the Deputy Secretary for Housing emphasized that demolition and compensation were two separate issues. The current proposal only aimed to enable HD to plan ahead for the demolition work. The discussion on compensation between HD and CA residents could still be carried on after the funding proposal was approved. The Principal Assistant Secretary for Housing supplemented that the Administration had considered CA residents' requests and was prepared to accord first Green Form priority to these residents and to exempt them from the income-cum-asset test before admission to public rental housing upon clearance of CAs. Legal advice on compensation had also been sought which confirmed that CA residents were not eligible for compensation since they were not owners of the land. However, as residents concerned claimed that they had new evidence to prove their ownership of the land, the Administration needed to consider such evidence before reaching a final decision on compensation.

6. In view of the latest development, members asked if the Administration would consider submitting the proposal after the dispute on compensation had been resolved. BD/A&M cautioned that any delay in funding allocation would affect the entire clearance programme for THAs and CAs. He pointed out that CA residents could still take separate action on compensation after re-housing if they could provide sufficient evidence to substantiate their claims.

7. The Chairman asked if ex-gratia allowance would be given to CA residents for loss of their structures. BD/A&M advised that ex-gratic allowance had only been offered to former Tiu Keng Leng CA residents on account of their special historical background. Apart from that, no other CA clearees would be eligible for such allowance.

8. In order not to delay the clearance programme of THAs, members requested and the Administration agreed to submit a separate funding proposal solely for clearance of THAs for consideration of the Finance Committee. In the meantime, the Administration was urged to liaise with the CA residents concerned with a view to reaching a consensus on compensation.

V Rent reduction for commercial premises in public housing estates
(LC Paper No. CB(1) 562/98-99(02))

Results of rent reassessment

9. Mr NG Leung-sing noted that 1,209 out of the 9,400 eligible tenants had not applied for rent reassessment. He asked if these tenants were dissatisfied with the reassessment exercise and how many of them, by respective trades, had served notice to quit to the Housing Authority (HA). The Chief Estate Surveyor/Commercial Properties (CES/CP) responded that although HA received notices to quit from tenants from time to time, there was no sign of increase in the number of such notices as a result of the rent reassessment scheme. As regards their respective trades, CES/CP advised that it was difficult to provide further precise information as they comprised a wide range of trades.

10. While acknowledging that tenants dissatisfied with the results of rent reassessments could request for a review with the provision of supplementary information, including assessments conducted by surveyors in the private sector, some members expressed concern on how a final rent was determined given that the reassessed rents between HD and the private surveyors could be very different. CES/CP replied that when conducting rent reassessment, HD would take into account the special characteristics of individual premises of different public housing estates such as the trade, location, size, catchment and pedestrian flow. However, as such information was not available for private surveyors, they would tend to assess rent with reference to the market conditions in the private sector and therefore arrive at different assessment results. Nevertheless, HD would study very carefully the valuation reports provided by tenants and, if necessary, exchange views with the private surveyors concerned. HD was prepared to revise its own assessment on justifiable cases. As regards the results of the review, CES/CP advised that these had yet to be worked out as HD was still investigating the 88 review applications. At members' request, the Administration undertook to provide a report on the review upon completion of investigation.

(Post-meeting note: The results of the review on rent reassessment were circulated vide LC Paper No. CB(1) 827/98-99.)

11. As to why new tenants who entered into tenancy agreements with HA after 31 January 1998 were not eligible for rent reassessment, CES/CP explained that the rent reassessment scheme was introduced because HA recognized that some of the tenants who tendered successfully for shop premises when the economy was booming were now in difficulty as a result of the economic slump. New tenants were however well aware of the financial turmoil and should have taken the business environment into consideration before submitting tenders. Rent reassessment was therefore not applicable to them. Mr CHAN Kam-lam considered it unfair to exclude new tenants from rent reassessment, in particular those who had tendered successfully before 31 January 1998 but could not have their tenancy agreements completed by that date due to the delay in delivery of premises by HA. Expressing similar concern, Ms CHAN Yuen-han urged HA to extend the rent reassessment exercise to cover all new tenants because amid the plunging economy, these tenants were facing the same financial hardship as those with tenancy renewals.

12. As regards storerooms and quarters, the Chairman expressed reservations at the Administration's explanation that premises let for the purpose of storage and quarters fell outside the category of commercial premises. He pointed out that since such premises were used in conjunction with the business, these should be included in the rent reassessment exercise. Mr LI also urged HA to consider lowering the rents of the premises leased to non-subvented voluntary organizations. CES/CP undertook to relay members' concerns to HA for consideration.Admin

13. On commercial premises managed by single operators, CES/CP advised that single operators could apply for rent reassessment but they had to undertake to reduce the rents of their licencees accordingly based on the reassessment results. Mr Andrew WONG however pointed out that licencees concerned might not be able to benefit from rent reassessment. A single operator might have bid the tender at a low rent level and sub-let individual commercial premises at high rents. As a result, although the same rate of reduction would apply to both the single operator and the licencees, in reality, the licencees were still paying rents above the market level. CES/CP replied that the situation described by Mr WONG would unlikely happen as competition for single operator markets and shopping centres among tenderers was very keen and the final bids were usually at very competitive levels.

Vacancy rate of the Housing Authority commercial premises

14. Given that the vacancy rate of HA commercial premises had risen from 3.5% in the first quarter to 4.9% in the third quarter of 1998, Dr YEUNG cautioned that the situation would be further aggravated when HA put up another 33,613 and 55,831 square metres of shop areas for lease in 1998/99 and 1999/2000 respectively. He considered that there was a need for HA to review the rent levels to attract more prospective tenants to improve the occupancy rate. CES/CP explained that rents of HA commercial premises were determined by market force and reflected in tender results. Nevertheless, HA would consider adjusting the upset rents in the light of the economic situation and market conditions. Efforts such as the introduction of the rent reassessment scheme and simplification of letting procedures had also been made to reduce the vacancy rate. HA would also closely liaise with its tenants to see what could be done to help them to adapt to the downturn business environment. By way of illustration, HA had agreed to reduce the leased area of a commercial premises of a restaurant tenant so that he could continue to operate at a reduced overhead cost. Information also revealed that some tenants were able to keep their business after rent reduction. While acknowledging that it was not uncommon for HA to accord preferential treatment to the restaurant trade as they were the major clients of HA, Mrs Selina CHOW was particularly concerned about those owners of small businesses since they might not be able to enjoy the same attention as their counterparts in the restaurant trade. CES/CP however pointed out that the tenant who received the highest percentage of rent reduction after reassessment was the tenant of a vegetable stall. To facilitate a better understanding, the Administration undertook to provide a breakdown of rent reassessment results by trade and the respective rent reduction rates.

(Post-meeting note: The Administration's response was circulated vide LC Paper No. CB(1) 717/98-99.)

15. As regards the loss of rent as a result of the rise in vacancy rates from 3.5% to 4.9%, CES/CP advised that it was difficult to give an estimate of the loss having regard to the large portfolio and complexity of the types of commercial premises managed by HA and the often changing designated trades for individual premises. Notwithstanding, HA would endeavour to improve the vacancy rate with a view to maximizing the utilization of resources. In reply to Mr LEE Cheuk-yan's question, CES/CP confirmed that HA did not take into account premises managed by single operators in compiling the vacancy rates of HA commercial premises as the latter were not required to report their vacancy rates to HA. At members' request, CES/CP undertook to provide the following information:

    - the number, instead of area, of vacant commercial premises under HA; and

    - the number and area of commercial premises managed by single operators and the respective percentages to the total number and area of HA commercial premises.

    (Post-meeting note: The required information was circulated vide LC Paper No. CB(1) 717/98-99.)

16. The Chairman noted that only 60 out of the 152 selected shops had been successfully leased out through "walk-in" applications. He considered that there was a need for HA to lower the upset rents substantially in order to attract more prospective tenants, and that efforts should be made to simplify the letting procedures and to arrange for re-letting of vacant premises immediately after each unsuccessful letting exercise. CES/CP clarified that the poor response rate of the "walk-in" application exercise was due to the lack of interested applicants rather than the rent levels. Some members were of the view that HA should arrange more vacant premises for lease through "walk-in" applications in order to improve the occupancy rate. To this end, the Administration was requested to provide a paper explaining the basis upon which shops were selected for inclusion in the "walk-in" application exercise.

(Post-meeting note: The Administration's response was circulated vide LC Paper No. CB(1) 717/98-99.)

VI Tenants Purchase Scheme
(LC Paper No. CB(1) 562/98-99(03))

Phase 1 of the Tenants Purchase Scheme (TPS)

17. On sales, Mr LI pointed out that the arrangement to sell the some 450 vacant flats in TPS Phase I estates under the Home Ownership Scheme was at variance with the original proposal, under which vacant units in TPS estates would be put up for sale to tenants of the same estate and to those of the same district afterwards. The Assistant Director/Tenants Purchase Scheme (AD/TPS) clarified that under approved policy, vacant units would be initially offered for sale to residents of the same estate, with first priority for overcrowded families after which allocation would be by ballot. Flats vacant on completion of this exercise, and units subsequently becoming vacant, would be offered to "Green Form" applicants: tenants in public rental housing estates, Waiting List applicants and clearees, at the Home Ownership Centre together with Home Ownership Scheme flats. The Administration undertook to provide details of the 450 flats, including locations, sizes and prices.

(Post-meeting note: The required information was circulated vide LC Paper No. CB(1) 688/98-99 on 28 December 1998.)

18. On withdrawals, Mr TAM Yiu-chung enquired about the cause of disagreement on the finalized Government Lease and Deed of Mutual Covenant (DMC) which had led to rescission of purchases. BD/A&M explained that as TPS Phase 1 was implemented before the Lease and DMC were finalized, minor amendments to owners' rights and obligations at a later stage were required. Although the amended terms were not less favourable than those indicated in the sales brochure, these had led to some misunderstandings among the prospective buyers. Efforts had been made to reach agreements with the buyers concerned and the situation had been significantly improved since then. Of the 957 families which had withdrawn from TPS Phase 1, 357 families re-submitted their offers.

19. While acknowledging that it was not appropriate for HA to help those tenants who withdrew their offers due to financial difficulties to complete their assignments, Mrs CHOW considered that HA should refund the intention money to them taking into account their financial situation. AD/TPS replied that as the conditions of purchase had been spelt out clearly in the sales materials, tenants concerned should be well aware of the financial implications before they decided to proceed with the purchase. It was therefore reasonable not to refund the intention money on the ground of financial difficulties. Furthermore, the intention money had already been used to cover the administrative cost incurred. Mrs CHOW however remained of the view that HA should adopt a more sympathetic approach in dealing with these cases.

20. On repairs, BD/A&M advised that about half of the tenants of the 26,896 TPS flats had requested for minor repair works. Dr YEUNG expressed concern on the large number of maintenance requests and considered that there was a need for HA to increase the contributions to the Maintenance Fund of each TPS estate to ensure that sufficient funding was available to meet the cost of major maintenance expenses. This was particularly important for TPS estates with slopes, such as Cheung On and Wah Kwai Estates. AD/TPS replied that the cost of repairs to slopes should not be a particular concern having regard to the infrequent nature of repair works. BD/A&M added that the one-off contribution of about $14,000 made by HA for each TPS flat sold in Phase I, coupled with the monthly contributions made through the management fees to the Maintenance Fund should be able to meet the cost of major maintenance expenses.

Phase 2 of the Tenants Purchase Scheme

21. On pricing, Mr LAU asked if HA would consider lowering the sale prices of Phase 2 flats having regard to the recent fall in property prices in the private sector. AD/TPS explained that the pricing of Phase 2 flats would follow the formula applicable to Phase 1, i.e. by reference to the Adjusted Replacement Cost (ARC) basing on the prevailing cost of replacing the flat, with adjustments to take into account factors such as age and location. He stressed that any reference to the assessed market value was made to facilitate a better understanding of the amount of premium payable by the buyers upon resale of the TPS flats. Furthermore, special credits would continue to be offered to Phase 2 buyers in the first two years to ensure that the total monthly housing expenditure for most families after purchase would not exceed twice the rent. Preliminary calculations showed that the sale prices of Phase 2 flats would be very close to that of Phase 1. Mr LAU however expressed concern that prospective buyers in subsequent batches might have to pay a higher price due to the rise in replacement cost. AD/TPS assured members that if ARC were to increase dramatically which undermined the balance between housing expenditure and rent, HA would consider adjusting the special credits to ensure affordability of tenants concerned. He nevertheless declined to predict the sale prices of TPS flats in subsequent batches as these would hinge on ARC at that time.

22. On land rights and obligations, BD/A&M assured members that both the Government Lease and DMC would be made available for purchasers' perusal before sale.

Future programme

23. As to whether HA would consider amalgamating the subsequent batches of TPS in view of the good response to Phases 1 and 2, BD/A&M advised that this might not be feasible given the need to complete major repair works under the existing maintenance programme before the estates were put up for sale.

VII Any other business

Mixed development concept for the development of public housing estates

24. Mr LEE remarked that when the subject was discussed at the meeting on 5 October 1998, members asked if HA had ever urged the Administration to redevelop the site of San Fat Estate for PRH purpose. However, according to the Planning, Environment and Lands Bureau (PELB), neither HA nor HD had made any request for allocation of the site. The Chairman therefore considered it necessary for HA or HD to clarify with supportive documents whether they had followed up the issue with the Administration.

(Post-meeting note: Reply from HA was circulated vide LC Paper No. CB(1) 711/98-99 on 5 January 1999.)

25. There being no other business, the meeting ended at 7:00 pm.

Legislative Council Secretariat
24 February 1999