Legislative Council

LC Paper No. CB(1) 390/98-99
(These minutes have been seen
by the Administration)

Ref: CB1/PL/HG/1

Panel on Housing

Minutes of special meeting
held on Wednesday, 16 September 1998, at 10:45 am
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 Edward HO Sing-tin, JP
Hon LEE Cheuk-yan
Hon Fred LI Wah-ming
Hon NG Leung-sing
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon James TO Kun-sun
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon LEUNG Yiu-chung
Dr Hon YEUNG Sum
Hon TAM Yiu-chung, JP

Members absent :

Hon Albert HO Chun-yan
Hon Ronald ARCULLI, JP
Hon Christine LOH
Hon Andrew WONG Wang-fat, JP
Hon LAU Kong-wah
Hon Andrew CHENG Kar-foo
Hon Timothy FOK Tsun-ting, JP

Public officers attending :

Housing Bureau

Mr Andrew R WELLS, JP,
Deputy Secretary (2)

Ms Ophelia TSANG,
Acting Principal Assistant Secretary (2)

Housing Department

Business Director/Allocation and Marketing

Mr Andrew LAI,
Acting Head of Corporate Strategy Unit

Clerk in attendance :

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

Staff in attendance :

Miss Becky YU,
Senior Assistant Secretary (1)3

I Introduction of a Comprehensive Means Test on Public Rental Housing Applicants
(LC Paper No. CB(1) 204/98-99(01))

In response to the Chairman, the Deputy Secretary for Housing (DS for H) explained that the objective of the income-cum-asset test for prospective public rental housing (PRH) tenants of the Housing Authority (HA) was to ensure that public housing resources were allocated to those in genuine need. Although, in the past, applicants on the Waiting List (WL) had undergone income and property ownership tests, such tests were not comprehensive enough as assets other than domestic properties held by applicants were not taken into account. As a result, HA could not make a complete and objective appraisal of the financial capability of these applicants and hence their need for PRH. In addition, households in committed categories, including clearees, which took up a large proportion of PRH flats each year had never undergone any form of means test. To address these shortcomings, the Long Term Housing Strategy (LTHS) White Paper had reaffirmed that all prospective PRH tenants should be subject to the same set of eligibility criteria, inter-alia, a comprehensive means test covering both income and assets before admission to PRH.

Allocation of public resources

2. Dr YEUNG Sum said that the Democratic Party was strongly opposed to the introduction of an income-cum-asset since this was confusing and contradicted the principle of helping those in genuine need. By way of illustration, families with monthly household income of $70,000 were allowed to apply for substantial loan assistance to buy their own homes under the Home Starter Loan Scheme (HSLS) while four-person household with monthly income of $17,700 and net asset value of $470,000 were deprived of the opportunity for PRH flats under the new income-cum-asset test. DS for H replied that there was no confusion as far as housing objectives were concerned. The Administration was committed to helping all households gain access to adequate and affordable housing and to encouraging wider home ownership in the community. The difference between HSLS and PRH applicants referred to was to take into account the different housing needs of different groups. Moreover, loans granted under HSLS had to be repaid within a specified period whereas PRH was a long-term subsidy. He reiterated that the Administration had pledged to help those who could not afford other types of accommodation by reducing the average waiting time for PRH flats from the current six and a half years to three years by 2005. However, as PRH was heavily subsidized by the community, it was essential to ensure that the limited public housing resources were only given on the basis of genuine need. The income-cum-asset test was therefore necessary to identify the housing needs of PRH applicants. Nevertheless, those who failed the test but required other forms of housing assistance would be given opportunities to acquire their own homes through various subsidized home ownership schemes and loan schemes.

Home ownership rate

3. Disputing the Administration's explanation, Ms CHAN Yuen-han said that the Hong Kong Federation of Trade Unions was against the new income-cum-asset test. She was of the view that the test was being used to force WL applicants to become home owners in order to achieve the housing target of home ownership rate of 70% by the year 2007. In response, DS for H emphasized that the Administration had no intention to force WL applicants to become home owners. The objective of the income-cum-asset test was to ensure that PRH was given on the basis of genuine need and had no relationship with the 70% home ownership target. The Business Director/Allocation and Marketing (BD/A&M) supplemented that the test would enable a more equitable allocation of PRH flats. Coupled with an increase in the production of PRH flats, the average waiting time for PRH would be reduced. He stressed that it was more important to allocate housing resources to those in genuine need during the economic slump when resources should be focused on addressing the need of an increasing number of people falling within the eligibility net for PRH.

Waiting time for WL applicants

4. Mr CHENG Kai-nam was of the view that the Administration was using the income-cum-asset test to drive out WL applicants in order to reduce the average waiting time. In reply, DS for H noted that the allocation of PRH was not automatic upon registration on WL. Applicants were only assessed to establish their eligibility when their turn for PRH came up. According to past experience, about 40% of applicants on WL were not eligible for PRH at the time of detailed vetting. This gave rise to a distorted picture of the number of families in genuine need. Addressing a member's question on the number of applicants expected to be deleted from WL after the implementation of the income-cum-asset test, DS for H advised that as HA did not have information on the assets owned by applicants, it would not be meaningful to predict the number of WL applicants who would fail the test. The objective was to ensure equity, not to reduce the waiting time by an arbitrary amount.

5. Mr CHAN Kam-lam said that the introduction of the income-cum-asset test had altered the prevailing first-come-first-served principle for PRH. It would be unfair to the existing WL applicants, in particular to those who failed the means test now but had to start queuing up again on WL when their financial situation deteriorated. These applicants should have been allocated PRH had sufficient housing resources been made available. DS for H advised that flexibility had been provided to allow those who failed the test to return to the queue without prejudice to their waiting time if their household income or net asset value fell below the prescribed limits within one year.

Asset limits and declarable items

6. Mrs Selina CHOW said that while the Liberal Party supported in principle the need to establish the eligibility before admission to PRH, they did not agree that income-generating assets should be included as declarable assets. The Head of Corporate Strategy Unit (Acting) (HCSU (Atg)) replied that the items to be declared and assessed under the asset test were the same as those required under the Policy on Safeguarding Rational Allocation of Public Housing Resources. The inclusion of income-generating assets was also in line with other subsidized housing schemes such as the Sandwich Class Housing Scheme and HSLS. He however clarified that the asset limits referred only to net asset value, and that outstanding mortgages, overdrafts and personal loans from approved financial institutions could be deducted. Mr Edward HO asked if an owner of a small business who earned less than the relevant income limit but whose value of assets such as office furniture and machinery on books exceeded the asset limit was still eligible for PRH. HCSU (Atg) advised that only the net present value of the assets would be taken into consideration in the assessment.

7. Mrs CHOW considered the asset limits too low and enquired about the basis upon which the asset limits were arrived at. HCSU (Atg) advised that these were devised with reference to private domestic rentals. The limits were set at a level which was sufficient for a household to finance rental payment for a private flat of size comparable to the average allocation standards in PRH for six years. Six years had been used as a benchmark because it was close to the existing average waiting time for PRH. Those who could afford private rental for more than six years should be considered as having less urgent need for PRH since they could look after their housing need on their own for a relative long period of time. Moreover, the limits were already four to five times higher than those set by the Social Welfare Department under the Comprehensive Social Security Assistance Scheme.

8. Mr LEUNG Yiu-chung was not convinced of the Administration's explanation. He pointed out that the private rentals, the reference to which the asset limits was drawn, took up a third to half of a household's monthly income which was a great burden to WL applicants.

9. Mr LEE Cheuk-yan cautioned that in view of the low prescribed income and asset limits, those who failed the test would not be capable of buying their own flats even with the provision of housing subsidy. They would have no choice but to rent private accommodation which would increase their financial burden. The situation would be further aggravated amidst the economic downturn when many of them were facing the uncertainty of losing their jobs or salary cut. Mr LEE added that the past success of Hong Kong was largely attributed to subsidized rental accommodation which had not only provided shelter but also enabled many families to prosper which in turn motivated the growth of the economy as a whole. The introduction of the income-cum-asset test would undermine such an element for success and impede the revival of the current declining economy.

10. Mr SZETO Wah was of the view that the Administration was forcing WL applicants to use up their savings to rent private accommodation before they could be eligible for PRH. He cautioned that this would weaken their ability to respond to unexpected changes, in particular amidst the economic downturn.

11. Mr Fred LI expressed worries that the Administration would further lower the asset limits as a result of reduction in waiting time to three years by 2005. HCSU (Atg) reiterated that the asset limits were set with reference to private domestic rentals and they had no direct relevancy with the reduction in waiting time.

12. Dr YEUNG questioned the need for the asset test since the income test alone should be sufficient to establish the eligibility for PRH. HCSU (Atg) explained that as the financial situations of PRH applicants could be very different if their assets were taken into account. By way of illustration, the financial capability of two taxi drivers with comparable monthly incomes would differ if one owned two taxis and the other hired a taxi to earn a living. An asset test was therefore required to provide a better assessment on the financial well-being of these applicants and hence their need for PRH. The Chairman however pointed out that the one with two taxis would have failed the income test had he leased out one of his taxis. BD/A&M remarked that the asset test was not a new policy and this had been applied to HA's sitting tenants since the implementation of the Policy on Safeguarding Rational Allocation of Public Housing Resources in 1996. The extension of the asset test to WL applicants were to ensure consistency in housing policy and to help shorten the average waiting time of the needy families in the long term.

13. Given that sitting tenants who failed the means test could still retain their PRH flats if they agreed to pay market rent, Mr CHENG asked if the same arrangement could apply to PRH applicants for the sake of consistency. DS for H replied that better-off tenants were allowed to stay in PRH because of their long association with their places of living. They were encouraged to move into other accommodation. It would be an inequitable use of public resources not to ensure that prospective tenants were in genuine need at the time of admission.

Assistance to WL applicants

14. Some members considered that the most effective way to help WL applicants was for the Administration to provide rental assistance to these applicants before the allocation of PRH. DS for H advised that direct financial assistance might not necessarily be the best solution. The Administration would expedite the construction of PRH in order to meet the housing demand of WL applicants.

Households in committed categories

15. DS for H took the opportunity to clarify that not all households in committed categories were affected by the income-cum-asset test. Residents who moved in Temporary Housing Areas (THAs) before 23 September 1995 would continue to be exempted from the test. The same would apply to those living in squatter areas which had been designated for clearance before the announcement of the income-cum-asset test on 11 September 1998. Notices had been posted on those squatter structures which would be affected by announced clearance operations to facilitate a better understanding among clearees. At members' request, the Administration undertook to provide a list of squatter areas which were not subject to the test.

(Post-meeting note: The list was circulated vide LC Paper No. CB(1) 263/98-99 on 29 September 1998.)

16. Mr David CHU considered that in addition to rehousing to PRH, compensation should be offered to those living in squatter areas upon resumption of land for clearance since the squatter structures were built on their own expenses. In reply, HCSU (Atg) clarified that rehousing and compensation were two separate issues. In case of land resumption for squatters on private land, the Government would ensure that the legal owners of the land and properties were fully compensated in cash. For those on government land, it was government policy to ensure that no one would be rendered homeless as a result of government clearance operations. Those affected would be offered PRH flats if they met the prevailing rehousing criteria i.e. they must be registered by the 1984/85 Squatter Occupancy Survey; the majority of family members must have lived in Hong Kong for at least seven years; and they must not own any domestic property during the period of 24 months prior to the date of pre-clearance survey until the date of intake. These clearees were subject to the income-cum-asset test to establish their eligibility for PRH.

Approach undertaken by HA in implementing a new policy

17. In view of the far-reaching implication of the income-cum-asset test, members were highly dissatisfied that HA had endorsed and implemented immediately such an important policy on 11 September 1998 without consulting the Panel at its meeting on 7 September 1998. They cautioned that this would further undermine the relationship between the Executive and the Legislature. DS for H replied that the introduction of asset test and the adoption of common eligibility criteria for PRH were covered in the LTHS Review consultative document which had undergone intensive public consultation in early 1997, including consultation with the Legislature and Provisional District Boards. The majority of the public had expressed support to the proposals. Members however pointed out that LTHS was only intended for strategic planning, consultation should also be conducted on implementation details which had far-reaching implication and of public concern.

18. Mr LEE asked whether HA would consider shelving the income-cum-asset test having regard to the strong opposition from the Panel. Dr YEUNG cautioned that the Democratic Party would move a Member's Bill to revoke the test if HA refused to do so. DS for H emphasized the need to uphold the principle of genuine need in the allocation of PRH. He nevertheless noted that HA would review the asset limits annually in conjunction with the Waiting List Income Limits based on the approved methodology.

19. Members were not unconvinced of the Administration's response. Ms CHAN Yuen-han moved and Mr Fred LI seconded the following motion:

"That this Panel urges the Government to revoke the new policy on income-cum-asset test, and regrets the implementation of such a policy by the Government and the Housing Authority in a short time without consulting the public and the Legislative Council."

The motion was voted on and endorsed. The Chairman instructed that the motion be conveyed to the Administration.

(Post-meeting note: A letter on the motion was sent to the Administration on 17 September 1998.)

20. There being no other business, the meeting ended at 1:00 pm.

Legislative Council Secretariat
30 October 1998