LPLC Paper No. CB(1)5/97-98
(These minutes have been seen by the
Administration and cleared with the Chairman)
Ref : CB1/BC/10/96/2

Bills Committee on Housing (Amendment) (No.3) Bill 1996 and Housing (Amendment) Bill 1997

Minutes of meeting held on
Thursday, 5 June 1997, at 2:30 pm in
Conference Room B of
the Legislative Council Building

Members present :

    Hon LEE Wing-tat (Chairman)
    Hon Edward S T HO, OBE, JP
    Hon Ronald ARCULLI, OBE, JP
    Hon CHAN Kam-lam
    Hon CHAN Yuen-han
    Hon LEUNG Yiu-chung
    Hon Bruce LIU Sing-lee

Member absent :

    Dr Hon LAW Cheung-kwok

Public officers attending :

Mr Andrew R Wells
Deputy Secretary for Housing
Mr Marco WU
Deputy Director of Housing (Management)
Mr Parrish NG
Principal Assistant Secretary (Housing)(2)
Miss Sandy CHAN
Principal Assistant Secretary (Consultation)
Miss L K LAM
Chief Assistant Secretary (Housing Strategy)
Mr Simon P S LEE
Legal Adviser (Housing Department)

Clerk in attendance :

Miss Polly YEUNG
Chief Assistant Secretary (1)3

Staff in attendance :

Ms Bernice WONG
Assistant Legal Adviser 1
Mrs Queenie YU
Senior Assistant Secretary (1)8

I. Confirmation of minutes of meeting

(LegCo Paper No. CB(1)1774/96-97)

The minutes of the meeting held on 9 May 1997 were confirmed.

II. Meeting with the Administration

(Paper Nos. CB(1)1733/96-97, 1672/96-97(01) to (05) and information tabled at the meeting and subsequently issued vide 1809/96-97)

2. The Chairman informed members that four sets of Committee stage amendments (CSAs) to the Housing (Amendment) (No.3) Bill 1996 proposed by four members had already been circulated to the Bills Committee and the Administration. Referring to the Administration’s written response tabled at the meeting, the Deputy Secretary for Housing (DS for H) said that the Housing Branch was still awaiting the Attorney General’s Chambers’ advice on the charging effect, if any, of the proposed CSAs. He then highlighted the following views:-

(a) whilst the Long Term Housing Strategy Consultative Document had recognized the need to review certain aspects of current rent policy, the principle of affordability underlying the present policy was fundamental and should be upheld;

(b) the Administration had not been given sufficient time to analyse the practical, legal or financial effects of the proposed CSAs;

(c) the proposed CSAs would obstruct the Housing Authority (HA) from achieving a reasonable, fair and objective policy to cater for different categories of public rental housing (PRH) tenants, notably the better-off or needy tenants; and

(d) any proposed restriction of rent increases might have a superficial appeal. Members should however responsibly consider all the implications for public housing services and facilities before coming to a balanced view in the interests of the community.

Financial considerations

3. The Deputy Director of Housing (Management) (DD of H) reiterated that inflation did not necessarily reflect tenants’ affordability as the growth in household income might be higher or lower than inflation. He explained that increased expenditures on PRH had been incurred as a result of the substantial improvement works to meet the rising aspirations of tenants. Capping the ceiling for rent increases at the annual inflation rate less 2% or at a median rent-to-income ratio (MRIR) of 10% as proposed by members would increase the deficits of the domestic operating account of the HA.

4. A member stressed the importance of setting rent on the principle of affordability and the need for improving services provided by the HA in PRH estates. DS for H commented that the HA’s ability to maintain its present level of service, let alone to improve it, would be seriously curtailed if the CSAs were passed.

Operational difficulties

5. DD of H pointed out that whilst members had proposed a statutory 10% ceiling on the MRIR, the practical application of this ceiling on new PRH estates where the MRIR of tenants was about 14% had not been clearly spelt out. He added that it would not be practicable to conduct comprehensive and accurate assessments of the household incomes of all PRH households. The provision in the CSAs on the MRIR would require the HA to deploy substantial resources to carry out comprehensive surveys of all households of public housing estates in each rent review exercise for different groups of estates. Instrusive individual investigations would have to be conducted to ensure accuracy of information collected from the households.

6. Mr CHAN Kam-lam argued that the concept of MRIR was initiated and currently implemented by the HA in determining rents for PRH estates. Although the MRIR ceiling of 10% might be arguable, he disagreed that it was arbitrarily determined as the actual average MRIR was about 9% in recent years. Referring to the actual rent increases and the average inflation rate in recent years, he said that the HA could still increase rents on the current basis within the coming four years before reaching the 10% ceiling. In reply to the Administration, the proponent members clarified that the proposed MRIR of 10% represented the average rate applicable to all estates.

7. In reply to a member, DD of H said that the current MRIRs were derived inter alia from findings of the General Household Survey conducted by the Census and Statistics Department on a quarterly basis. He expressed the view that it would not be safe legally for the HA to use the current approach to determine the MRIR if the CSAs on the MRIR became law. While proponents of the CSAs held the view that it would be up to the HA to determine the method of calculating the MRIR, the Administration was of the firm view that the MRIR should be defined so that it would be clear to the HA as to how to fulfill the statutory requirement. The Administration repeated the point that it would not be practicable to survey every household of every public housing estate for the purpose of determining the MRIR at each rent review as required by the CSAs on the MRIR.

Legal implications

8. Commenting on the legal implications outlined in para 28 of the Administration’s paper, the Assistant Legal Adviser 1 (ALA1) informed the meeting that the two CSAs proposing a MRIR ceiling of 10% had been carefully worded to give the HA sufficient flexibility in determining the method of calculation. If the Administration still required further elucidation, a declaration could be applied from the court on the interpretation of the MRIR. Alternatively, the HA could provide detailed information on how the existing MRIR was determined for members’ consideration. The proponents of the CSAs did not envisage serious problems as the MRIR was not a new concept and was currently being used by the HA.

9. On the Administration’s concern about possible inconsistency of the proposed cap on rent increases with section 4(4) of the Housing Ordinance, members were of the view that ‘the revenue accruing to it from its estates’ included all estates owned by the HA on top of PRH estates, as well as the non-domestic operating account of the HA. As such, the CSAs proposed by members would not result in any inconsistency with the Housing Ordinance. ALA(1) concurred and advised that section 4(4) had prescribed a policy direction and so long as the HA formulated and implemented a policy which was consistent with this direction, section 4(4) would have been complied with.

10. Legal Adviser (Housing Department) (LA(HD)) suggested that the proposed CSAs might affect the contractual relationship between the Authority and its tenants as stipulated in section 16(1) of the Housing Ordinance. Mr Bruce LIU considered that the contractual relationship was subject to the tenancy agreement signed and renewed biennially between the HA and its tenant which was governed by the general provisions in the Housing Ordinance. As restrictions of rent increases were proposed in the interest of PRH tenants, he did not anticipate any challenge from them. ALA(1) referred to section 16(1) which began with "Subject to this Ordinance, the Authority may ......." and suggested that as long as the HA would comply with the amended law, there was no evidence of any resultant conflict with the contractual relationship between the Authority and its tenants.

11. Since the proposed CSAs prescribed the basis and frequency of rent reviews, LA(HD) was concerned about the lack of flexibility and exception which would affect the HA’s current policy on better-off tenants in requiring them to pay higher rents. Mr Bruce LIU and ALA(1) considered that appropriate amendments to section 1A(a) under clause 2 of the Bill which specified that "any class of land (whether determined by the nature of the land or status of the lessees)" would provide sufficient flexibility for the HA to implement its current policy for better-off tenants.

12. Due to unforeseen commitment, the Chairman left the meeting and Mr Ronald ARCULLI took the chair. At the request of the Administration, members proceeded to examine Mr LEUNG Yiu-chung’s further amendments to the proposed section 1A.

Proposed section 1A(a)

13. In reply to the Chairman, Mr LEUNG Yiu-chung confirmed that his proposed triennial rent review was applicable to all PRH tenants and that the triennial rent review period should be set on the basis currently adopted by the HA. Any change of tenancy in an individual unit should not affect the triennial rent review period of the unit.

14. DS for H cautioned that ‘any determination of rent’ might also apply to the initial rent determination for new PRH estates which was not the intention of the CSA. He urged the member in charge to reconsider the wordings so as to reflect more appropriately the application of the proposed CSAs on variation of rents only.

Proposed section 1A(c)

15. Mr LEUNG Yiu-chung clarified that " the monthly year-on-year rates of increase" referred to the increase in inflation level expressed as a percentage of the increase over the same month of the previous year in a three-year period. Nevertheless, the Administration considered the proposed method of calculation complicated and added that it was neither currently used by the HA nor economists. The Chairman suggested that Mr LEUNG might consider adopting a simpler mechanism.

III Any other business

16. Members agreed to hold the next meeting on 12 June 1997 at 10:00 am.

17. The meeting ended at 5:00 pm.

Provisional Legislative Council Secretariat
4 July 1997

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