LegCo Paper No. CB(1) 797/96-97
(These minutes have been seen
by the Administration)

Ref : CB1/PL/HG/1

LegCo Panel on Housing

Minutes of Meeting held on
Monday, 6 January 1997 at 10:45 am
in the Chamber of the Legislative
Council Building

Members present:
    Hon LEE Wing-tat (Chairman)
    Hon Frederick FUNG Kin-kee (Deputy Chairman)
    Hon SZETO Wah
    Hon Edward S T HO, OBE, JP
    Hon Albert CHAN Wai-yip
    Hon CHEUNG Man-kwong
    Hon Fred LI Wah-ming
    Hon James TO Kun-sun
    Dr Hon YEUNG Sum
    Hon CHAN Kam-lam
    Hon CHAN Yuen-han
    Hon CHEUNG Hon-chung
    Hon CHOY Kan-pui, JP
    Hon LEUNG Yiu-chung
    Hon LO Suk-ching
    Hon SIN Chung-kai
    Hon LAW Chi-kwong (Non-Panel Member)
Members absent:
    Hon Mrs Selina CHOW, OBE, JP
    Hon Ronald ARCULLI, OBE, JP
    Hon Zachary WONG Wai-yin
    Hon Albert HO Chun-yan
    Hon Bruce LIU Sing-lee
Public officers.attending:
    Mr Andrew R Wells
    Deputy Secretary for Housing
    Mr William SHIU
    Principal Assistant Secretary for Housing
    Mr FUNG Ho-tong
    Assistant Director/Application and Home Ownership Scheme, Housing Department
    Mr Y K CHENG
    Chief Housing Manager/Applications, Housing Department

Attendance by invitation:

    From the Society of Community Organization

    Miss TSANG Ka-wai
    Community Organizer
    Mr YEUNG Bing
    Resident Representative
    Resident Representative

    From the HK People's Council on Public Housing Policy

    Mr LAW Chau
    Mr LEUNG Ping-wah
    Mr LAU Yuen-cheung
    Resident Representative
    Ms AU YOUNG Hung
    Resident Representative
Clerk in attendance:
    Mrs Vivian KAM
Staff in attendance:
    Miss Becky YU
    Senior Assistant Secretary (1)3

I.Confirmation of minutes of previous meeting

(LegCo Paper No. CB(1) 572/96-97)

The minutes of the meeting held on 2 December 1996 were confirmed.

Matters Arising

Subcommittee on Long Term Housing Strategy Review

2. The Chairman reported that subsequent to the meeting of the Subcommittee held on 26 November 1996, the Administration had confirmed that it would:

    - revise its projections of housing demand to take account of the early results of the 1996 Population By-census;

    - brief the Panel on both the Administration's proposals and the projections of housing demand before publication of the Consultative Document;

    - provide members with the Consultative Document and the Report of the Working Group on Housing Demand; and

    - arrange further technical briefings where necessary.

3. The Chairman also reported that the Hong Kong Institute of Real Estate Administration had prepared a report on Existing Development Process Mechanism and made recommendations for improvement. A copy of the report had been circulated vide LegCo Paper No. CB(1) 618/96-97, and a joint meeting with the Planning, Lands and Works Panel was being arranged with policy branches and Government departments concerned to examine means for expediting the lead time for construction of flats.

(Post-meeting note: The meeting has been scheduled for Tuesday, 18 February 1997, at 8:30 am.)

II.Date and items for discussion at the next meeting

4. The next regular meeting would be held on Monday, 3 February 1997, at 10:45 am to discuss the following:

    - Contracting out of management of public housing estates; and

    - Policy on cottage areas.

5. The Chairman also reminded members that a special meeting had been scheduled for Monday, 13 January 1997, at 10:45 am to discuss the "Redevelopment of Kwun Lung Lau and Tanner Hill Estate" and to receive briefings on the Housing (Amendment) (No. 3) Bill 1996 proposed by Hon LEUNG Yiu-chung and the Housing (Amendment) 1997 Bill proposed by Hon Bruce LIU Sing-lee.

III.Private residential property prices

(LegCo Paper Nos. CB(1) 615/96-97(01) and (02))

6. The Chairman expressed dissatisfaction at the late provision of the Chinese version of the information paper for this agenda item, and reiterated the request for the Administration to make available bilingual information papers at least five working days in advance of meetings. The Deputy Secretary for Housing (DS for H) explained that the delay was on account of the time required to collate and check relevant data in the information paper. To avoid recurrences, the Chairman suggested and DS for H agreed that the Administration would forward to the Legislative Council Secretariat information papers which were ready for circulation, to be followed by supplementary papers such as annexes.

7. At the invitation of the Chairman, DS for H highlighted salient points in the information paper. He said that there were mixed signals in the residential property market. Prices for all classes of residential properties in the secondary market continued to rise in November 1996 whereas prices of large flats had risen slightly faster than those of small and medium-sized flats. On the other hand, the primary market had seen a significant increase in speculative activities, particularly those at the upper end of the market, through the purchase of flats in the name of companies and subsequent transfer of shares. There was also speculation in the form of sale of successful ballots through shell companies. The Secretary for Housing had set up an inter-departmental group to collate information on the property market and monitor the situation on a regular basis, in particular the impact on the end-user market. The group would also consider suitable measures for dealing with deteriorating situations where necessary. DS for H emphasized that any measures to be introduced by the Administration would be aimed at striking a balance of the interest of parties concerned without interfering with the free market competition.

8. Members considered that the problem was fast deteriorating and that urgent actions were called for. As the prices of small and medium-sized flats would also rise consequent upon speculation with large flats, the Administration should take immediate actions to dampen speculative activities. Some members said that the position of the Democratic Party (DP) was that fiscal measures such as the imposition of 10% capital gains tax on short-term resales, and a higher rate of stamp duty of 10% as opposed to the current rate of 0.3% upon transfer of share capital of land-holding companies within two years should be introduced to curb the spiralling property prices. Under the DP's proposal, the cost for speculation would be substantially increased, thereby making it unprofitable for frequent transactions. Consideration should also be given to prohibiting the purchase of flats in the names of companies.

9. While appreciating members' concerns for combating speculation in the property market, DS for H advised that he was not in a position to comment on the proposed financial measures as these fell under the remit of the Finance Branch; members' views would however be duly considered. He stressed that the property market was very sensitive and complicated, and that any form of intervention would need to be carefully considered before implementation in view of the impact which the property sector would have on Hong Kong's economy. DS for H assured members that the Administration would keep the market under close scrutiny and would introduce suitable measures if warranted. He added that the Housing Branch had been monitoring the property market eversince the establishment of the Branch. The Principal Assistant Secretary for Housing (PAS for H) acknowledged that there had been an increased trend of speculation. It would however be imprudent to prohibit the trading of properties by companies as this was part of the normal activities in a business community; furthermore, not all companies were involved in speculation. He added that following the Panel meeting on 12 July 1996, the Administration had been pursuing the proposal for introducing transfer duty which would be payable upon the transfer of share capital of land-holding companies. The Administration had also warned citizens of the dangers of speculation. In parallel, some property developers had adopted such self-initiated measures as limiting the purchase of properties under the names of companies to 20% of the total number of flats put on sale, and releasing flats in larger batches with a view to dampening speculation. It was hoped that other developers would adopt similar approaches in future sales if these measures proved effective.

10. Members were not convinced that the Administration should allow the trade to regulate itself given the fact that housing was a basic need of people. Some members were of the view that the first stage of anti-speculation measures introduced in mid-1994 had failed to achieve its objective in stabilizing property prices, and that the second phase of punitive fiscal measures should be used to curb short-term speculations. They also enquired about progress of the proposed transfer duty, and the possibility of making it compulsory for developers to limit the purchase of properties under the names of companies to 20% of the total number of flats put on sale, in the same way as banking institutions were restricting mortgage loans to 70% of property prices. Other members pointed out that the proposal of releasing flats in larger batches would not benefit genuine home purchasers as many such flats were reserved for private sales. They asked if the Administration would consider imposing more stringent criteria to restrict private sales. Other suggestions made included the registration of names of directors of companies putting in applications for purchase of properties so that the properties would only be sold to companies registered under the same names, and the rezoning of old industrial areas for residential purposes.

11. PAS for H emphasized that the Administration subscribed fully to the philosophy of free market economy and that intervention should be kept to the minimum if the market was able to adjust itself. The Administration would encourage developers to introduce anti-speculative measures voluntarily and flexibly. He assured members that the Administration would closely monitor the outcome of the new sales practices adopted by developers. As regards anti-speculation measures in 1994 including those targeted at speculation of uncompleted properties, PAS for H advised that these had been effective in containing speculative activities taking into account the relatively low number of transactions and amount involved in 1994. However, in view of the different modes of speculation now and in April 1994, technical adjustments to such measures might be required to tackle the rise in speculation involving sales of properties under the names of companies. DS for H supplemented that the Inland Revenue Department would levy profit tax on property transactions through sale of companies or chips on the basis of information collated from developers. He reiterated that the Administration had no intention of delaying action in this respect but then it was inappropriate to disclose measures prematuredly. As for private sales, PAS for H advised that the quota for private sales had been reduced to 10% following introduction of anti-speculation measures in 1994. Developers would also be required to submit to the Legal Advisory and Conveyancing Office (LACO) a schedule of the purchasers and the units to be allocated through private sales. To facilitate members' understanding, the Administration was requested to provide a full list of anti-speculation measures drawn up in 1994 and also the LACO's report on the recent sales of a property project in Tseung Kwan O.

12. A member considered that the Administration should provide prospective home buyers with accurate information on the market situation and future housing supply to enable them to make informed decisions. DS for H acknowledged such a need and advised that a co-ordinated information system was being developed with the assistance of the Rating and Valuation Department (RVD) and other concerned departments to monitor the progress of individual projects and provide an accurate forecast of supply in the short and medium term. He reiterated that it was the Administration's policy objective to provide 195,000 private residential units in the next five years, and that the Administration was confident that the objective could be met. Members requested and the Administration agreed to provide as far as information was available: (a) a table detailing the land holdings of property developers, in particular those acquired through Government land auctions, and the number of units completed in the past two years and the number to be constructed under individual Land Grants; and (b), an estimate on the annual target of the 195,000 residential units. As for the breakdown of flat sizes recently registered in Agreements for Sale and Purchase, PAS for H advised that it would take about four weeks after transactions for RVD to consolidate related information; this also explained the time taken for compiling relevant information papers to the Panel.Admin

13. Some members considered the sharp rise in property prices a result of high land prices, and that the ultimate solution to the problem would be for the Administration to supply more land and housing units to meet demand. DS for H assured members that the Administration would closely monitor the progress of flat production in both the public and the private sectors on regular five-year intervals, and that the subject of land supply would be considered in the context of the Long Term Housing Strategy (LTHS) Review. A member expressed concern on the hoarding of flats by developers and asked if the Administration would consider imposing in the Building Covenants (BC) due dates for the sale of newly completed units to ensure that the sale of units would not be held up. DS for H advised that developers would be subject to fines if units were not completed as scheduled in BCs. PAS for H supplemented that hoarding of flats would tie up capital and incur interest and other expenses such as management and rates, etc., and these would be effective disincentives. Moreover, as most developers were public listed companies, they should be accountable to their share holders.

14. Hon LEUNG Yiu-chung proposed the following motion:

"that the LegCo Panel on Housing strongly requests the Administration to take urgent action to increase the supply of residential units and take positive measures to combat short-term speculative activities in the residential market, and to provide a report to the Panel shortly".

While Hon Albert CHAN Wai-yip and Hon SZETO Wah were in support of the motion, they suggested inclusion of such statements as "the LegCo Panel on Housing strongly reprimands the Administration for not taking action on short-term speculative activities" and "the Administration should take positive measures to combat short-term speculative activities in the residential market, in particular the trading of chips" in the motion. Hon Edward S T HO however expressed reservations at Mr CHAN's proposed inclusion.

The Chairman subsequently reworded the motion as follows:

"that the LegCo Panel on Housing strongly reprimands the Administration for not taking action on short-term speculative activities, and strongly requests the Administration to take urgent action to increase the supply of residential units and take positive measures to combat short-term speculative activities in the residential market (in particular the trading of chips), and to provide a report to this Panel shortly".

15. The motion was put to the vote. Of the Panel members who were present at the meeting, nine voted for the motion, one voted against (Hon Edward S T HO) and two abstained (Hon CHOY Kan-pui and Hon LAW Suk-ching). The motion was passed by the Panel. The Chairman instructed that the motion be conveyed to the Administration, and that the Administration should be requested to provide a positive response within one month.

(Post-meeting note: A letter to the Administration on the motion was issued on 6 January 1997.)

IV Rent Assistance

Meeting with the Society for Community Organization (SOCO)

(LegCo Paper No. CB(1) 615/96-97(05))

16. At the invitation of the Chairman, Miss TSANG Ka-wai highlighted salient points in the information paper. She said that tenants in private premises, including those in bedspace apartments and small rooms and units, who at the same time were applicants on the General Waiting List (WL) had been suffering from exorbitant high rents on account of the Administration's failure to honour its pledge to provide adequate public rental housing (PRH) units. One-member households had to wait as long as nine years before they were allocated PRH. According to surveys conducted by the Hong Kong Council of Social Services and the Oxfam Hong Kong, tenants in private tenements had to pay 40% of their income on rent. This had resulted in a standard of living worse than that of recipients of the Comprehensive Social Security Assistance (CSSA) Scheme. The situation would be aggravated if the Administration maintained its stance to allow for rent control in private premises to lapse in phases. Miss TSANG considered that the Administration had an obligation to provide such compensation as rent assistance to tenants concerned on the basis that they would have been allocated PRH flats had the supply of public housing units been able to meet the demand. Under the SOCO's proposal, rent assistance equivalent to the difference between the actual rent payable and the domestic rent of public rental flats, or the upper limit of the rent allowance under CSSA should be offered to applicants who had been on the waiting list for two years. Miss TSANG emphasized that the proposed rent assistance was not unprecedented as evidenced by the loans offered to applicants under the Sandwich Class Housing (SCH) Scheme. The long-term goal would be for the Administration to provide adequate PRH units to meet the demand. Messrs YEUNG Bing and LEUNG So also urged the Administration to consider providing financial assistance to tenants in private premises so as to ease the pressure of high rents.

Meeting with the Hong Kong People's Council on Public Housing Policy

(LegCo Paper No. CB(1) 615/96-97(03))

17. In response to the Chairman, Mr LAW Chau said that the Administration had failed to achieve its pledge in the 1987 LTHS Review to meet the outstanding demand for PRH from WL applicants by 1996. To rectify the situation, Mr LAW considered a need for the Administration to provide sufficient land to both the Hong Kong Housing Authority (HKHA) and the Hong Kong Housing Society to produce an average of 50,000 new PRH flats per year in addition to refurbished units; he added that it was unreasonable to allocate "old" units to WL applicants. Consideration should also be given to allocating a minimum of 28,000 PRH units per year to WL applicants in order to reduce the waiting time. Mr LAW suggested that as a short-term measure, the Administration should provide rent assistance to the 150,000 applicants currently on the waiting list. This should be payable in the same manner as proposed by SOCO, and should cease upon allocation of PRH units. Funding for the rent assistance could come from the Land Fund in order not to affect the financial position of HKHA. Mr LEUNG Ping-wah remarked that if the Administration were to uphold the free market policy, subsidized home purchase schemes should not have been introduced in the first place. He considered that the loans provided to SCH applicants should be used to subsidize WL applicants since the former did not have immediate housing needs. The long-term goal would be for the Administration to expedite production of PRH flats to meet housing demand.

Meeting with the Administration

18. In response to the Chairman, DS for H advised that the Administration recognized the need to provide for a safety net for the poor, and had made available CSSA for those in genuine need; the adequacy of CSSA was however a separate issue. As regards the 1987 LTHS Review, DS for H said that the projections on housing demand might appear optimistic with hindsight. The Administration had adopted in the current LTHS Review a new housing model which could be adjusted in response to changes so as to be able to produce a range of best possible estimates of future demand. In recognition of the significant impact of land supply on production targets, DS for H assured members that the subject would be considered in the context of the LTHS Review, the consultation paper on which would be released shortly. He also emphasized that the Administration was committed to providing adequate housing units, both in the public and the private sectors, to households in need, and reducing the average waiting time for PRH flats. The waiting time of eight years in 1985 had been reduced to the present 6-1/2 years, and a further reduction to under five years had been aimed for by 2001. DS for H further explained that of the 150,000 applicants currently on WL, only an estimated 70,000 to 80,000 households would be eligible for PRH according to past experience.

19. While members were well aware of the channels through which eligible applicants could seek assistance, they remained concerned about those who were not eligible for CSSA and whose standard of living was worse than that of recipients of CSSA. Some members considered that the Administration should be held responsible for being over-optimistic in the 1987 LTHS Review, and were of the view that rent assistance should be provided as a form of compensation for affected WL applicants. Others agreed that rent assistance would be a feasible alternative, in particular for those who were reluctant to seek assistance through CSSA. This would also serve as an incentive for the Administration to speed up production targets for PRH.

20. DS for H emphasized that apart from some factors unknown to the Administration at the time when the Review was conducted which might have affected housing demand, there had been significant achievements under the 1987 LTHS. He also considered a direct comparison between the proposed rent assistance and the loan under SCH inappropriate as different groups of people had different needs. Furthermore, the latter had been introduced at the request of members. As regards bedspace apartment lodgers, he would liaise with the Home Affairs Branch to provide every possible assistance. The Assistant Director/Application and Home Ownership Scheme supplemented that the Home Purchase Loan Scheme was a channel through which PRH flats could be recovered for re-allocation. So far, about 10,000 units had been recovered. The waiting time for about 84,000 applicants on the WL was slightly over three years. He also cautioned that rents in private premises and the number of applicants on WL would rise upon provision of the proposed rent assistance. Leaving aside the administrative cost for the proposal, an estimated $3.2 billion would be required annually to provide assistance to all eligible WL applicants. The Chairman pointed out that the estimated cost was too high giving the fact the Administration had estimated that only about 80,000 applicants on WL would be eligible. The Chief Housing Manager/Applications agreed that the estimate might be on the high side and added that according to past experience, about 54% of the applicants would be eligible after deducting those not eligible for rehousing through other channels. A member considered it useful for the Administration to conduct a survey to ascertain the number of tenants in private premises who were not eligible for CSSA and whose standard of living was worse than that of recipients of CSSA.

21. On the possibility of including rent assistance in the current LTHS Review, DS for H advised that it would be premature to discuss the subject before the release of the consultation document. He confirmed that members' views would be duly considered. The important point was to provide adequate public housing flats at affordable rents to households in need. In reply to a related question, DS for H advised that one possible solution put forward by the Director of Housing to reduce the long waiting list would be to accord higher priority in the allocation of PRH flats to needy families on the WL. Mr LEUNG Ping-wah of the Hong Kong People's Council on Public Housing Policy was opposed to such an approach as this would be unfair to other WL applicants.

22. Before concluding, the Chairman remarked that a motion debate on rent assistance would be held in mid-January 1997, and appealed to members to express their views. He urged the Administration to consider members' views seriously.

V Any other business

23. There being no other business, the meeting closed at 1:30 pm.

Legislative Council Secretariat

29 January 1997

Last Updated on 20 August 1998