LegCo Paper No. CB(1) 1170/96-97
(These minutes have been seen
by the Administration)
Ref : CB1/PL/HG/1

LegCo Panel on Housing

Minutes of meeting held on
Friday, 31 January 1997, at 8:30 am
in the Chamber of the Legislative Council Building

Members present :

    Hon LEE Wing-tat (Chairman)
    Hon Ronald ARCULLI, 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 Zachary WONG Wai-yin
    Hon CHAN Kam-lam
    Hon CHAN Yuen-han
    Hon LEUNG Yiu-chung

Members absent :

    Hon Frederick FUNG Kin-kee (Deputy Chairman)
    Hon Mrs Selina CHOW, OBE, JP
    Hon SZETO Wah
    Hon Edward S T HO, OBE, JP
    Hon CHEUNG Hon-chung
    Hon CHOY Kan-pui, JP
    Hon Albert HO Chun-yan
    Hon Bruce LIU Sing-lee
    Hon LO Suk-ching
    Hon SIN Chung-kai

Public officers attending :

Housing Branch
Mr Andrew R Wells
Deputy Secretary for Housing
Miss Sandy CHAN
Principal Assistant Secretary for Housing
Miss L K LAM
Chief Assistant Secretary

Planning, Environment and Lands Branch
Mr Stanley WONG
Principal Assistant Secretary for Planning, Environment and Lands

Housing Department
Mr CHAN Yiu-loon
Senior Assistant Director/Housing Administration

Planning Department
Government Town Planner

Clerk in attendance :

Mrs Vivian KAM
Chief Assistant Secretary (1)2

Staff in attendance :

Miss Becky YU
Senior Assistant Secretary (1)3

In the absence of a quorum at the beginning of the meeting, members agreed to hold the meeting as an informal discussion. A quorum was subsequently formed at 8:45 am.

I Consultative Document on Long Term Housing Strategy Review

(LegCo Paper No. CB(1) 798/96-97)

2. Before commencing discussion, the Chairman proposed and members agreed that the Consultative Document (CD) would be further examined by the Subcommittee on Long Term Housing Strategy (LTHS) Review. Non-Subcommittee members who were interested in the subject were welcomed to join in the discussion.

(Post-meeting note: Four meetings of the Subcommittee were scheduled as follows:

    - Thursday, 20 February 1997, at 8:30 am;
    - Monday, 10 March 1997, at 4:30 pm;
    - Monday, 24 March 1997, at 8:30 am; and
    - Monday, 9 April 1997, at 8:30 am.)

General policy

3. A member asked if the Administration would consider shelving some of the recommendations in the CD if there were objections from the public. The Deputy Secretary for Housing (DS for H) considered it premature to come to such a conclusion at the present stage. He assured members that the Administration would take every opportunity to explain to the public recommendations in the CD during the four-month consultation period, and would fully take into account public opinion collated in reaching its final conclusions. The objective was to ensure that the scare housing resources in Hong Kong would be allocated to those in genuine need.

Chapter 3 Increasing flat supply

4. The Chairman was not optimistic that the Housing Authority (HA) could achieve its production target of 106,000 public housing flats in 2001 having regard to past experience, nor that the average waiting time for public rental housing (PRH) could be reduced from seven to under five years as pledged. DS for H advised that adequate land had been allocated to or designated for HA to meet the production target. The discrepancy between the estimated and actual supply of public housing flats over the past few years was largely attributable to the lead time of 60 months for construction of flats, and the bunching effect during the later years of the period. Efforts had been made to monitor progress of individual development projects to ensure timely completion, and the Administration was confident that the target of producing 141,000 PRH flats during the planning period up to 2001 could be met. As regards the average waiting time for PRH, DS for H advised that this should be reduced by the provision of sufficient land to meet flat requirements, and the promotion of home ownership amongst PRH tenants to release more PRH flats for re-allocation. The Chairman asked if the LTHS Advisory Committee would consider reducing the average waiting time further by the year 2006, and if so, what the expected waiting time would be. DS for H considered it inappropriate at the present stage to predict the precise waiting time having regard to the need to work out such data as the splitting ratio between subsidized home ownership and PRH flats. He also advised in response to the Chairman that no specific recommendations had been made for bedspace lodgers and persons living in bedrooms and who were applicants on the General Waiting List.

5. In referring to paragraph 3.23, a member questioned the rationale for setting a safety margin at 7%; she cautioned that an under-estimation of housing needs in 1987 had given rise to a serious shortfall in the supply of public housing flats. The Principal Assistant Secretary for Planning, Environment and Lands explained that the purpose of a safety margin was to accommodate changes or delays in the land production programme, and that a higher safety margin would be expected for a longer planning period. The current Housing Demand Model indicated an average annual requirement for about 80,000 new flats in both the public and the private sectors during the period from April 1995 to March 2006: some 85,000 flats for the first period 1995/96 to 2000/01, and 73,000 flats for the second period 2000/01 to 2005/06. Sufficient land for the first period had been allocated or identified to meet the forecast requirement. For the second period, the Administration had assumed a requirement for some 78,000 flats as reflected in the Territorial Development Strategy Review. This would provide for a safety margin of about 7% over the forecast requirement for the period. DS for H supplemented that the safety margin of 7% might be adjusted to take account of changing circumstances and when data from the 1996 Population By-census became available.

6. Some members expressed disappointment at the absence of specific policies on legal immigrants from China in the CD given the large number of such immigrants entering Hong Kong each year; they urged the Administration to provide for this particular category of demand. DS for H advised that the Administration had pledged to provide for this particular category of housing demand in the 1996 performance pledge. It had also taken into account the projected number of new immigrants from China in forecasting the overall housing demand in paragraph 3.5. Details of these projections had been included in the Technical Report on Assessment of Housing Demand to be published by the Planning Department. He stressed that as the CD was a strategic document, reference to specific categories of housing demand had not been made. The Government Town Planner (GTP) supplemented that since legal immigrants from China had to satisfy the seven-year residence rule before they would become eligible for public housing, the housing demand of these immigrants in a particular year would relate to those having arrived seven years earlier. Based on an analysis of past statistics, about 17% of these immigrants had no next of kin in Hong Kong or were adults joining their parents and who would become heads of households, whereas the remaining were coming for the purpose of family reunion and thus had no immediate need for housing; the latter would be categorized as "inadequately housed households".

Chapter 5 Encouraging wider home ownership

7. A member expressed concern that many White Form applicants might be forced to acquire homes in the private sector as a result of the limited supply of subsidized home ownership flats and the long waiting list for PRH. This would in turn push up property prices in the private sector. DS for H acknowledged that home ownership in the private sector was beyond the reach of many families. The Administration had to this end implemented a series of subsidized home ownership schemes such as the Home Ownership Scheme (HOS) and the Sandwich Class Housing (SCH) Scheme to assist middle and low income families to buy their own homes, the income limit of the latter of which was $26,000 to $60,000. He supplemented that members would be briefed on the enhancement of the SCH Loan Scheme at the next Panel meeting on 3 February 1997. As regards property prices in the private sector, DS for H advised that the Administration would continue to provide a steady and sufficient supply of land for housing with a view to stabilizing property prices in the long term.

Chapter 6 Providing public rental housing for those in genuine need

Allocation of public rental housing based on genuine need

8. On the yardstick for "genuine need" for PRH, DS for H advised that this would be measured by reference to income and net assets of prospective tenants, and that the precise limits would have to be determined by HA.

Common eligibility criteria

9. In response to a member, the Chief Assistant Secretary for Housing clarified that unlike those households outlined in paragraph 6.9, sitting PRH tenants were not required to move to interim housing upon redevelopment of estates concerned. They would be subject to an income and assets assessment to determine whether additional rent should be charged upon re-allocation.

10. Some members were concerned that the requirement to include the income and assets of every member of PRH households in the means test might induce deletion of household members in order to get round the rules and avoid paying higher rents; they asked if the Administration would consider relaxing the income and assets assessments to encourage young family members to live with the elderly. The Senior Assistant Director/Housing Administration (SAD/HA) advised that the Administration acknowledged the need to encourage families to look after their elderly members, and had introduced such schemes as the Families with Elderly Persons Priority Scheme and the Special Scheme for Families with Elderly Persons to speed up the allocation of PRH flats to families with elderly members. At members’ request, SAD/HA undertook to provide information on the number of households which had renounced public rental tenancies after implementation of the income and assets assessments. He however pointed out that amongst the 16,000 double-rent paying households, only 400 would be required to pay market rent. In reply to a related question, SAD/HA advised that the Administration did not keep such information as the income and assets of individual household members since each household was regarded as an integral entity, and that the total income of every member of households would be taken into account when assessing their affordability.


Restrictions on grant of new tenancy on death of principal tenant

11. A member considered the proposed requirement for adult family members of deceased principal tenants of PRH flats to undergo a comprehensive means test before the grant of new tenancies a retrograde step in the overall housing policy. He reckoned that the role of principal tenants was no more than a liaison person for dealing with the Housing Department; the tenancy should be passed onto other members of the households concerned upon the death of principal tenants. DS for H advised that under the existing housing policy, tenancies of PRH flats might be passed onto the surviving spouses without means testing, upon the death of principal tenants. When there was no surviving spouse, the tenancy might be granted to another adult member of the same household, subject to an income test. The Administration was of the view that as PRH flats were public properties, tenancies concerned should not be allowed to be passed on from one generation to the next as a matter of course, and that the grant of new tenancies should be assessed on the basis of genuine need. SAD/HA supplemented that according to a survey on inheritance of public housing tenancies, members of the public generally felt that the second generation of PRH tenants should apply for their own PRH flats once they got married. The member was not convinced of the Administration’s response; he emphasized that adult family members of deceased principal tenants were entitled to live in the PRH flats concerned in accordance with provisions in the tenancy agreements, and that the question of inheritance did not exist.

Affordable rents

12. Some members made reference to the surveys conducted by the Hong Kong Council of Social Services and the Oxfam Hong Kong which indicated that about 10% of the population in Hong Kong were living in poverty; they were worried that the situation would be aggravated in the event the median rent-to-income ratios (MRIRs) were to reach 15% and 18.5% as proposed in paragraph 6.17. Members considered a need for the Administration to disclose the preliminary assumptions upon which these MRIRs had been arrived at, and the anticipated rent increases up to 2006 in PRH estates, in terms of types and years of completion (at 10-year intervals) which would enable the Administration to achieve the target ratios. DS for H advised that the MRIRs referred to were the prevailing criteria adopted by HA in determining the levels of rents for different types of PRH estates. He clarified that the Administration did not propose to achieve the MRIRs of 15% and 18.5% for each estate, but rather to achieve the overall target ratios for all PRH estates. DS for H emphasized that tenants’ affordability would remain the prime consideration when determining the levels of rents, and there was also an upper ceiling that rent should not exceed 25% of the household’s income. Other factors such as the comparable estate values and locations of estates would also be taken into consideration. The present overall MRIR for all PRH estates was about 9% whereas the MRIRs for new and old estates were about 14.6% and 7.5% respectively. The average rent increase over the past years was about 9-10%. DS for H supplemented that PRH tenants facing temporary financial hardship or whose RIR exceeded 25% could seek temporary rent relief through the Rent Assistance Scheme. As regards the anticipated rent increases, DS for H considered it imprudent to give indicative rent increases for individual estates or group of estates at the present stage as essential elements such as the relative values of estates had yet to be worked out by HA. He nevertheless undertook to provide the relevant information when this was available.

13. Some members sought clarification on the basis upon which the Administration considered that MRIRs of 15% and 18.5% would still fall within the affordability of PRH tenants; they were worried that PRH tenants, in particular those in older estates, would suffer from exorbitant rents in the event MRIRs were to reach the target ratios. DS for H advised that the MRIR of 15% or 18.5% was considered reasonable when compared with that of 27% in private premises and 35-40% in many other developed cities. He also made reference to the Director of Housing’s recent remarks that these MRIRs were long-term objectives to be achieved over a period of ten years. Furthermore, the impact of rent increases in older PRH estates would become less significant as most of these estates would be demolished by the year 2006. A member considered a direct comparison between tenants in public and private housing inappropriate as this would have a divisive effect on society. He urged the Administration to adopt a macro approach to increase land supply through measures such as re-zoning of industrial land to residential land; this would help to contain the surge of property prices and rents in the private sector. At members’ request, the Administration undertook to provide information on the relative MRIR and Nominal Wage Index ratio, the average income of tenants, and the relative value of each PRH estate for the last five years.


14. In response to members, DS for H emphasized that while it was the Government’s objective to encourage home ownership as this would help to foster social stability and a sense of belonging, the Administration had no intention to increase domestic rents to such an extent to force out sitting PRH tenants. He reiterated that tenants’ affordability would remain the prime consideration in determining the levels of rents in PRH estates.

Clearance policy

15. In referring to paragraph 6.29, some members considered that the Administration had failed to fulfil its pledge to clear all urban squatters by the year 1997 as in the case of the Lei Yue Mun and the Diamond Hill squatter areas. They also questioned the rationale behind the statements "However, squatter structures on Government or private land, as well as roof-top structures, while illegal, do not necessarily represent inadequate housing. Nor would it be a sensible use of our limited resources to clear all the structures, irrespective of the future land use of the areas affected" as this represented a drastic change to the existing clearance policy. DS for H emphasized that the Administration had completed its pledge in the 1992 Policy Commitments to offer re-housing to all households living in all urban squatters on Government land by March 1996; squatters on private land in urban areas did not come within the pledge. He also clarified that the statements referred to were consistent with the Administration’s commitment to improve the living conditions of those who were inadequately housed, including those living in squatter areas.

II Any other business

16. There being no other business, the meeting closed at 10:40 am.

Legislative Council Secretariat
2 April 1997

Last Updated on 20 August 1998