Provisional Legislative Council

PLC Paper No. CB(1) 477
(These minutes have been
seen by the Administration)

Ref : CB1/PL/HG/1

Panel on Housing

Minutes of meeting held on Monday, 29 September 1997, at 2:30 pm in the Chamber of the Legislative Council Building

Members present :

Hon CHAN Yuen-han (Chairman)
Hon Frederick FUNG Kin-kee (Deputy Chairman)
Hon WONG Siu-yee
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon Edward HO Sing-tin, JP
Hon CHEUNG Hon-chung
Hon HUI Yin-fat, JP
Hon CHAN Choi-hi
Hon CHAN Kam-lam
Hon CHENG Kai-nam
Hon Andrew WONG Wang-fat, JP
Hon Bruce LIU Sing-lee
Hon LAU Kong-wah
Dr Hon TANG Siu-tong, JP
Hon TAM Yiu-chung, JP

Member attending :

Hon LEE Kai-ming

Members absent :

Hon Mrs Selina CHOW, JP
Hon Ronald ARCULLI, JP
Hon LEUNG Chun-ying, JP
Hon Kennedy WONG Ying-ho
Dr Hon Charles YEUNG Chun-kam
Hon CHOY Kan-pui, JP
Hon Timothy FOK Tsun-ting

Public officers attending : For item IV

Housing Bureau

Mr Parrish NG,

Principal Assistant Secretary (Housing)(2)

Miss LAM Lit-kwan,

Principal Assistant Secretary (Housing Strategy)

Housing Department

Mr Marco WU,

Deputy Director of Housing

Mr Simon LEE,

Legal Adviser

For item V

Housing Bureau

Mr Parrish NG,

Principal Assistant Secretary (Housing)(2)

Housing Department

Mr FUNG Ho-tong,

Assistant Director (Applications & Home Ownership)

Mr Y K CHENG,

Chief Housing Manager (Applications)

Clerk in attendance :

Ms LEUNG Siu-kum,

Chief Assistant Secretary (1)2

Staff in attendance :

Miss Becky YU,

Senior Assistant Secretary (1)3

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I.Confirmation of minutes of previous meeting
(PLC Paper No. CB(1) 265)

The minutes of the meeting held on 19 August 1997 were confirmed.

II.Date and items for discussion at the next meeting

2.In order to allow sufficient time for the Administration to prepare information papers, members agreed to postpone the meeting originally scheduled for 20 October 1997 to Tuesday, 28 October 1997, at 10:45 am. The items for discussion at this meeting would be decided at the meeting on 9 October 1997.

Scheduling of meetings for the first quarter of 1998

3.Members agreed that meetings of the Panel from January to March 1998 would be held on 19 January, 16 February and 16 March at 2:30 pm in the Chamber of the Legislative Council Building.

III.Information paper issued since last meeting
(PLC Paper Nos. CB(1) 224 and 275)

4.Members took note of the submission on public housing and redevelopment issues from a deputation named " Residents of No. 177 Prince Edward Road West " and the report on 'sales Descriptions of Overseas Uncompleted Residential Properties' published by the Law Reform Commission of Hong Kong. These papers had been circulated vide PLC Paper Nos. CB(1) 224 and 275 respectively.

IV.Assessment on the practical and financial difficulties envisaged by the Housing Authority in implementing the Housing Ordinance in respect of rent increase for residential units in public rental housing estates
(PLC Paper No. CB(1) 271(01))

5.Referring to the Administration's paper on the subject, the Chairman reminded the Administration of the importance of forwarding papers to the Panel on time. The Principal Assistant Secretary for Housing/2 (PAS for H/2) explained that the assessment report prepared by the Housing Authority (HA) on the implications of the Housing (Amendment) Ordinance 1997 (Amendment Ordinance) was submitted to the Housing Bureau on 25 September 1997. It had taken the Housing Bureau some time to study the financial, legal and operational problems which the report identified and the options it raised in dealing with these problems.

Financial implications

6.Referring to Annex D of the report which outlined the anticipated financial loss to HA as a result of implementing the Amendment Ordinance, Mr Bruce LIU expressed dissatisfaction that the Administration had failed to provide similar details when the legislation was examined by the former Legislative Council (LegCo). The major concern at that time was on the proposed triennial rent review which, according to the Administration, would create greater resistance and hardship as increases for each rent revision exercise was expected to be more substantial. PAS for H/2 emphasized that the Administration had alerted the former LegCo of the possible financial implications of the Amendment Ordinance, albeit not as detailed as those outlined in Annex D. At that time it was practically not possible for the Administration to conduct any comprehensive assessment of the implications given the numerous amendments put forward by Members.

7.Mr FUNG Kin-kee pointed out that financial concern should not constitute a cause for repealing the Amendment Ordinance, which was one of the options listed in the report. Any move to amend a piece of legislation before it was put to implementation would run contrary to the legislative spirit which underpinned the obligation for the Executive to implement the legislation passed by the Legislature. Subsidiary legislation could be introduced to enhance the implementation of the Ordinance. He cautioned that the Hong Kong Association for Democracy and People's Livelihood would consider bringing the case to court if the Provisional Legislative Council (PLC) were to consider any proposal to amend the Amendment Ordinance as this was at variance with the decision of the Preparatory Committee that PLC should only consider legislation essential to the smooth functioning of the Hong Kong Special Administrative Region (HKSAR). He considered that HA should explore other means to generate more income as well as to control expenditure instead of finding a way to repeal the Amendment Ordinance. PAS for H/2 stressed that the report also recommended the implementation of the Amendment Ordinance, subject to certain amendments necessary to minimize the legal problems, operational difficulties and financial loss to HA. The Administration would consult the Department of Justice on whether these amendments were essential.

Calculation of financial loss

8.The Deputy Director of Housing (DD of H) advised that while HA was committed to controlling expenditure by various measures such as streamlining the management structure, it was inappropriate to use the savings from other sources to make up the financial loss resulting from the implementation of the Amendment Ordinance as these were two separate issues. He pointed out that the financial impact of the Amendment Ordinance was inconsistent with the spirit of section 4(4) of the Housing Ordinance which required HA to direct its policy to ensure that the revenue accruing from its estates were sufficient to meet the recurrent expenditure of these estates. The domestic operating account of HA, which applied to estates let for residential purposes, was showing a forecast deficit of $6.3 billion for the five-year period from 1997/98 to 2001/02. The situation would be further aggravated by the anticipated financial loss of $1.7 billion resulting from capping the median rent-to-income ratio (MRIR) at 10% and a loss of $5.2 billion due to the change of the rent review cycle from two to three years over the period from 1997/98 to 2005/06. DD of H also questioned the need for a new triennial cycle if there was already the 10% MRIR ceiling in existence. Furthermore, the triennial rent review cycle borne no direct relationship with the affordability of tenants.

9.As for the basis on which the loss of $5.2 billion had been arrived at, DD of H explained that with the MRIR already capped at 10%, a change from biennial to triennial rent review cycle would result in reduced rental income in the intervening years between each cycle. There would only be two instead of three rent reviews for every six-year period. Assuming a biennial rent increase of 18% versus a triennial rent increase of 28.1% throughout the period from 1997/98 to 2005/06, a financial loss of around $5.2 billion was expected.

10.Members considered that the situation would be significantly improved if incomes such as those generated from the leasing of commercial premises and carparks as well as the sale of public rental housing (PRH) flats etc were taken into account. DD of H advised that income from other sources were kept in accounts separated from the domestic operating accounts, as was the case with the Home Ownership Scheme. He reiterated that it was not appropriate to make up the financial loss with other incomes. Nevertheless, details on the sale of PRH flats had yet to be worked out. Members were not convinced of the Administration's response as virement of funds among accounts was a common practice. At members' request, the Administration undertook to further advise members the basis on which the loss of $5.2 billion had been arrived at and the difference envisaged if incomes such as those generated from the leasing of commercial premises and carparks had been taken into account.

Admin

Effect of rates payment

11.In reply to a question, DD of H advised that with the MRIR being capped at 10%, a rise in the level of rates which were calculated according to the open market rental level, would further reduce HA's net rental income as HA was responsible for paying the rates of premises under its control and management.

Rent increases

12.On future rent increases, DD of H advised that with the 10% MRIR ceiling in place, rent increases for the period from 1997/98 to 2001/02 and 2001/02 to 2005/06 would be 18% and 16.6% respectively. Members asked if HA would consider freezing all rent increases before a final decision was reached on the Amendment Ordinance. DD of H explained that under the current practice, PRH estates were grouped into batches for the purpose of rent review. The review for the batch scheduled for 1 September 1997 had been withheld. The Management and Operations Committee of HA would consider whether the same should apply to the next batch which would be due for review in December 1997.

Legal implications

Median Rent-to-income ratio

13.The Legal Adviser of the Housing Department cautioned that as the Amendment Ordinance did not provide a clear definition of the overall MRIR and a methodology as to its determination, HA would be obliged to conduct comprehensive surveys of incomes of all households living in PRH estates at least twice each year, as opposed to the present practice of determining MRIR by way of sample surveys. Such exercises would be necessary to ensure compliance with the provisions in the Amendment Ordinance. This would arouse resentment among tenants and would incur administrative costs as high as $32 million per survey. Members took note of the Administration's concern and agreed that legislative amendment would be necessary so that HA could rely on the MRIR figures computed by way of the sampling method currently adopted.

Licence fee

14.DD of H pointed out that licence fees for Cottage Areas, Temporary Housing Areas and Interim Housing would be included for the purpose of assessing MRIR and subject to the triennial rent review cycle under the Amendment Ordinance which application would create inflexibility for future variation of licence fees. As it was not intended to apply the Amendment Ordinance to these licence fees, amendment would therefore be required to exclude such licence fees from the application of the Amendment Ordinance.

Operational implications

Triennial rent review

15.DD of H considered that the triennial rent review would remove all discretion of HA to vary rents of individual households according to their financial situations between reviews. This would also make it impossible to implement effectively the rental policies applied to better-off tenants and those in temporary financial hardship paying reduced rents under the Rent Assistance Scheme. As to whether HA would consider relaxing the eligibility criteria for the Rent Assistance Scheme, DD of H assured members that HA would regularly review the adequacy of the Scheme for the purpose of helping those tenants in genuine need of assistance.

Members' views

16.Having considered the Administration's views, the majority of members remained of the view that the Amendment Ordinance should only be amended if this was operationally not viable. The anticipated financial loss should not constitute a cause for the repeal or suspension of the Amendment Ordinance since the Administration had not illustrated that such financial loss would bring HA's functioning to a standstill. Mr FUNG Kin-kee reiterated that the Administration should implement the Amendment Ordinance without delay. If the Administration had to make any legislative amendments to the Amendment Ordinance, they should only be introduced to the first Legislative Council of HKSAR. He pointed out that the anticipated financial loss to HA before the establishment of the first LegCo next year was only $400 million which was minimal when compared with its annual recurrent expenditure of $11 billion. He was therefore not convinced that the Administration had to introduce any amendments to PLC. PAS for H/2 stressed that as a responsible Government, the Administration had to take account of the full implications of the Amendment Ordinance before implementation to avoid frequent amendments and to save resources.

17.Members reiterated that it was against the legislative spirit for the Executive to withhold implementation of the legislation passed by the Legislature. The Chairman moved the following motion:

" That the Panel on Housing urges the Secretary for Housing to expeditiously appoint a date under Section 1(2) of the Housing (Amendment) Ordinance 1997 on which the Ordinance should come into operation. "

18.The motion was put to vote. Of the Panel members who were present at the meeting, ten voted for the motion; Mr Edward S T HO and Mr HO Sai-chu voted against the motion on the ground that clarifications on the detailed breakdown of the financial loss arising from the implementation of the Amendment Ordinance should be sought before any conclusion should be made. The motion was passed by the Panel. The Chairman instructed that the motion be conveyed to the Administration.

(Post-meeting note: A letter to the Administration on the motion was issued on 3 October 1997.)

V.Provision of public housing for elderly persons
(PLC Paper No. 271(02))

Registering the elderly on the Waiting List

19.Some members were concerned about the elderly persons living in sub-standard private accommodation and asked if measures such as reduction in the average waiting time were in place to expedite the allocation of PRH flats to them. The Chief Housing Manager (Applications) (CHM(A)) advised that efforts had been made to encourage elderly persons who had not yet registered on the Waiting List (WL) to apply for public housing, including establishing Housing Information Centres in districts populated with larger number of elderly. Priority housing schemes were also made available for elderly persons aged 60 or above, such as the Single Elderly Persons Priority Scheme for those who preferred to live on their own, and the Elderly Persons Priority Scheme for those who chose to share accommodation. The average waiting time for the former was four years and the latter two; further reduction in the waiting time would be subject to the availability of housing resources. Compassionate re-housing would also be offered to emergency cases on medical or social grounds, upon the recommendation of the Social Welfare Department. Elderly tenants sharing a PRH flat who subsequently chose to live on their own would have to re-register on WL.

20.CHM(A) supplemented that nuclear families living together with their elderly dependents aged 60 or above could apply for PRH flats through the Families with Elderly Persons Priority Scheme under which allocation would normally be advanced by three years. While appreciating a member's suggestion for allocating PRH flats in urban areas to families under the scheme in order to encourage more families to live with their elderly dependents, CHM(A) advised that new applications other than those under the Single Elderly Persons Priority Scheme and the Elderly Persons Priority Scheme would no longer be accepted owing to the acute shortage of PRH units in the urban districts. As regards the addition of adult family members to public rental tenancies, CHM(A) advised that there was an established policy to allow for a one-line continuation of the family. The spouse of one of the tenant's married children could be added to the tenancy provided that the other children would move out upon marriage. These families could apply for overcrowding relief if they were occupying less than 4.5 square metres internal floor area per person.

Flats for the elderly

21.A member was not optimistic that the Administration could make available 30,000 PRH flats over the period from 1997/98 to 2001/02 as planned in view of past slippages. He asked if the flat requirement had been projected taking into account the growth of elderly population. CHM(A) conceived that more elderly persons would be living on their own as a result of an aging population. The Administration was confident that with the construction of 30,000 PRH units and the recovery of some 10,000 vacant flats for re-allocation, about 17,000-18,000 small flats would be suitable for allocation to single elderly persons on WL. One member pointed out that the flat requirement for the elderly would far exceed 17,000-18,000 units having regard to the number of 22,300 elderly persons who had already registered on WL. CHM(A) clarified that not all elderly WL applicants would choose to live on their own; some might prefer to share accommodation. PAS for H/2 assured members that the Administration would regularly update its projected flat requirement taking into account factors such as aging population etc.

22.As regards allocation of PRH flats, CHM(A) advised that elderly applicants would be given three choices of preferred district. Subject to the availability of resources, allocation would be made according to their choice of district. However, applicants who refused to accept allocation to a less preferred district would have to wait for a longer period.

Financial assistance

23.In reply to a member's question, CHM(A) advised that elderly tenants with long-term financial difficulties could apply for Comprehensive Social Security Assistance (CSSA) under which a rent allowance equivalent to the full amount of rent payable would be provided. The existing maximum levels of monthly rent allowance were $1,420 and $2,860 for one-person and two-person households respectively.

Feasibility of offering an ex-gratia payment to elderly persons who were willing to give up their public rental flats and live outside Hong Kong

24.CHM(A) advised that the offering of ex-gratia payments to elderly persons who were willing to give up their public rental flats might attract those who were not in genuine housing need to apply for PRH. A member, however, pointed out that there were genuine cases where those who chose to live outside Hong Kong were in need of extra money. To safeguard against abuse, one member suggested that additional eligibility criteria for granting of the ex-gratia payment could be imposed, such as a specified period of occupancy in PRH flats. CHM(A) explained that ex-gratia payments were only made available to those who were affected by HA's Comprehensive Redevelopment Programme. He considered it not appropriate to offer ex-gratia payments in this situation. Furthermore, the majority of elderly persons who chose to live outside Hong Kong were CSSA recipients and the allowance they received would enable them to lead a dignified life, say, in the Mainland China. Members were not convinced of the Administration's response as not all elderly tenants were CSSA recipients.

Elderly Commission

25.Mr FUNG Kin-kee remarked that HA had made a number of proposals on housing arrangements for elderly persons in 1994 and urged the Administration to refer these proposals to the Elderly Commission (EC) for consideration. While welcoming the member's suggestion, the Principal Assistant Secretary for Housing (Housing Strategy) (PAS for H (HS)) advised that the majority of proposals, including the establishment of Housing Information Centres and allocation of small scale sites for the construction of PRH flats for elderly persons had already been implemented. Nevertheless, she undertook to refer the proposals to EC as suggested. The Administration was also requested to advise if additional sites had been identified for the construction of PRH for the elderly, apart from the four sites which were allocated in 1994.

Admin

26.A member enquired about the possibility of establishing a link between the Panel and EC so that the former would be informed of all housing-related proposals put forward by the latter before final implementation. Mr TAM Yiu-chung, who was also the Chairman of EC, advised members that a direct link might not be necessary as the role of both the Panel and EC was to advise the Administration on issues regarding elderly policies. Moreover, any recommendations made by EC would be announced to the public. The Chairman agreed that it would be more appropriate for the Administration to brief the Panel as both the Secretary for Housing and the Director of Housing were members of EC. PAS for H/2 said that the Administration would make every endeavour to brief the Panel when requested.

VI.Any other business
(PLC Paper No. CB(1) 271(03))

27.The Chairman drew members' attention to the list of concerns raised by Mrs Selina CHOW. She suggested and members agreed that the subject on housing supply over the next two years would be discussed at the second joint meeting with the Panel on Planning, Lands and Works to be held in late November 1997.

28.There being no other business, the meeting ended at 4:55 pm.

Provisional Legislative Council Secretariat
12 November 1997