Information Paper for Legislative Council Panel on Housing
Rent Reduction for Commercial Premises in Public Housing Estates
The Housing Authority is responsible for 12% of Hong Kong's retail space. It runs commercial premises on a commercial basis. Rents are fixed with reference to market conditions at the time of reaching tenancy agreements, and form part of binding contracts between the Housing Authority and commercial tenants.
Measures taken by the Housing Authority in relieving business hardship
2. The Housing Authority recognises that the recent unpredictable changes in the wider economic environment have impacted on business. To assist retailers in public housing estates to adapt to the downturn in business environment, the Housing Authority has taken a number of positive measures:
Motion passed by Legislative Council to alleviate people's hardship
- The rents of all tenancies due for renewal between 1 February 1998 and 31 December 1998 are being reduced or frozen.
- The requirements to serve advanced notice to quit and to pay compensation to the Housing Authority for early surrender have been waived.
- Tenancies commenced or renewed between 1 January 1996 and 31 January 1998 may apply for re-assessment of rents. Rent will be reduced for the residual term, if the re-assessed rent is lower than that in the tenancy agreement.
3. The Legislative Council carried a motion on 8 July 1998 to urge for a number of immediate and effective measures to alleviate people's hardship to reduce the plight caused by the current economic difficulties. The measures include, inter alia, an across the board 30% rent reduction for Housing Authority commercial tenancies.
4. We share Members' concern over the business hardship faced by commercial tenants in the light of economic downturn. We have carefully considered Members' request, but cannot agree to an across the board 30% rent reduction of the Housing Authority commercial tenancies. The rents payable by tenants reflect the market conditions at the time of their reaching the tenancy agreements with the Housing Authority. The Housing Authority recognises that some of the commercial tenants who tendered successfully for shop premises when the economy was booming are now in difficulty. Given the different sizes and locations of the commercial tenants, and the varying impacts the economic downturn has on different businesses, the only equitable way of assisting them is to invite those who feel that the rents they pay no longer represent real market values to apply for a review. This opportunity is offered to ensure that commercial tenants in public housing estates retain their competitiveness and that services to domestic tenants are uninterrupted as far as possible. A 30% across rent reduction is not a fair approach and does not accord well with the principle of rational allocation of public resources.
The responses to re-assessment of commercial rents
5. Tenants of about 9,400 commercial premises with tenancies commenced or renewed between 1 January 1996 and 31 January 1998 can apply to the Housing Authority for re-assessment of rents during the period from 1 July 1998 to 30 September 1998, upon payment of an administrative fee. The re-assessed rent payable for the residual period would take effect from 1 July 1998.
6. As at 15 July 1998, the Housing Authority has received over 1,200 applications for rent re-assessment. The Housing Department has recently completed the rent re-assessment for the first batch of 52 applications. 58% of these tenants were given rent reduction of 30% or more. The average rent reduction is 34%. A summary of rent reduction for these cases is at Annex
7. As landlord, the Housing Authority retains the final decision on rent to be charged. While there is no contractual basis under the tenancy agreements for appeal, the Housing Department will review cases if tenants can provide more information to support their application.
Summary of the amount of rent reduction
for the first batch of 52 applications