Panel on Housing (Minutes) 9 Oct 97

Provisional Legislative Council

PLC Paper No. CB(1) 478
(These minutes have been
seen by the Administration)

Ref : CB1/PL/HG/1

Panel on Housing

Minutes of meeting held on Thursday, 9 October 1997, at 11:00 am in the Chamber of the Legislative Council Building

Briefing by the Administration on the Chief Executive' s Policy Address 1997

Members present :

Hon CHAN Yuen-han (Chairman)
Hon Frederick FUNG Kin-kee (Deputy Chairman)
Hon WONG Siu-yee
Hon Edward HO Sing-tin, JP
Hon Mrs Selina CHOW, JP
Hon Ronald ARCULLI, JP
Hon CHEUNG Hon-chung
Hon LEUNG Chun-ying, JP
Hon CHAN Choi-hi
Hon CHAN Kam-lam
Hon CHENG Kai-nam
Hon Kennedy WONG Ying-ho
Hon Bruce LIU Sing-lee
Hon LAU Kong-wah
Hon CHOY Kan-pui, JP
Dr Hon TANG Siu-tong, JP
Hon Timothy FOK Tsun-ting

Member attending :

Hon Mrs Sophie LEUNG LAU Yau-fun, JP

Members absent :

Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon HUI Yin-fat, JP
Hon Andrew WONG Wang-fat, JP
Dr Hon Charles YEUNG Chun-kam
Hon TAM Yiu-chung, JP

Public officers attending :

The Honourable Donald TSANG, JP,: Financial Secretary
Mr Dominic WONG, JP,: Secretary for Housing
Mr Bowen LEUNG, JP,: Secretary for Planning, Environment and Lands
Mr Andrew Wells, JP,: Deputy Secretary for Housing
Mr Tony Miller, JP,: Director of Housing
Mr Bob Pope, JP,: Director of Lands
Dr K S PUN, JP,: Director of Planning

Clerk in attendance :

Ms LEUNG Siu-kum,: Chief Assistant Secretary (1)2

Staff in attendance :

Miss Becky YU,: Senior Assistant Secretary (1)3

I.Briefing by the Administration on the Chief Executive's Policy Address

The Chairman welcomed the Financial Secretary (FS), the Secretary for Housing (S for H), the Secretary for Planning, Environment and Lands (S for PEL), and other representatives from the Administration to the meeting. The Chairman also invited members to refer to the following documents which were tabled at the meeting:

Forecast of flat production in 1997/98-2004/05;
Booklet entitled " Better Housing for All " ; and
Review of the development approval process.

Briefing by the Financial Secretary

2.FS briefed members on the work of the Steering Committee on Land Supply for Housing (HOUSCOM). HOUSCOM, under his chairmanship, comprised five bureau secretaries and five department heads. It provided a high level forum within the Government for setting priorities and making decisions on land supply for housing. Over the past three months, HOUSCOM had made much efforts to simplify and fast-track procedures, to identify sites and compile site-specific control lists on flat production, and to devise a new accountability system and management structure at both central and district levels to ensure the meeting of the housing targets.

3.Referring to the housing targets set out by the Chief Executive (CE) in his Policy Address, FS advised members that HOUSCOM aimed to institute a change of attitude and working practice towards housing development from a passive, critical approach to a proactive and constructive approach. An internal circular asking all concerned bureaux and departments to accord absolute priority to housing development had been issued. The Chairmen of District Lands Conferences would also be empowered to take forward housing development projects expeditiously and to overrule other departmental obstacles when necessary.

4.On land disposal, FS advised that a rolling five-year Land Disposal Programme (LDP) which comprised, inter-alia, a site-specific schedule of land sales for the first two years and a forecast of land for sale for the following three years, would be announced each year. In the first five-year LDP from 1997/98 to 2001/02, some 690 hectares of land would be disposed of for both public and private housing development. The Administration was confident that with the LDP and the land sale programme, a steady annual land supply would be sustained.

5.As regards flat production, FS advised that HOUSCOM was finalizing a 13-year rolling programme for flat production. An inventory of all housing developments in the coming eight years as well as control lists on annual flat production of individual housing sites had been compiled. It was expected that the pledge for annual production of 85,000 flats could be met from 1999/2000 onwards. The Administration was not able to disclose the site specific information at this stage as such information was commercially sensitive and the programme would be subject to changes due to land resumption and other operational problems.

6.To ensure timely delivery of flats, FS informed members that a new micro-management approach had been adopted in the implementation of the flat production programme. Under the new mechanism, a directorate officer would be nominated to oversee each of the some 920 housing sites in the eight-year flat production programme from 1997/98 to 2004/05 and the officer would be held personally responsible for timely completion of the development. In addition, HOUSCOM had devised a set of new procedures to remove uncertainties impeding housing developments and to enable expeditious resolution of problems. Individual concerned departments would be charged with specific responsibilities so that every step in the flat production process was properly accounted for. A well-structured mechanism would be put in place to resolve problems in housing projects speedily at both central and district levels. In the event of any inter-departmental conflict which might impede the speedy progress of housing projects and which could not be resolved at district levels, it would be immediately escalated to a higher level, even as high as to HOUSCOM, if necessary, for settlement.

7.On labour supply, FS admitted that the annual target supply of not less than 85,000 flats had led to concern over the issue of manpower supply for the construction industry. To facilitate a better understanding of the capacity of the industry, the Education and Manpower Bureau (EMB) had commissioned a study on the manpower needs in the various construction trades. The results of this study would be made available at the end of 1997. EMB had also set up a Working Group to identify measures to ensure an adequate supply of labour for the industry, including increasing the supply of construction workers through training and re-training.

8.FS assured members that with the concerted efforts of relevant policy bureaux and departments, the targets set by CE could be met.

Briefing by the Secretary for Planning, Environment and Lands

9.S for PEL advised the Panel that to speed up the development approving processes, the Administration had consulted relevant parties, including the professional bodies in the trade, and devised improvement measures to eliminate red tapes and to expedite various land and housing development approving processes. Given the scarcity of land resources in Hong Kong, measures such as rezoning industrial and agricultural land and increasing development densities were being taken to enhance land production and utilization to meet the housing production programmes. In the past, 37 hectares of industrial land capable of producing 39,000 units had already been rezoned for residential purposes. Of these, 22 hectares were from the Western Reclamation. The Administration would take into consideration the results of a survey on industrial development which had identified a further 100-140 hectares of industrial land for possible rezoning. Furthermore, an integrated planning and engineering studies on the Northwest New Territories and the Northeast New Territories Strategic Growth Areas would begin to consider the possibility of turning 1,000 hectares of agricultural land into residential use.

10.On urban renewal, S for PEL advised that an Urban Renewal Authority would be set up to take over the work of the Land Development Corporation for the purpose of expediting urban redevelopment. The Administration would introduce legislation in 1998:

-to facilitate land assembly for redevelopment of private lots with multiple owners.

Although details of the legislation had yet to be worked out, the intention was to enable property owner(s) who had obtained 90% of ownership of the property concerned to apply to court for putting the property up for tender or auction. The proceeds would then be apportioned amongst the owners.

11.On the subject of building safety, S for PEL explained that the $500 million Urban Rehabilitation Fund mentioned in the Policy Address aimed to provide low interest loans to building owners in need of financial assistance for conducting inspection and maintenance to their buildings required under the proposed Mandatory Building Safety Inspection Scheme. The Fund was expected to be set up in 1998.

Briefing by the Secretary for Housing

12.S for H stressed that the Administration was confident that the annual production level of 85,000 flats could be achieved from 1999-2000 onwards. Measures aiming at streamlining the public housing development process of the Housing Authority (HA) and the Housing Society (HS) had been agreed. These included carrying out the planning and engineering feasibility studies for each site in parallel with the district or area-wide studies undertaken by the Territory Development Department, and combining the piling and building contracts for construction works. The standard lead time required for HA and HS in producing public flats would be expected to reduce from 62 to 47 months and from 52 to 46 months respectively.

13.S for H also explained the work of the Housing Project Action Team under the Housing Bureau which was set up to monitor, facilitate and accelerate the progress of major housing projects. The Team was currently fast-tracking 68 housing projects capable of producing 144,000 flats. To avoid delay to housing production as a result of shortfalls in infrastructure, a Housing Project Action Fund was set up to finance housing-related infrastructural projects such as land formation, road links, water supply, drainage services and transport facilities.

14.Referring to the target of achieving 70% home ownership rate by 2007, S for H advised that the Administration would increase the opportunities for families to buy their own homes by:

-giving all families on the General Waiting List (WL) and other re-housing categories the option of buying rather than renting public rental housing (PRH) flats when their turn for allocation came up;

-selling PRH flats to sitting tenants. Opportunity would be given for at least 250,000 families living in PRH to buy their flats at reasonable and affordable prices over the next ten years, starting with the first batch of 25,000 flats in 1998;

-building more Sandwich Class Housing flats;

-introducing a new mixed development scheme in 1998 on a pilot basis under which private developers bidding for a site would be required to hand over at least 30% of the flats built to the Government for sale to eligible purchasers at designated prices;

-increasing the number of home purchase loans to low and middle income families; and

-introducing a new " Home Starter " loan scheme under which loans of $600,000 each would be provided for 6,000 eligible first time home buyers each year in the next five years.

15.To provide public housing for those in genuine need, S for H stressed that the Administration had pledged to reduce the average waiting time for PRH from the current six-and-a-half years to just under five years by 2001, to four years by 2003, and to three years by 2005. These targets would be achieved by increasing the supply of new and refurbished flats for allocation and by encouraging sitting tenants to buy subsidized home ownership flats. It was expected that the housing demand arising from public housing redevelopment and clearance would decline as most committed clearance programmes would be completed by 2001.

Discussion session

General policy

16.Mrs Selina CHOW noted that the forecast flat production of 166,700 flats for the year 2000/01 was over two times as that for the year 1997/98. Together with other reclamation and infrastructural development projects over the period, Mrs CHOW expressed worries that the capacity of the construction industry might not be able to meet the demand of these construction projects. She also cautioned about the possible impact on inflation resulting from the rising wages in the industry. In response, FS advised that the majority of these flats were public sector housing flats, and construction work in most of these sites had already commenced. So far, no report on any significant shortage of manpower had been received. Nevertheless, the Administration would closely monitor the situation and, if necessary, take appropriate early measures, such as importation of labour after consultation with relevant parties, to alleviate any specific constraint which might arise. FS considered that the impact of the rise in wages on inflation would not be significant, but there would inevitably be other negative impacts arising from the heavy demand on the construction industry.

17.As to whether additional resources would be allocated to improve supporting infrastructure for housing development, FS affirmed that a number of transport and public work projects would be implemented to allow necessary housing development to proceed on schedule. Having regard to the large number of impending projects, a member expressed concern that relevant departments such as the Lands Department and the Buildings Department might not have sufficient manpower to cope with the increasing workload. FS stressed that the Administration was committed to implementing these projects. Staff increases would be considered if the anticipated workload could not be absorbed through internal deployment.

Public sector housing

18.Some members said that there would continue to be skepticism over the proposed sale of 25,000 PRH flats among sitting tenants concerned due to the absence of sales details such as prices, mortgage arrangements and resale conditions etc. S for H advised that although details of the scheme had yet to be worked out by HA, tenants' affordability would remain the prime consideration in determining the sale prices of PRH flats. Other factors such as the age and location of the flats would also be taken into account. Subject to the availability of proposed sales details from HA, the Administration would take a final decision by the end of 1997 with a view to releasing the first batch of some 25,000 flats for sale in early 1998.

Private sector housing

19.A member noted that of the 85,000 flats to be constructed each year, 36,000 would be private housing flats. Having regard to the limited control over the private sector, he asked if the Administration would consider increasing the proportion of public housing flats to ensure sufficient supply to meet demand. S for PEL acknowledged the member's concern and advised that a number of new measures were being considered to maximize the contribution of the private sector. One of these might be to stipulate in new land leases the minimum number of flats to be constructed. Consideration was also given to provide for some flexibility under the Buildings Ordinance for developers who wanted to achieve the number of flats but with increased sizes. Legislation would be introduced in 1998 to assist property owners and developers to assemble land so as to expedite the process of urban renewal. Other measures such as relaxing plot ratios and allocating land which was not taken up by property developers in land auctions to HA and HS for the construction of PRH and HOS flats would also be considered.

20.Some members expressed worries that property developers might procrastinate the production of flats through lease modification and land exchange in the event of poor market situation. They enquired about the measures to ensure timely supply of flats on the one hand and to avoid intervention of the free market economy on the other. S for PEL explained that under the building covenants, developers were required to complete the building work within a period of three to five years. An extension to the period might be approved on valid grounds subject to payment of fines on a progressive scale based on the prevailing land value. Should there be no progress or should the developer fail to pay the fine, the Director of Lands might exercise the right to re-enter the site in question in accordance with the conditions stipulated in the land lease.

21.As regards the hoarding of flats by property developers, FS reiterated that developers concerned would be subject to fines if units were not completed as scheduled. Moreover, hoarding of flats would tie up capital and incur interest and other expenses on management and rates. These would be effective disincentives.

22.The Chairman was concerned that the absence of anti-speculative measures in the Policy Address might encourage property speculation. FS stressed that the Administration was determined to tackle the problem of speculation by increasing housing supply. The target of an annual provision of 85,000 flats was higher than the projected demand of 80,000 and the safety margin of 5,000 flats would help stabilize the property prices. He assured members that the Administration had in hand a package of measures to be introduced at short notice should signs of excessive speculation emerge. However, it was inappropriate to disclose these measures prematurely.

II.Any other business

23.The Chairman reminded members that the next Panel meeting would be held on Tuesday, 28 October 1997, at 10:45 am during which the sale of PRH flats would be discussed.

24.There being no other business, the meeting ended at 12:15 pm.

Provisional Legislative Council Secretariat
12 November 1997