Panel on Housing (Minutes) 11 Dec 97

Provisional Legislative Council

PLC Paper No. CB(1) 881
(These minutes have been
seen by the Administration)

Ref : CB1/PL/HG/1

Panel on Housing

Minutes of special meeting held on Thursday, 11 December 1997, at 10:00 am in Conference Room A of the Legislative Council Building

Members present :

Hon CHAN Yuen-han (Chairman)
Hon Frederick FUNG Kin-kee (Deputy Chairman)
Hon WONG Siu-yee
Hon Mrs Selina CHOW, JP
Hon LEUNG Chun-ying, JP
Hon CHAN Kam-lam
Hon CHENG Kai-nam
Hon Andrew WONG Wang-fat, JP
Dr Hon Charles YEUNG Chun-kam
Hon LAU Kong-wah
Hon CHOY Kan-pui, JP
Hon TAM Yiu-chung, JP

Members absent :

Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon Edward HO Sing-tin, JP
Hon Ronald ARCULLI, JP
Hon CHEUNG Hon-chung
Hon HUI Yin-fat, JP
Hon CHAN Choi-hi
Hon Kennedy WONG Ying-ho
Hon Bruce LIU Sing-lee
Dr Hon TANG Siu-tong, JP
Hon Timothy FOK Tsun-ting

Public officers attending :

For item I Housing Bureau
Mr Andrew R Wells,: Deputy Secretary for Housing/2
Housing Department
Mr Stephen POON,: Deputy Director of Housing
For item II
Housing Bureau
Mr C M LEUNG,: Deputy Secretary for Housing/1
Ms Sandy CHAN,: Principal Assistant Secretary for Housing
Housing Department
Mr Marco WU,: Deputy Director of Housing
Mr Simon LEE,: Deputy Director/Legal Adviser

Clerk in attendance :

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

Staff in attendance :

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

I. Sale of public rental housing flats
(PLC Paper No. CB(1) 632)

At the invitation of the Chairman, the Deputy Director of Housing (DD of H) highlighted the salient points in the information paper on "Tenants Purchase Scheme (TPS)" tabled at the meeting. Members then proceeded to the discussion session.

Selection of estates

2. In response to a question on the selection criteria for TPS, the Deputy Secretary for Housing/2 (DS for H/2) acknowledged that age was a critical factor in choosing public rental housing (PRH) flats for sale. Given the need to reserve sufficient PRH flats for allocation to applicants on the General Waiting List in order to reduce the average waiting time from six to three years and the fact that the majority of old PRH estates had been earmarked for redevelopment under the Comprehensive Redevelopment Programme, the Administration therefore intended to focus on estates built between 1985 and 1992. A review on the selection criteria would be conducted after the sale of the second batch of PRH flats.

Sale prices

3. Members remained of the view that the sale prices of PRH flats should not be pegged to market value. DS for H/2 clarified that the basic sale prices would be set by reference to the "adjusted replacement cost" approach, under which the price of a PRH flat was based on the prevailing cost of replacing the flat, with adjustments to take into account factors such as age and location. The reference to the assessed market value was made to facilitate a better understanding of the amount of premium payable by the buyers upon resale of the PRH flats. This was consistent with the current resale conditions under the Home Ownership Scheme (HOS). Some members expressed concern that prospective buyers in subsequent batches might have to pay a higher price due to the rise in replacement cost. They considered that a standardized pricing strategy should be adopted. DD of H advised that apart from the "adjusted replacement cost" approach, the Administration had also taken into account tenants' affordability in determining the sale price of PRH flats. Furthermore, the special credits of 60% in the first year and 30% in the second year applicable to purchase in the first two years would be made available for buyers in subsequent batches to encourage early purchase.

4. Noting that the monthly housing expenditure (mortgage repayment, rates, government rent and management fees) of tenants who bought flats under TPS would generally be less than twice their current monthly PRH rentals, a member enquired about the basis upon which such a calculation was arrived at and if the Administration would consider setting the sale price of PRH flats at an affordable level at which the housing expenditure of TPS applicants would not exceed two times of their prevailing rents. DD of H explained that the housing expenditure referred to was for illustrative purpose only and would vary according to different circumstances such as the size of the mortgage loan. To assist TPS applicants, efforts had been made to encourage financial institutions to offer favourable and flexible mortgage terms, such as extending the repayment period and waiving of the downpayment requirement. However, details of mortgage terms could not be disclosed prematurely at this moment as these were commercially sensitive.

5. As to whether the Administration would consider making available loans under the Home Starter Loan Scheme for TPS applicants to buy their own PRH flats, DS for H/2 considered the present financing arrangement for TPS applicants adequate having regard the affordable prices set for sale.

Resale conditions

6. A member was of the view that the low prices and relaxed resale conditions under TPS would reduce the attractiveness of HOS. DS for H/2 stressed that TPS was targeted only at sitting tenants, and that the successive over-subscription of HOS flats from "White Form" applicants served as a useful indicator on the attractiveness of HOS.

Maintenance

7. As the special credits would lapse after the first two years, some members expressed concern that tenants might be compelled to rush into early purchase despite the uncertainty about the quality of flats. DD of H assured members that all estates selected for sale would be surveyed to ensure good physical conditions. Major repair works, such as waterproofing to roof, plumbing and drainage replacement and checking of elevators would have been completed under the existing maintenance programme before these estates were put up for sale. He however admitted that there might be difficulties for estate staff to carry out maintenance works inside the flats as they might not have access to tenants' premises. To this end, a detailed list of repair and maintenance works included under the maintenance programme and the expected completion dates would be made available to the prospective buyers concerned.

8. As regards the responsibility of owners in the maintenance of slopes and open areas near the shopping centres and carparks in PRH estates, DD of H confirmed that owners would share the responsibility for the maintenance of nearby slopes as was the case with their counterparts in private premises. He added that only few estates selected for sale had slopes nearby and those slopes were built according to safety standards. Owners would have to pay management fees and assume liability in accordance with the numbers of shares they held, as stipulated in the Deeds of Mutual Covenant. DD of H said that the Administration had no intention to include shopping centres nor carparks under TPS and the maintenance of these facilities would remain the responsibility of the Housing Authority (HA). He assured members that a demarcation plan would be drawn up to delineate between areas that would be the responsibility of the home buyers and those that would be under HA.

9. To avoid recurrence of the 26 problematic PRH blocks, some members considered that the Administration should extend the structural safety guarantee period for TPS flats from seven to 40 years which was the average serviceable life of reinforced concrete buildings in Hong Kong. DD of H stressed that the 26 PRH blocks referred to were only isolated cases. All existing HA-managed estates were well maintained under a comprehensive maintenance programme. As regards the seven-year structural safety guarantee period, DD of H said that this was intended to align with the impending Building Safety Inspection Scheme, under which building owners were required to conduct inspection and maintenance to their buildings in a cycle of seven years. He reiterated that HA would carry out the necessary building inspection before selecting estates for sale. Therefore, only minor repair works to the structure of the buildings would be expected from time to time within the seven-year period and the repair costs incurred would be borne by HA. DD of H emphasized that serious structural problems should not arise if these estates were properly maintained.

Other features

10. As regards vacant flats, DD of H advised that, for each phase of the TPS, the initial batch of flats vacated by tenants would be offered for sale to other tenants in the same estate in the first instance. Subsequent batches of vacated flats would be put up for sale to tenants in other estates, families on the General Waiting List and cleareers. In the event of oversubscription, allocation would be determined by ballot.

11. A member noted that financial assistance from family members might be required if elderly tenants wished to buy their PRH flats and enquired about the possibility for including such family members in the deeds. DD of H advised that in order to guard against abuse of TPS, the addition of family members in the deed would be subject to the same criteria applicable to PRH tenancies. Notwithstanding this, family members concerned could act as guarantors.

II Housing (Amendment) Ordinance 1997
(PLC Paper No. CB(1) 611(01))

12. The Chairman questioned the Administration's intention of introducing a bill to amend the Housing (Amendment) Ordinance 1997 (Amendment Ordinance) before it was put to implementation. She reminded the Administration of the motion passed by the Panel on 29 September 1997 which urged the Secretary for Housing (S for H) to expeditiously appoint a date on which the Amendment Ordinance should come into operation.

13. In response, the Deputy Secretary for Housing/1 (DS for H/1) said that the Administration had carefully considered HA's report on the implications of the Housing (Amendment) Ordinance 1997 and agreed with its recommendation that the Amendment Ordinance should be implemented, subject to certain necessary amendments, particularly those related to the change from biennial to triennial rent review cycle, to minimize the legal problems, operational difficulties and financial loss to HA. The Department of Justice had been consulted and confirmed that these amendments were essential to the smooth functioning of the Hong Kong Special Administrative Region (HKSAR). DS for H stressed that the amendments were in conformity with the following principles:

fairness -- as rental policies applied to better-off tenants and those in temporary financial hardship paying reduced rents under the Rent Assistance Scheme would then be made possible for implementation;
justice -- as licence fees for Cottage Area, Temporary Housing Areas and Interim Housing would be excluded from the application of the Amendment Ordinance;
equity -- as rational allocation of public housing resources to those in genuine need could be safeguarded; and
impartiality -- as the amendments would be scrutinized by the Legislature.

14. Members were not convinced of the Administration's response. Mr Frederick FUNG Kin-kee cautioned that any move to amend a piece of legislation before it was put to implementation would be on contrary to the legislative spirit which underpinned the obligation for the Executive to implement the legislation passed by the Legislature. He considered that instead of making an amendment, subsidiary legislation could be introduced, if necessary, to enhance the effective implementation of any Ordinance. DS for H stressed that as a responsible Government, the Administration had to take account of the full implications of the Amendment Ordinance before its implementation. He emphasized that the introduction of amendments meant no disrespect for the former Legislature since a comprehensive assessment of the implications of the Amendment Ordinance was not available at that time. Mrs Selina CHOW said that although the Liberal Party considered that restrictive measures which interfered with the autonomy of HA should be avoided, they also found it inappropriate to introduce amendments to the Amendment Ordinance before it was put to implementation.

15. Mr CHAN Kam-lam reiterated that financial loss to HA should not constitute a cause for the repeal or suspension of the Amendment Ordinance as the loss could be recovered by income generated from the sale of PRH flats. The Legal Adviser of the Housing Department advised that apart from financial loss, the Amendment Ordinance also created certain legal and operational difficulties to HA. For example, HA would be obliged to conduct comprehensive surveys of incomes of all households living in PRH estates at least twice each year since the Amendment Ordinance did not specify clearly how the determination of the overall median rent-to-income ratio could be made. Mr FUNG however pointed out the Amendment Ordinance had empowered HA to decide on the manner in which the median rent-to-income ratio should be determined.

16. Regarding the basis upon which the introduction of amendments was considered essential in this legislative session, the Principal Assistant Secretary for Housing explained that as HA had already withheld the rent review for two batches of PRH estates in September and December 1997 to allow sufficient time to study the implications of the Amendment Ordinance, further delay would hamper the smooth operation of HA. As such, a prompt decision on whether amendments should be introduced was essential. As regards the way forward of the Amendment Ordinance, DS for H confirmed that the Administration would implement the Amendment Ordinance without delay if Members at the Provisional Legislative Council meeting decided to repeal the proposed amendments, but the Administration would consider introducing the same amendments after the establishment of the first HKSAR Legislative Council.

17. As the majority of members supported the implementation of the Amendment Ordinance without delay, the Chairman asked if the Administration would consider withdrawing the amendments given the strong opposition expressed by members. DS for H said that he was not in a position to comment on this but would try his best to solicit support from Members when the amendments were introduced to the Provisional Legislative Council in due course.

III Any other business

18. The Chairman reminded members of the joint meeting with the Panel on Transport on 15 December 1997 and of the regular Panel meeting on the same day, immediately after the joint meeting.

19. There being no other business, the meeting ended at 1:00 pm.

Provisional Legislative Council Secretariat
5 February 1998