Information Paper for the
Legislative Council Panel on Housing
Rent Review for Public Rental Housing
PURPOSE
This paper informs Members of the current domestic rent policy for public rental housing estates and measures taken to help tide tenants over the economic downturn.
BACKGROUND
2. The Housing Authority (HA)'s current domestic rent policy is based on tenants' affordability. In fixing the rents of new estates, new rents are set not to exceed the median rent-to-income ratio of 15% and 18.5% of the prospective tenants at the minimum allocation standard of 5.5m2 and 7m2 internal floor area per person respectively. Other factors taken into account are the comparative values of estates; location and transportation; management and maintenance costs, inflation and rates etc. Although the minimum space allocation standard in new estates is 7m2 internal floor area per person, the actual space allocation has always been on the generous side to meet tenants' rising aspiration.
3. Under Section 16(1A) of the Housing Ordinance which came into effect on 13 March 1998, review of the domestic rents of public housing estates has been changed from once every two years to once every three years and that the overall median rent-to-income ratio of all public rental housing estates shall not exceed 10%.
4. Section 4(4) of the Housing Ordinance also provides that the policy of the HA shall be directed to ensuring that the revenue accruing to it from its estates shall be sufficient to meet its recurrent expenditure on its estates.
MEASURES TO ASSIST TENANTS
5. With a view to tiding tenants over the prevailing economic downturn, the Housing Authority decided in January 1998 and November 1998 to freeze the rents of newly completed rental estates at the July 1997 level up to June 1999. As a result of the rent freeze, the HA estimated that there would be an annual shortfall of revenue of $60.8 million.
6. To further assist tenants, the HA has also decided to waive the increase in rent for one year (without recouping the amount of increase forgone in the second and the third years) of 260,000 tenants affected by the September 1998, December 1998 and April 1999 rent review exercises. The Housing Authority estimated that the total rental foregone would be $743 million.
7. The above are measures to cushion tenants' financial burdens. They have already caused significant financial impact on the HA which is obliged under the Housing Ordinance to ensure that the revenue accruing to it from its estates shall be sufficient to meet the recurrent expenditure on its estates. The present rent levels of public rental housing estates are within tenants' affordability. In fact, 75% of households are paying a monthly rent of less than $1,500. Further rent reduction without regard to tenants' affordability will compel the HA to incur greater deficit or to reduce the quality of management service in order to meet the recurrent expenditure of its estates.
RATES REBATE AND RATES CONCESSION
8. Domestic rents are collected by the HA on an inclusive rent basis and will not be varied within the three-year cycle i.e. rent will not be increased if there is an increase in rates or will not be decreased if there is a decrease in rates. In response to the Government's promulgation of rates rebate, the HA, as a caring landlord, had in October 1998 refunded $400 million rates collected from its tenants in the first quarter of 1998/1999. In line with the Government's announcement, the Housing Authority has also decided to grant a concession of 50% of the rates payable by the tenants in the July to September 1999 quarter. It is estimated that $196 million rates concession will be granted. These measures are meant to assist tenants further in the current economic climate.
RENT ASSISTANCE
9. Tenants in temporary financial hardship may approach the Estate Office for rent assistance under the HA's Rent Assistance Scheme. For those who suffer long term financial hardship, they may approach the Social Welfare Department to apply for the Comprehensive Social Security Assistance.
SETTING RENTS FOR NEW ESTATES AND REVIEWING RENTS FOR EXISTING PUBLIC HOUSING ESTATES IN 1999
10. The HA will take into account tenants' affordability, the legislative provisions, the prevailing economic climate, the impact on its financial position and all other related factors before setting the rents of newly completed estates and reviewing the rents of existing public housing estates in the latter half of 1999.
HOUSING DEPARTMENT
April 1999
