For information
on 5 July 1999
Purpose

This paper sets out the Administration's response to the submission put forward by the Hong Kong Housing for the Sandwich Class (HKHSC).

Background

2. The Sandwich Class Housing Scheme(SCHS) aims at providing housing to those who are unable to afford flats in the private sector, and yet are ineligible for public housing. Sites were granted to the Housing Society at half premium. The Housing Society, being the agent of the Government, is responsible for construction of flats for sale to eligible households at discounted prices. So far, 10 projects, comprising 8,920 flats, have been completed.

Buyback guarantee

3. In its submission, the HKHSC suggested that the Housing Society should exercise its right to buy-back all SCHS flats so as to allow purchasers, in particular those who have financial difficulties, to re-sell their flats back to the Society at original prices if they wish to. We would like to reiterate that the buy-back arrangement as provided for under the land grant was designed to deter property speculation rather than providing a "safety net" to purchasers against changes in financial circumstances or falling property prices. SCHS flat owners are required to observe a five-year resale restriction, during which the owners must first offer their flats to the Housing Society if they wish to sell their units. They may dispose of their flats in the open market at full market value if the Society declines to buyback, subject to the payment of premium to the Government. As speculation in the residential property market has greatly subsided, the Housing Society has decided not to exercise its right to buyback.

4. Although the SCHS and the Home Ownership Scheme are subsidized housing schemes, they have different target groups and are administered by different agencies with different financial arrangements. The provision of a buy-back guarantee by the Housing Society will likely have serious implications on the financial position and contingent liabilities of the Housing Society.

Eligibility to subsidized housing benefits

5. The HKHSC suggested that defaulted purchasers of SCHS should be allowed to apply immediately for other Government housing subsidies. At present, under various Government housing benefit schemes, applicants are subject to a property ownership restriction rule to ensure that limited housing resources are allocated to those who are most in need and those who have not bought any properties within the restriction period. According to advice obtained from the Department of Justice, a person who has signed an Agreement for Sale and Purchase acquires an "equitable interest" in the property concerned, whether or not he subsequently completes the purchase by signing a Deed of Assignment. The property in question is treated under the law as belonging in equity to the purchaser, although the purchase money is not fully paid. Such "equitable interest" has monetary value and is transferable in the open market. Based on these considerations, we regard persons who have signed an Agreement for Sale and Purchase as having owned properties, even though these persons subsequently defaulted on the purchase.

6. As the property ownership restriction rule under various subsidized housing schemes (such as the public rental housing, Home Ownership Scheme, Home Starter Loan Scheme and SCHS) applies to all applicants, it would be inappropriate to relax the rule for defaulted SCHS purchasers.

Sales plan of the remaining SCHS flats

7. The Housing Society, being the implementation agent of the SCHS, is responsible for formulating the sales plan of the SCHS flats. However, the sales prices of SCHS flats require the approval of the Secretary for Housing, as stipulated by the land grant conditions. In determining the sales prices of the remaining flats, we will take into account the affordability of the eligible households.

Membership of the Executive Committee of the Housing Society

8. The Housing Society is an independent, non-profit-making organization. According to the Constitution of the Housing Society, the Executive Committee Members are elected by the General Members of the Society in the Society's General Meeting. To improve the work of the Society, the Society will from time to time invite people with different background, expertise and knowledge to join its Executive Committee.

Housing Bureau
Government Secretariat
June 1999