LegCo Panel on Housing Meeting on 7 September 1998
Possible Abuse of Home Purchase Loan Scheme
Background
The Home Purchase Loan Scheme (HPLS) has been serving dual purposes since its implementation in 1988. It aims to promote home ownership by providing financial assistance to public rental housing (PRH) tenants. It also helps lower-middle income families living in private rented housing to purchase domestic flats in the private sector. Through the release of the PRH flats by Green Form (GF) applicants upon successful application of the HPLS, the Housing Authority (HA) can re-allocate the units to people in greater need for PRH such as eligible applicants on the Waiting List.
2. Up to end of July 1998, we have assisted 21,873 households through HPLS (20,545 loans and 1,328 subsidies) to buy private housing, thereby recovering 12,277 PRH units for re-allocation to other needy families. An information leaflet about the scheme is at the Annex.
Enhancement of the Home Purchase Loan Scheme
3. The HA approved the expansion of the quota of HPLS for the period from August 1998 to July 1999 from 4,500 to 10,000, and introduced flexible loan options with different repayment periods in July 1998. The HA also allows GF applicants (mainly PRH tenants, occupants of Temporary Housing Areas/Interim Housing/Cottage Areas and eligible Waiting List (WL) applicants) to make use of HPLS loan to purchase Home Ownership Scheme (HOS) flats in the secondary market. The enhanced scheme has been well received by both GF and White Form (WF) applicants. During the application period ended on 18 August 1998, we have received 3,198 GF applications and 9,347 WF applications. A ballot to determine the priority will be held in early September.
Members' Concerns about the HPLS
(A) Use of HPLS loan to settle existing mortgage payments by PRH tenants
4. Apart from requiring "better-off" tenants to pay additional rents, the HA encourages these tenants to buy subsidised home ownership flats or join HPLS so that they can surrender their PRH units for re-allocation to more needy families. To achieve this purpose, it follows that PRH tenants are exempted from income test and no-property rule in applying for the HPLS. To recover a PRH unit through HPLS enables better use of housing resources since the amount of subsidy of the former is higher than the latter.
(B) Allowing PRH tenants to buy secondary HOS flats with HPLS loan
5. As earlier mentioned, GF applicants are now allowed to use HPLS loans to buy HOS flats in the secondary market but not in the main HOS exercise. Based on the market mechanism, the owner of the HOS flat will reach a mutually agreed selling price with the GF applicant on the understanding that the latter will inherit the premium liability should he sell the property in the open market in future. The Housing Authority does not give a double benefit to the GF applicant in enabling him to buy a HOS flat in the secondary market. On the other hand, a PRH flat is subsequently recovered for fresh allocation to a needy family.
(C) Quota allocation for GF and WF applications
6. To encourage more applicants to make use of HPLS loans to gain home ownership under the current property market situation, the HPLS quota has been increased from 4,500 to 10,000. Since the HPLS can help to induce greater mobility among PRH tenants and to secure a steady supply of refurbished flats for re-allocation to those in need, the quota allocation was set at 7:3 for GF and WF applicants. To WF applicants, the quota of 3,000 has been doubled when compared with the previous exercise. To maximize the use of quota, the Director of Housing will review the demand for HPLS loans quarterly and if necessary, transfer part of the GF quota for use by WF applicants.
(D) Provision of PRH to families on the Waiting List and encouraging home ownership
7. The objectives of the Government's housing policy are to help all households gain access to adequate and affordable housing and to encourage home ownership in the community. On the former, we have made clear commitments to shorten the average waiting time of WL applicants to five years by 2001, to four years by 2003 and to three years by 2005. On the latter, we have implemented a number of schemes to promote home ownership, including the HPLS.
8. We do not consider our commitment in providing PRH flats to WL families is in conflict with our objective to encourage home ownership. In fact, the HPLS serves both purposes. It helps PRH tenants to purchase their own home, and at the same time enable the PRH units thus released be re-allocated to WL families.
Measures Taken To Guard Against Abuse
9. Implementation of the HPLS has achieved the desired results. Abuse of the system in application is minimized at the outset. Furthermore, applicants making false information in obtaining loans under the scheme are liable to prosecution under the Housing Ordinance, Cap. 283. At present, the maximum penalty is six months' imprisonment and a fine of $50,000 in addition to recovering the loan amount plus interest.
10. Random checks on applications are carried out by the Housing Department. Should any false information be detected, the cases will be referred to the authority concerned for instituting prosecution action. Since the launch of the scheme in 1988, we have successfully prosecuted five applicants for making false declaration.
Housing Department
September 1998
