Legislative Council Panel on Housing
Special Meeting on 16 September 1998
Introduction of a Comprehensive Means Test on Public Rental Housing Applicants

PURPOSE

This paper briefs Members on the introduction of a comprehensive means test for the Housing Authority (HA)'s prospective public rental housing (PRH) tenants.

BACKGROUND

2.The HA is firmly committed to providing PRH for those in genuine need. Up to date, we have provided some 670,000 PRH units. To ensure that PRH is allocated to those in genuine need, a Waiting List (WL) is operated for allocating PRH flats to eligible applicants on a first-come-first-served basis. To be eligible, the family income of WL applicants must not exceed our Waiting List Income Limits (WLIL) and applicants must not own any private domestic property during the period from 24 months prior to the date of registration up to the date of intake.

3.In the past, WL applicants had to undergo income and property ownership tests. However, the means test was not comprehensive as assets other than domestic properties held by applicants had not been taken into account. Therefore, the HA did not have a complete and objective appraisal on the financial well-being of the WL applicants. To address this shortfall, the Long Term Housing Strategy (LTHS) White Paper has reaffirmed that PRH should only be allocated to those in genuine need. Prospective PRH tenants should be required to undergo a comprehensive means test, covering both income and net assets before entry.

4.On the other hand, about 10% to 20% of PRH flats available for allocation each year are taken up by committed categories, including clearances, compassionate and emergency rehousing. These households however have been exempted from the usual PRH means test. To ensure that PRH is allocated to people most in need, the LTHS White Paper has proposed that prospective PRH tenants, including Temporary Housing Areas (THA) residents and other clearees, should be required to undergo an income-cum-asset test before entry.

PRESENT POSITION

5.The Rental Housing Committee (RHC) of the HA approved the introduction of the asset test for prospective tenants on the WL, in addition to the property ownership and income tests on 10 September 1998. At the same meeting, it endorsed that all prospective tenants, including THA residents and clearees affected by Government's clearance operations should be subject to the same PRH eligibility criteria unless there were strong policy and compassionate grounds for doing otherwise. They should be subject to both income and asset tests alike the WL applicants.

6.When approving these new recommendations, the main considerations of the RHC are -
  1. The introduction of asset test and the unification of rehousing eligibility were covered in the LTHS Review consultative document which had undergone intensive public consultation in early 1997. The majority of the public have expressed support to the proposals;

  2. PRH is a public asset and its allocation should strictly be based on need. The asset test will provide a better assessment on the financial capability of the applicants and hence their need for PRH;

  3. Asset test is a prominent feature in the allocation of public housing subsidy. It has been applied to HA's sitting tenants since 1996. It is also found in Housing Society's subsidized housing schemes. The asset test has proved to be an effective tool to identify the housing needs of the applicants; and

  4. To achieve consistency in rehousing policy and to facilitate the rational allocation of housing resources, all prospective tenants should be subject to the same PRH eligibility criteria unless there are strong policy and compassionate grounds for doing otherwise.
ASSET TEST

7.For PRH applicants, the RHC considers it appropriate to set the asset limit at a level which is sufficient for a household to finance rental payment for a private flat for six years. Six years have been used as a benchmark because it is close to the existing PRH average waiting time. Those who can afford private rental for more than six years should be considered as having less urgent need for PRH as they can look after their housing needs on their own for a relative long period of time. Indeed, the WLIL are also derived with reference to the private domestic rentals. In devising the asset limits, we have made reference two parameters -
  1. The size of reasonable private flats for different household sizes are based on the current average allocation standards in PRH; and

  2. Private rentals are derived along the methodology used in setting the 1998/99 WLIL which are updated to reflect the latest situation in August 1998.
In the light of the above parameters, the asset limits are -

Household size 1998/99 WLIL
($ per month)		Monthly rental
($) 		Asset limits ($)
16,6003,027220,000
211,9004,512320,000
314,8005,396390,000
417,7006,486470,000
519,2007,332530,000
620,7008,272600,000
723,5009,137660,000
826,2009,776700,000
928,70010,378700,000
1030,70010,434700,000


8. Since many of the elderly applicants are nearing retirement and not all employees in Hong Kong enjoy the benefit of pensions on retirement, asset limits for small households of three persons or less whose members are all aged over 60 have been raised to the same level as that of a 4-person household.

9. The asset limits are considered to be reasonable and acceptable for the following reasons -
  1. They are reasonably generous as they assume that applicants who are cast out of the eligibility net can rent private accommodation at space standards comparable to those of PRH at least for six years.

  2. The asset limits in general are about 4 to 5 times higher than those set by the Social Welfare Department under the Comprehensive Social Security Assistance (CSSA) Scheme which are generally regarded as the baseline for measuring poverty. The asset limits for CSSA applicants in 1998/99 are -

    Household sizeAsset limit ($)
    137,000
    256,000
    374,000
    493,000
    5111,000
    6130,000


  3. The levels of our asset limits are also comparable with those of other subsidized housing schemes as shown in the following -


Housing SchemeIncome limit
($ per month)		Asset limit ($)
Public rental housing17,700
(4-person household)
470,000

Home Ownership Scheme33,000700,000
(subject to approval
by Home Ownership
Committee)

Sandwich Class Housing
Scheme		60,0001.2 million

Home Starter Loan Scheme70,0001.2 million
10. As regards the items for asset declaration, the assets to be declared and assessed under the new asset test are the same as those of the SRA policy which has been implemented and well-established since 1996. A list of the declarable assets is at Annex. These assets should represent the most common forms of income-generating assets held by Hong Kong citizens. Since the asset limits refer to net asset value, outstanding mortgages, overdrafts and personal loans from approved financial institutions can be deducted. In addition, the loss of earning power due to injuries sustained at work, traffic and other accidents will be exempted from the assessment of asset value.

11. Since the proposed asset limits are primarily linked to private residential rentals, they will be reviewed annually in conjunction with the WLIL.

REHOUSING ELIGIBILITY CRITERIA

12. For THA residents who moved in after 23 September 1995, they have been required to register on the WL. It will be reasonable for them to observe the prevailing PRH eligibility criteria strictly and should therefore be subject to the income-cum-asset test. However, to be in line with previous decisions of the RHC, THA residents who are eligible for direct offer of PRH and who have been affected by clearance operations announced on or before 23 September 1995 and subsequently rehoused to IH on or before 25 July 1997 will continue to be exempted from the income-cum-asset test.

13. Similar to THA residents, all squatters and roof-top occupants will undergo the income-cum-asset test alike other WL applicants before they are rehoused in PRH. From legal and public policy points of view, compensation for land resumption and rehousing upon clearance are two different matters. In case of land resumption, the Government has an obligation to ensure that the legal owners of the land and properties are fully compensated in cash. At the same time, it is government policy to ensure that nobody will be made homeless as a result of public clearances, and that all those affected, be they owners or occupiers, will be offered PRH flats if they meet the prevailing rehousing criteria or THA/Interim Housing (IH) units if they do not meet the rehousing criteria. Therefore, rehousing and compensation are two entirely different matters.

14. Against this background, all squatter clearees and roof-top occupants should go through the income-cum-asset test to establish their PRH eligibility. Clearees who are to be rehoused through the 'Emergency Rehousing' category will also be subject to similar treatment. Families displaced by clearance operations who fail the means test will be offered IH as they may still have a temporary need for housing. However, their stay in IH will be restricted to one year only and will be required to pay market rent. During this period, they will be given priority for the purchase of Home Ownership Scheme/Private Sector Participation Scheme flats or the grant of Home Purchase Loans, subject to meeting the normal eligibility criteria as if they were White Form applicants.

Housing Department
September 1998

Annex

Declarable Items under the Asset Test
for Prospective Public Rental Housing Tenants



The declarable assets include the following -
  1. cash in hand, bank savings and fixed deposits;

  2. landed properties, including both domestic and non-domestic properties in respect of which sale and purchase agreements have been concluded; land, including lease agreements and Letters A or B entitlements;

  3. vehicles, including private and commercial vehicles etc;

  4. transferable vehicle licences, including taxi and public light bus licences etc;

  5. other investment assets, including mutual funds, unit trust funds, listed shares, deposits with brokers, commodities futures, paper gold, certificates of deposits and bonds; and

  6. for those engaged in business, all categories of asset owned by the companies will need to be declared.
Apart from local assets, overseas assets and assets in the Mainland of China are also required to be declared. However, outstanding mortgage loans, personal loans, overdrafts from approved financial institutions, compensation or ex-gratia allowance for industrial or traffic accidents, etc are excluded.