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Following is a question by the Hon Starry Lee and an oral reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (19 December 2012):
Question:
The rents of private domestic units have continued to rise, with the rental index for private domestic units of size below 40 square metres rising from 130.8 in October 2009 to 239.2 at the same time this year, or a rate of increase of 83%. Moreover, a survey has revealed that the average rent of a 90-square-feet unit which is a sub-division of a flat (commonly known as "sub-divided units") in Sham Shui Po has reached as high as $34 per square foot, which is over 10% higher than that one and a half years ago. Some members of the public have indicated that the high levels of rents have aggravated the burden on those who are at the lowest stratum of society. In this connection, will the Government inform this Council whether:
(a) it has conducted any analysis on the changes in the proportion of rental expenditure in the income of grass-roots families in private housing brought by the increase in rents in recent years; if it has, of the details; if not, the reasons for that;
(b) it will, in response to the increase in rents, relax the rental limits for applicants of the Community Care Fund's assistance programme "to provide a subsidy for low-income persons who are inadequately housed", and increase the amount of subsidies granted to eligible persons; if it will, of the details; if not, the reasons for that; and
(c) it will consider allowing rental expenditure to be deducted from the assessable income under Salaries Tax; if it will, of the details; if not, the reasons for that?
Reply:
President,
In recent years, in the midst of a continuous exuberant state of the property market, as well as a tight supply of residential flats, it is apparent that the overheated property market and the economic fundamentals are heading in different directions, and property prices are rising beyond the affordability of the general public. Hence, the Government introduced exceptional demand-management measures in late October 2012, with a view to stabilising the property market and to reducing the risk of a property bubble. The rental level of private residential flats reflects the property prices, and is also influenced by a host of factors, including the macro-economy, market need and atmosphere in the property market.
The Hon Starry Lee has quoted in the preamble of the question the rental index for private residential flats of size below 40 square metres. According to the "Private Domestic Rental Indices" published by the Rating and Valuation Department, for Class A units (ie units with saleable area of 39.9 square metres or below), the relevant figure for October 2009 was 106.5 and the provisional figure for October 2012 was 158.2, with a rate of increase of 48.5%.
Our reply to the various parts of the question raised by the Hon Starry Lee is as follows:
(a) Information on the ratio of rental expenditure to household income can be obtained from the population census (conducted once every ten years) and the by-census (conducted between two population censuses).
While we do not have a definition of "grass-roots families", the results of the 2011 Population Census show that, for households residing in private residential flats with a monthly income below $10,000, their median rent to income ratio was 41.2% in 2011; vis-à-vis 35.4% in 2001 and 41.9% in 2006. For households residing in private residential flats with a monthly income of $10,000 or more but less than $30,000, their median rent to income ratio was 31.1% in 2011; vis-à-vis 29.5% in 2001 and 27% in 2006.
(b) The Community Care Fund (CCF) rolled out in October 2012 an assistance programme to provide a one-off subsidy for low-income persons who are inadequately housed to relieve their financial pressure. The amount of subsidy is $3,000 for one-person households, $6,000 for two-person households, and a uniform $8,000 for three-or-more-person households. Among others, if applicants are renting rooms/cubicles, cocklofts or bedspaces in private buildings, their average monthly rent in the past three months shall not exceed the specified rental limit corresponding to the relevant household size, such as $4,370 for one-person households and $6,705 for two-person households.
Same as the other CCF programmes, the relevant CCF committees will monitor the implementation of this programme for review on a continual basis. The CCF Secretariat will convey the suggestions and views received from various sectors of the community to the relevant CCF committees for reference.
(c) All along, Hong Kong has been adopting a simple and low tax regime, and striving to uphold the taxation principles of fairness and neutrality. For salaries tax, apart from adopting the progressive tax rates which reflect the fairness principle of "earning more, paying more", we have also provided a number of generous allowances. Taking the year of assessment 2010/11 as an example, about 60% of our working population did not have to pay any salaries tax. Even before implementing the one-off tax reduction announced in the 2011-12 Budget, 85.3% of salaries tax payers were subject to an average effective tax rate of less than 5.5%, while the overall average effective tax rate (net of allowances) for all salaries tax payers was just 8.1%, which is a relatively light tax burden.
The Government has introduced from time to time various tax measures in the light of socio-economic development as well as the livelihood needs of the public. To relieve the tax burden of salaries tax payers in times of economic slowdown, the Financial Secretary announced in the 2012-13 Budget a series of tax measures which include increasing all personal allowances under salaries tax, thus benefiting a total of about 1.5 million taxpayers of salaries tax and tax under personal assessment. The increased personal allowances have already come into effect upon the passage of relevant legislation this July.
The Government considers that the various adjusted personal allowances under salaries tax have already taken into account taxpayers' basic needs, including housing expenditure. The Government does not intend to provide tax deduction for rental expenditure.
Ends/Wednesday, December 19, 2012
Issued at HKT 13:11
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