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LCQ13: Housing and land supply

     Following is a question by the Hon Kwok Ka ki and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (January 28):


     In January last year, the Development Bureau submitted to the Panel on Development of this Council a paper setting out some 150 potential housing sites. The Secretary for Transport and Housing announced the Long Term Housing Strategy on December 16 last year, stating that the Government had accepted the projection methodology of the Long Term Housing Strategy Steering Committee and had updated the projection of long-term housing demand for the 10-year period from 2015-2016 to 2024-2025. A total housing supply target of 480 000 units was adopted for the coming 10 years, with the public-private split maintained at 60:40. Hence, the public housing supply target would be 290 000 units, comprising 200 000 public rental housing (PRH) units and 90 000 subsidised-sale flats, whereas the private housing supply target would be 190 000 units. On December 18 last year, the Financial Secretary announced the establishment of a Housing Reserve (the Reserve) to meet the public housing supply target on the financial front, and the transfer of all the investment return on the Government's fiscal reserves in 2014 (about HK$27 billion) to the Reserve. In this connection, will the Government inform this Council:

(1) of the respective numbers of PRH units, subsidised-sale flats and private residential units which (i) were completed in the past five years, (ii) will be completed in the next five years, and (iii) are vacant at present (set out such information in a table);

(2) regarding the aforesaid 150-odd potential housing sites, of (i) their specific locations, (ii) their sizes, (iii) the latest progress of amending the relevant statutory plans, (iv) their proposed uses (for public or private housing), and (v) whether they are "Green Belt" sites (set out such information in a table);

(3) regarding the idle residential sites currently owned by the Government, of (i) their number, (ii) their specific locations, (iii) their sizes, and (iv) their planning progress (set out such information in a table); whether the authorities will undertake to give priority to planning such sites for the use of public housing;

(4) of the specific criteria for determining the quantity of land put up for sale in each quarter; whether the authorities will ensure that they will review the quantity of land put up for sale in a timely manner when the total housing supply target has been met;

(5) whether it knows the information of the sites owned by private developers; if so, of (i) the number, (ii) the specific locations, and (iii) the sizes of the idle residential sites among those sites (set out such information in a table);

(6) of the details concerning the regulations requiring private developers to complete the construction of residential units within a designated period after successfully bidding for a residential site; whether it will explore imposing a requirement that private developers must put up residential units for sale within a designated period after the units are completed; if it will, of the details; if not, how the authorities will attain the target set for private housing supply;

(7) whether it knows the profit and loss situation, as well as the cash and investment balance of the Housing Authority (HA) in each of the past five years and each of the next five years (set out such information in a table); how the authorities will regulate the price levels of the subsidised housing units to be sold by HA in future;

(8) of the details of the arrangement of using the Reserve to support HA in constructing public housing; how the authorities will monitor the use of the Reserve; the amount of funds the authorities intend to transfer to the Reserve in each of the next five years (set out such information in a table); and

(9) whether it will increase the supply of other types of public housing (such as the re-introduction of the Sandwich Class Housing Scheme); if it will, of the details?


     To solve the current housing problem, we must adopt a multi-pronged approach to increase land supply and housing supply. Therefore, the Long Term Housing Strategy announced by the Government last December adopted the "supply-led" approach. Based on the latest projection of housing demand, the Government has adopted 480 000 units as the total housing supply target for the coming 10 years (i.e. 2015/16 to 2024/25), with the public housing supply target of 290 000 units, comprising 200 000 public rental flats and 90 000 subsidised sale flats, whereas the private housing supply target will be 190 000 units. It is undoubtedly a huge challenge to deliver this total housing supply target and land supply is of particular importance.

     The most immediate and effective way to augment land supply in the short- to medium-term is to make more optimal use of the developed areas in the existing urban areas and new towns, as well as the land in the vicinity of existing infrastructures, through land use reviews and increasing development intensity where planning terms permit. The information paper on "increasing land supply" (LC Paper No. CB(1)407/14-15(01)) submitted by Development Bureau (DEVB) to the Legislative Council (LegCo) Panel on Development in early January this year has reported the latest progress of the various initiatives to increase land supply (including land use reviews).

     In consultation with the DEVB, my replies to the Hon Kwok Ka ki's questions are as follows:

(1) The production of public rental flats and subsidised sale flats in the past five years and the production forecast for the next five years are at Table 1. Private domestic completions in the past five years and production forecast for the next five years are at Table 2.

     As regards the vacancy of Public Rental Housing (PRH) units, as the number of vacant flats will change from time to time according to the progress of allocation, the figures provided are only snapshot figures indicating the situation at a given point of time. As at end December 2014, the number of lettable vacant flats (Note 1) was 2 829. The vacancy rate was 0.4 per cent, which fell within the Hong Kong Housing Authority (the HA)'s Key Performance Indicator of keeping the vacancy rate at a level below 1.5 per cent. As for the private sector, according to statistics published in the Rating and Valuation Department's Hong Kong Property Review 2014, as at end 2013, the overall private domestic stock was 1 123 600 units, of which 46 600 units were vacant. This represented a vacancy rate of about 4.1 per cent, which was the lowest since 1997, and was considerably lower than the long-term average vacancy rate of about 5 per cent over the period from 2004 to 2013.
(2) As mentioned above, to meet the total housing supply target of providing 480 000 units of public and private housing for the coming 10 years, the Planning Department has conducted a series of land use reviews over the whole territory on the government land currently vacant; under Short Term Tenancies; or different short-term, "Government, Institution or Community" and other government uses; as well as Green Belt sites. The various land use reviews have identified in total some 150 potential housing sites (including 70 Green Belt sites), most of which may be made available for housing development in the five-year period from 2014/15 to 2018/19 for providing over 210 000 flats, with over 70 per cent of them for public housing, subject to timely amendments to the respective statutory plans for change of land use and/or increase in development intensity.

     Statutory plan amendments had already been initiated in respect of 45 of these sites as at end December 2014, among which nine sites had completed the statutory rezoning procedures. The geographical distribution of these some 150 sites; their estimated flat production capacity; estimated year of land availability; and proposed types of housing by districts are provided in the aforementioned information paper on "increasing land supply" (LC Paper No. CB(1)407/14-15(01)).   Relevant details are at Table 3 and Table 4 (Note 2).

     As with the established practice, we will further consult relevant District Councils and the local community when we finish the technical assessments and firm up the planning parameters to proceed with statutory plan amendments. More detailed information of individual sites will then be provided.

(3) The Government does not compile statistics on vacant government land regularly. Nevertheless, the aforementioned land use reviews already covered the currently vacant government land in order to identify potential housing sites. For individual sites of unleased or unallocated government land identified with potential for residential or other developments, we will review and assess its development feasibility in accordance with the established mechanism. When a plot of land is found suitable and ready for development, we will make appropriate arrangements, including allocating it for public housing development; including it in the Land Sale Programme; or allocating it for other uses.

     Some of these sites have indeed been allocated for residential development. For example, government sites at Lok Lam Road, Fo Tan (site area of about 1 190 square metres), at Mei Tin Road, Tai Wai (site area of about 687 square metres) and at the junction of Oi Kan Street and Oi Tak Street, Shau Kei Wan (site area of about 476 square metres) were added to the 2013/14 Land Sale Programme for disposal.

(4) It is the Government's general practice to compile and announce the annual Land Sale Programme before the commencement of a financial year. The Land Sale Programme includes sites anticipated to be available for sale in the year and sets out relevant basic site information in advance. This practice provides the market with transparency of land supply and facilitates the necessary preparations by the market.

     The Government announces quarterly Land Sale Programmes in advance to provide the market with certainty on land supply. When compiling quarterly Land Sale Programmes, the Government takes into account various factors, including the private housing supply target of the Government, market conditions, progress of various procedures required (such as termination of short-term tenancies, infrastructure works, amendments to outline zoning plans, etc.), size and location of sites, estimated flat numbers that could be produced by the sites, realised or projected land supply in the year and in different quarters, etc. The Government reviews quarterly Land Sale Programmes from time to time, taking into account the private housing land supply from various sources.

(5) The Government does not compile statistics on the land owned by developers.

(6) After purchasing a residential site, the developer is required to complete the construction of a minimum gross floor area specified in the conditions of sale and obtain an occupation permit from the Building Authority within the Building Covenant (BC) period specified under the conditions of sale. In general, the BC period for residential developments varies from 48 to 72 months. The Government sets an appropriate BC period for each development project by taking into account the actual circumstances of each project, including relevant factors such as its development scale and complexity.

     As private residential development projects are privately owned properties, subject to the lease conditions, developers are free to offer their properties for sale taking into account their commercial considerations and other factors. Therefore, the Government does not require developers to sell off their properties within a specific timeframe. In order to respond to the society's housing demands and to facilitate developers to plan and conduct pre-sale of their residential properties flexibly according to the actual circumstances, the Government extended the maximum pre-sale period for private residential properties under the Lands Department Consent Scheme from 20 months to 30 months in July 2013. The Lands Department also issued a new Legal Advisory and Conveyancing Office Circular Memorandum in October 2014 with a view to streamlining the pre-sale consent application procedures and shortening the processing time. The Lands Department will continue to expedite the processing of pre-sale consent applications such that more private residential units can be made available for sale as soon as practicable.

     Apart from the Government Land Sale Programmes, sources of private housing land supply also include railway property development projects, projects of the Urban Renewal Authority (URA), private development or redevelopment projects. The aim of setting a private housing land supply target is to build up a sufficiently large land reserve over a period of time to ensure steady land supply to the market. The actual supply of housing land depends on the progress of relevant statutory or other procedures, government land sale results, the planning of the projects of the Mass Transit Railway Corporation Limited and the URA as well as their tender results, and developers' initiative to carry out lease modifications/land exchanges for their development or redevelopment projects. These are inevitably affected by market factors.

     The Government will continue to work hard to increase land supply through a multi-pronged approach and expedite the supply of land to the market to achieve the 10-year private housing supply target.

(7) The HA's Overall Total Surpluses and Cash and Investment Balances in the past five years, and the next five years on the basis of the Proposed Budgets and Forecasts from 2014/15 to 2018/19 are set out in Table 5.

     According to the established Home Ownership Scheme (HOS) pricing formula, selling prices of HOS flats are determined by applying a certain discount to the market value. The discount is to take into account the affordability of the eligible households. The affordability is determined based on the principle that for at least 50 per cent of the flats for sale, a mortgage-to-income ratio of not more than 40 per cent can be achieved for eligible households with income at the level of the current HOS income limit for White Form applicants. Under normal circumstances, HOS flats would be sold at 30 per cent discount from the market value, but the HA would consider offering a higher discount if the aforesaid affordability criteria could not be met.

(8) The HA is the major organisation for the provision of public housing. The Government will ensure that the HA has adequate funding to meet the production target under the Long Term Housing Strategy. Given the huge financial commitment, the Government has to make advance planning. The Government will make provision for spendings on public housing by instalments where other public services will not be affected. The Government has set aside the investment return on the Government's fiscal reserves at about $27 billion for the Housing Reserve at the end of the year 2014. The Government will take into account the actual situation for making provision by installments in future.

     The Housing Reserve and its cumulative investment return (Note 3) will be used to support the public housing development programme and the related infrastructure. The HA has to assess its medium- to long-term financial requirements through its established five-year rolling Budgets and Forecasts exercise. When the Government and the HA have reached agreement on the quantum and timetable of funding injection from the Government, the Government has to seek approval of the Finance Committee of the Legislative Council for drawing funding from the Housing Reserve to support public housing development. At the same time, the HA will continue to adopt every possible measure to ensure the cost effectiveness of the public housing development programme.

(9) In the 2015 Policy Address, the Chief Executive suggested that in addition to the HA's HOS flats and the subsidised sale flats of the Hong Kong Housing Society, there should be different forms of subsidised sale flats to meet the needs of different people. To expand the forms of subsidised home ownership and further improve the housing ladder, the Chief Executive proposed to the HA that suitable flats among its PRH developments under construction be identified for sale to Green Form applicants in the form of a pilot scheme, with prices set at a level lower than those of HOS flats. Target buyers would mainly be sitting PRH tenants and PRH applicants who have passed the detailed vetting and are due for PRH flat allocation. The HA has started to consider the implementation details of the pilot scheme, including eligibility criteria, price setting mechanism, resale arrangements, site selection principle, etc.

     Development of land and housing requires substantial amount of public resources, including land, financial and manpower resources. With limited resources, our priorities are to house PRH applicants to PRH flats, and to assist low- and middle-income families for home ownership. The Government will strive to achieve the supply targets of PRH and subsidised sale flats under the 2014 Long Term Housing Strategy. From the policy perspective, the Government currently has no plan to re-introduce Sandwich Class Housing Scheme.

Note 1: There are certain flats which are not occupied but are "unlettable" since they are reserved for a purpose and are not available for letting to PRH applicants. They include flats pending or under conversion or structural repairs; flats withheld from allocation for operational/management reasons; flats reserved with reservation fees paid by the Urban Renewal Authority, etc. There are also flats which are "under offer" to applicants and are expected to be taken up in the near future.

Note 2: These some 150 sites are part of the land that could be made available in the five year of 2014/15 to 2018/19. The estimated number of sites, residential flats and year of land availability are subject to adjustments depending on the timely completion of plan amendments, the technical assessments of individual sites and the progress of relevant procedures or works.

Note 3: The Hong Kong Monetary Authority is responsible for the investment of the Housing Reserve.

Ends/Wednesday, January 28, 2015
Issued at HKT 17:03


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