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Following is a question by the Hon Frederick Fung and a written reply by the Secretary for Development, Mr Paul Chan, in the Legislative Council today (June 3):
Question:
It is learnt that for many years, owners of flats in buildings under the Civil Servants' Co-operative Building Societies Scheme (CBSs) have all along been asking the Government to offer them assistance in redeveloping such buildings. Considering the fact that redeveloping CBS buildings can release land to increase housing supply, the Development Bureau has recently put forward the proposal of rolling out a Pilot Scheme for Redevelopment of CBSs (the Pilot Scheme) by the Hong Kong Housing Society (HKHS). The Pilot Scheme will be implemented under a demand-led approach, whereby such owners themselves initiate application to HKHS. HKHS will lay down the eligibility criteria, including the requirements that a site must be at least 10 000 square feet in area and the relevant co-operative society must secure 100 per cent owners' participation within a reasonable period of time. Moreover, HKHS will pay the Government the outstanding land premium that such owners owe the Government under the assignments of their flats, and will purchase the flats from the owners at market prices. Under the "no loss" principle, HKHS may offer acquisition prices slightly above market prices. On the other hand, where circumstances permit, HKHS may consider allowing the owners concerned to purchase the residential units from its "Flat-for-sale Scheme Secondary Market". In this connection, will the Government inform this Council:
(1) given that 85 CBS sites have redevelopment potentials as assessed by the authorities, of the locations of these sites; whether the authorities have assessed the positive impacts of the redevelopment of such buildings on housing supply; if they have assessed, of the findings;
(2) of the difficulties encountered by the authorities in the past three years when it studied the feasibility of redeveloping CBS buildings; whether they have assessed if the implementation of the Pilot Scheme can help overcome such difficulties;
(3) whether the authorities have assessed if the Pilot Scheme can provide sufficient incentives to attract the participation of owners; whether they will consider relaxing the requirements under the Pilot Scheme, including lowering the requisite threshold of 100 per cent owners' participation for redevelopment; whether they will encourage HKHS to offer more attractive acquisition prices to owners, and allow owners to purchase the units under the Home Ownership Scheme of the Hong Kong Housing Authority(HKHA); if they will, of the details; if not, the reasons for that;
(4) whether the authorities have assessed the implications of the implementation of the Pilot Scheme on the manpower deployment and financial situation of HKHS; whether, on the premise of resolving the housing supply shortage in Hong Kong, the authorities will consider offering support to HKHS, including allowing HKHS not to pay full land premium, so as to assist HKHS in implementing the Pilot Scheme effectively; and
(5) whether the authorities will consider requesting HKHS to plan for the redevelopment of its rental housing estates in the areas concerned at the same time when it implements the Pilot Scheme (e.g. Lok Man Sun Chuen and Chun Seen Mei Chuen are in the vicinity of Ma Tau Wai Road, Kau Pui Lung Road and Ma Tau Chung Road where a large number of CBS buildings are located), so as to improve the housing developments in the areas concerned; if they will, of the details; if not, the reasons for that?
Reply:
President,
At the meeting of the Panel on Development (the Panel) of the Legislative Council held on July 15, 2013, Members passed a motion on the "Redevelopment of Civil Servants' Co-operative Building Societies (CBSs)", urging the Government to launch redevelopment programmes for buildings developed under the civil servants' CBSs immediately so as to increase land supply in urban areas and to submit feasible proposals. After the meeting, the Development Bureau, together with relevant government departments and public organisations, conducted in-depth study on the justifications for facilitating the redevelopment of CBS buildings and possible ways to proceed. In the discussion paper we submitted to the Panel on May 26, 2015, we put forward three proposals, namely, (i) the launch of a Pilot Scheme for Redevelopment of CBSs (Pilot Scheme) by the Hong Kong Housing Society (HKHS); (ii) inviting the Urban Renewal Authority (URA) to designate a queue for applications for facilitation service from CBS flat owners; and (iii) consolidating existing procedures of the Lands Department to facilitate the assessment of land premium involved in redevelopment.
My reply to the five-part question is as follows:
(1) Based on the parameters of those already redeveloped CBS sites, it is projected that, generally speaking, only those sites with redevelopment ratio (by comparing the floor area of the site after redevelopment with the current floor area of the CBS site) at or above two would stand a chance of the project breaking even or, in some cases, yielding a surplus. Among the 173 dissolved but yet to be redeveloped CBSs (involving 178 CBS sites), it is roughly estimated that only 85 have the potential for redevelopment (i.e. the redevelopment may not incur a loss). These 85 CBSs are mainly located in the Kowloon City, Eastern, Wan Chai and Sham Shui Po districts. It is also estimated that redevelopment of all these 85 sites will only yield some 230 000 square metres of additional floor area at maximum. As the 85 sites are scattered across the territory and may not be redeveloped as a whole, and given that each site is subject to its own constraints, the additional floor area that can actually be achieved will be even less.
(2) The Development Bureau, together with relevant departments and public organisations, has conducted in-depth study on the justifications for facilitating the redevelopment of CBS buildings and possible ways to proceed. This is found to be fraught with much difficulty. Our major considerations are as follows.
CBS flat owners have called for land premium concession. Redeveloping CBS buildings generally involves two levels of land premium payment. The first level is the two-thirds outstanding land premium payable to the Government for the removal of alienation restriction on the CBS flat. The second level is the premium involved in modification of the lease conditions for achieving the maximum development parameters permitted under the outline zoning plan upon redevelopment of the CBS site. The first land premium payment is an outstanding debt owed to the Government. The second land premium payment is no different from the requirement for other ordinary redevelopment sites. Any concession on the payment of either premium will be a departure from established Government policy and practice and must be supported by robust justifications.
We have considered whether, on the premise of increasing land supply, there are sufficient grounds for us to adjust the Government's established policy so as to facilitate the redevelopment of CBS buildings. While some of the CBS sites have not achieved their maximum development parameters, the redevelopment potential of the CBS sites as a whole is not as high as generally perceived. There are insufficient justifications to support concession on land premium payment for the purpose of releasing the development potential of these sites. Furthermore, if established Government policy should be adjusted to facilitate the redevelopment of CBS sites on the ground of increasing land supply, then, on parity grounds, we should also subsidise the redevelopment of other old building sites which could release additional floor area with public funds. We do not think that this approach is in line with community expectation.
CBS flat owners have also called for intervention by URA to help redevelop their sites. We have considered expediting redevelopment of CBS buildings from the perspective of urban renewal. As we have repeatedly explained, the purposes of URA are to undertake, encourage, promote and facilitate urban renewal, and to improve the standard of housing and the built environment of Hong Kong. It is URA's priority to assist the redevelopment of buildings in poor and dilapidated condition. Since CBS buildings are generally better kept, their need for redevelopment is, relatively speaking, less imminent. It is therefore inappropriate for URA to accord priority to the redevelopment of CBS buildings at the expense of other old buildings with greater urgency for redevelopment. That notwithstanding, CBS buildings may apply to the Demand-led Redevelopment Project (Pilot Scheme) of URA, and be selected by URA for redevelopment if they meet the requisite criteria of the URA scheme.
As the options stated above are found infeasible, we have examined with HKHS the launch of a Pilot Scheme for Redevelopment of CBSs. The Pilot Scheme is intended to be a response to the call for redevelopment by some CBS flat owners with the underlying premise that it must be fair, reasonable, in line with public interest and represents a proper use of public funds.
HKHS is not a profit-making organisation and does not receive direct subsidy from the Government. It is a self-financing organisation that has to bear the market risk of its projects. The Pilot Scheme as proposed is intended to strike a balance between the operating principles of HKHS and the wish of some CBS flat owners for redevelopment and move out. We understand that the Pilot Scheme may not meet the expectation of all CBS flat owners, and this precisely reflects the complexity involved in balancing the various public interest considerations in the redevelopment of CBS buildings. We have proposed a Pilot Scheme for consideration to provide to the CBS flat owners an alternative to redevelopment by private developers.
At present, CBS flat owners who have a need to move out from the CBS flats have the following ways to do so. For the dissolved CBSs, the owners concerned may move out after paying the Government the outstanding two-thirds land premium and then sell their flats in the market. There is an established mechanism under the Civil Service Bureau to allow these owners to apply for a temporary waiver so that they can sign sale and purchase agreements before paying the outstanding land premium. Under the current temporary waiver arrangement, the waiver is valid for a period of nine months. If the owners have a need, they can seek further extension. For those CBSs which have yet to be dissolved, the owners may transfer their CBS membership to other interested and eligible civil servants and move out from the CBS flats. No payment of premium is involved.
(3) On the various suggestions, namely, to lower the owners' participation threshold under the Pilot Scheme, for HKHS to make higher acquisition offers and to allow CBS flat owners to purchase flats under the Home Ownership Scheme (HOS) of the Hong Kong Housing Authority (HKHA) from the HOS Secondary Market, our response is as follows.
Owners' participation threshold
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The 100 per cent owners' participation threshold proposed by HKHS is based on the following three considerations.
First, the incumbent occupiers of CBS flats with alienation restrictions are either serving civil servants, retired civil servants or lawful successors-in-title of civil servants. To the serving civil servants, their CBS membership and their right to occupy the CBS flats is one type of housing benefit for which they may be eligible as government employees. Those serving civil servants who have obtained a legal title to their CBS flats upon dissolution of the CBS will no longer be eligible for other housing benefits. Therefore, unless all owners of a CBS agree to sell, it will be unfair to force those unwilling flat owners who are civil servants to move out and give up their housing benefit to fulfil the wish of the majority of the other owners.
Second, according to the Land (Compulsory Sale for Redevelopment) Ordinance (the Ordinance), the Lands Tribunal will determine if it is satisfied that the redevelopment of a lot is justified due to the age or state of repair of the existing development on the lot before deciding whether to grant a compulsory sale order. As CBS buildings are generally well kept, compulsory sale orders may not be granted under the Ordinance. If HKHS is to take on applications with only 80 per cent or 90 per cent owners' participation under the Pilot Scheme, HKHS would have to bear the risk of failing to obtain compulsory sale orders from the Lands Tribunal at the end, or having to pay much higher prices in order to acquire the remaining 20 per cent or 10 per cent property interests, as a result of which the project may not be able to proceed or will incur a significant loss. As a matter of fact, in all the 11 cases of CBS redevelopment, the developers had successfully acquired 100 per cent of the property interests in each case. Obtaining unanimous owners' consent for CBS redevelopment is not unprecedented.
Third, the intention of HKHS in launching the Pilot Scheme on a demand-led basis is to respond to the claim of some CBS flat owners that they are unable to pay the outstanding two-thirds land premium they owe the Government and call for Government intervention to facilitate redevelopment so that they can move out from the CBS flats. Since the HKHS Pilot Scheme is meant to respond to these owners' wish to have their buildings redeveloped as soon as possible, it is but reasonable that HKHS should only come on board where the owners have a desire to proceed with redevelopment.
Acquisition offer of HKHS
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We appreciate that the acquisition offer of HKHS proposed under the Pilot Scheme may not meet the expectation of all CBS flat owners. HKHS is not a profit-making organisation and does not receive direct subsidy from the Government. It is a self-financing organisation that has to bear the market risk of its projects. The acquisition offer now proposed is slightly above market price and has balanced the operating principles of HKHS and the wish of some CBS flat owners to move out from their flats through redevelopment.
Purchasing subsidised sale flats from the Secondary Market
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The Pilot Scheme aims to provide an alternative for the CBS flat owners to sell their flats at a price slightly above market price and, depending on their need, they may choose to purchase an HKHS "Flat-for-sale Scheme" (FFSS) flat from the Secondary Market. The terms and conditions proposed for the Pilot Scheme should have suitably struck a balance amongst all relevant considerations. At present, there are about 10 360 subsidised sale flats under HKHS' FFSS located in Hong Kong, Kowloon and the New Territories. These subsidised sale flats should be able to provide a choice for the CBS flat owners.
All subsidised housing (including subsidised sale flats with premium not yet paid) involves the use of precious public resources and should be used with due care.
It is HKHA's established policy that only persons who meet the eligibility criteria for Green Form status are allowed to purchase HOS flats with premium not yet paid in the HOS Secondary Market. The arrangement for White Form applicants to purchase this type of flats is still an interim scheme and subject to a quota. Besides, the persons concerned must also meet the eligibility criteria for White Form status, including income and asset limits set by HKHA. We do not consider it appropriate or prudent to extend the Pilot Scheme to cover HKHA's HOS flats with premium not yet paid. Such an extension may also be unfair to other members of the public.
(4) As the Pilot Scheme is launched on a trial basis, HKHS has confirmed that the Pilot Scheme is still manageable within HKHS' existing manpower and financial resources. HKHS will review the manpower and financial resources requirements after the launch of the Pilot Scheme, having regard to the response of CBS flat owners and the experience gained from implementing the Pilot Scheme.
The Government supports HKHS in implementing the Pilot Scheme. We will follow our established policy of premium concession in handling the land premium payable for HKHS' subsidised sale flat developments.
(5) According to HKHS, generally speaking, for the redevelopment of a HKHS housing estate to proceed, the subject site must have an area of not less than 4 000 to 5 000 square metres so that a sufficient number of rehousing units will be provided upon redevelopment. As site information (including location and area) of the CBS buildings which will participate in the Pilot Scheme is yet available, it is premature to assess how the Pilot Scheme may tie in with or facilitate the redevelopment of the HKHS housing estates.
Ends/Wednesday, June 3, 2015
Issued at HKT 15:27
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