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LCQ16: Housing Authority's single-operator markets
     Following is a question by the Dr Hon Cheng Chung-tai and a written reply by the Secretary for Transport and Housing, Mr Frank Chan Fan, in the Legislative Council today (April 11): 


     The Hong Kong Housing Authority (HA) has adopted since 1988 a single-operator arrangement for letting markets, under which an operator is awarded a single tenancy for the management of a market as a whole, who then sublets the stalls in the market to individual stall operators. Quite a number of stall operators from single-operator markets (SOMs) have indicated that they have to move out because they cannot afford the high rents for the stalls. In this connection, will the Government inform this Council:

(1) of the considerations based on which HA selected the six out of its 22 markets for letting under the single-operator arrangement; the rental income received by HA from those six markets in each of the past five years;

(2) as HA has indicated that the purpose of implementing SOMs is to leverage on the expertise and flexible management as well as operation mode of the private sector, with a view to providing better services for residents, whether the selection of single operators is undertaken mainly by civil servants who do not have any experience in doing business; if so, how those civil servants determine whether the shortlisted operators possess such qualities; whether HA will reconsider including a provision in new SOM contracts to specify the maximum rent levels that single operators may charge stall operators; and

(3) given that the Panel on Housing of this Council passed a motion at its meeting on June 5 last year urging HA to abolish the single-operator arrangement for letting markets, of the response of HA?



     My consolidated reply to various parts of the question raised by Dr Hon Cheng Chung-tai is as follows:

     The Government had previously explained to the Legislative Council (LegCo) on various occasions (Note 1) the policy objectives and related arrangements for the implementation of single-operator markets (SOM). Retail facilities under the Hong Kong Housing Authority (HA), including markets in public housing estates, are generally operated on a commercial basis. Since 1988, HA has adopted the single-operator letting arrangement for its markets. The purpose is to leverage on the professional operation capability and experience of the private sector, with a view to providing better shopping choices and service environment for residents. Since 1997, all HA's new markets in public housing estates have adopted the single-operator letting arrangement. At present, HA has six SOMs and the total rental income for the past year was about $60 million.

     According to the current arrangement, operators who are interested in leasing markets as single operators shall register on the Client List for SOM (the Client List) of HA. The eligibility criteria include that such operators must be properly incorporated companies with limited liability registered under the laws of Hong Kong, and have relevant management experience in the previous one year. HA will invite operators on the Client List to participate in restricted tenders for the leasing of SOM. When evaluating leasing proposals, HA adopts a system of combined scores which is based on both the bidders' past performance in the management of SOM and the proposed rent. Both factors carry equal weight. The operator with the highest combined score will be given the right to operate the market concerned.

     The operators can select tenants for individual stalls and negotiate with them on the rents and terms of letting. When negotiating the rents with individual stall operators, the single operator has to consider the commercial demand and supply situation in determining the rent, otherwise, the letting rate of the stalls as well as the competitiveness and effective operation of the market may be affected. We believe that the above market mechanism is a better way to ensure that the stall operators will provide the types of goods and standard of services that will meet the needs of the residents.

     In selecting operators, rent receivable from operators is not HA's sole consideration. HA will also closely monitor the operation of the markets and individual stalls after the single operators have been given the right to operate such markets. HA will monitor the quality of the single operators' management of the markets through comprehensive performance assessments. For example, staff of the Housing Department (HD) will inspect the markets regularly to ensure that the single operators comply with the tenancy requirements and maintain the quality of their management services. HD conducts assessment on the performance of the single operators every two months, taking into account views of the Estate Management Advisory Committees, the local District Council members and local residents. Whether the single operators are capable of managing the daily operation of the market effectively and smoothly is HA's most important assessment factor when making decisions on tenancy renewal.

     The Commercial Properties Committee (CPC) of HA is responsible for monitoring the said work and reviewing the SOM arrangements. In this connection, CPC has endorsed various measures to improve various arrangements for tendering and assessment of leasing proposals, as well as protecting stall operators and monitoring the single operators' performance. Specific measures include those for the protection of stall operators, whereby HA restricts the single operators from charging stall operators any fees apart from rent, management fee, air-conditioning charges and rates (Note 2); requires the single operators to grant licence-fee-free periods to stall operators; and requires the single operators to submit to HA returns that set out all fees collected from stall operators. HA also restricts the amount of deposits and management fees (Note 3), etc that single operators can charge on stall operators. As for monitoring the single operators, relevant measures include regular inspections of markets, as well as performance assessment over single operators, regulation over the proportion among different trades, restriction over the scale of direct operation by single operators, requirements on the single operators to carry out promotional activities and to publicise the letting of vacant stalls, etc.

     CPC also discussed the concerns and views expressed by LegCo Members at the meeting of the LegCo Panel on Housing on June 5, 2017. CPC considered that the current monitoring measures for SOM had already struck a balance between the practical circumstances of commercial operations and shopping needs of residents.

     HA understands that the public is concerned about the single-operator letting arrangement for HA's markets. HA will continue to review the letting arrangement and monitoring measures for SOM from time to time so as to ensure effective implementation of the management and operation mode of the SOM.
Note 1: Including the question on "The Hong Kong Housing Authority's SOM" raised by Dr Hon Priscilla Leung on May 17, 2017, Legislative Council papers no. CB(1)1466/16-17(01) and CB(1)1024/16-17(04), and the question on "Management of retail facilities in public housing estates" raised by Dr Hon Fernando Cheung on March 16, 2016, etc.

Note 2: The management fee can only be adjusted once a year and the annual adjustments should accord with the movement of the Nominal Wage Index published by the Census and Statistics Department. Regarding the air-conditioning charges and rates, the amount charged by the single-operators should not exceed the actual amount payable by them.

Note 3: The operators are allowed to collect a deposit no more than two months' licence fees from their stall operators. The amount of management fees to be charged (on a per square metre internal floor area basis) upon initial letting is capped by the level of prevailing average management fees charged by the existing operators of other single-operator markets under HA.
Ends/Wednesday, April 11, 2018
Issued at HKT 12:10
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