4.1 The private sector has an important role to play in meeting the housing needs of the community. Over the ten-year period from April 1986 to March 1996, the private sector produced on average some 31000 flats a year, with roughly one-third of this coming from development on new land sold by the Government during the period. We have pledged to facilitate the production of a further 195000 private flats over the period from April 1995 to March 2001. The ability of the private sector to help meet the community's demand for housing is clearly of great importance. Nevertheless, buying a flat in the private sector remains beyond the ability of many families, while developers face increasing difficulties in site assembly for housing development (other than on sites sold by the Government) arising from multiple ownership, and in identifying financially viable opportunities for redevelopment.
4.2 In part, the answer to this challenge lies in easing supply constraints, including land. But developers must also have sufficient opportunities if they are to play their proper role in the interests of the wider community. At the same time, the Government must continue to monitor the private property market to ensure that it operates in a fair and competitive manner, and to guard against a revival of speculative activities on the scale experienced in 1993 and early 1994.
4.3 It is clearly in the interests of the community for the Government to encourage private sector investment in housing, because the smaller the gap between the supply and demand for private housing, the lower the pressure on domestic property prices. However, the Government is also firmly committed to a free private housing market. The level and timing of supply of private flats are thus market decisions ultimately.
4.4 We believe that the best way for the Government to encourage investment in private housing is to ease as far as possible any supply constraints which may arise. Thus (as set out in Chapter 3 above), we will seek -
| (a) | to provide an adequate and steady supply of new land and supporting infrastructure to meet the demand for private housing; | |
| (b) | to take all reasonable steps to streamline and speed up Government procedures for the approval of private housing projects and related land transactions, and to apply these procedures flexibly and pragmatically; and | |
| (c) | to tackle any constraints in the capacity of the construction industry which may arise. |
4.5 We also believe that, in addition to the direct contribution which the private sector makes towards meeting housing demand, we should look imaginatively at ways in which we can make better use of the private sector's expertise and resources in helping us to deliver our public housing programmes. At present, such co-operation is limited to the Private Sector Participation Scheme (PSPS), introduced in 1978 as a supplement to the Home Ownership Scheme (HOS). The intention of the PSPS is to make use of the experience and resources of private sector developers in the production of flats for sale to prospective home owners eligible for HOS flats.
4.6 Under the PSPS, the Government offers sites for sale by tender to private developers to build flats for sale at a fixed price (in line with HOS flat prices) to purchasers nominated by the HA. Purchasers have to satisfy the same eligibility criteria as for flats sold under the HOS, and the same restrictions on resale apply.
4.7 The PSPS makes an important contribution to the overall supply of subsidised flats for sale in the public sector. Over the period from inception in 1978 to March 1996, some 66 000 flats were built, or about one-third of the total supply of subsidised home ownership flats. Over the period from April 1996 to March 2001, a further 62 000 flats will be built. We will continue to operate this successful scheme. However, we will also look for new ways to increase private sector involvement in our public housing programmes, with a view to improving the quality, variety and standard of management of the flats concerned.
4.8 One option is to invite private developers to build subsidised home ownership flats as part of a mixed development. Under this approach, we would continue to offer residential sites for sale by tender. But, at the same time, we would require the successful tenderer to make available a specified number of flats within the development for sale to eligible purchasers, at designated prices. The flats could be selected at random throughout the development, or the developer could be required to construct a mixture of subsidised home ownership flats and private housing blocks on separate parts of the same site. However, in either case, the developer would be required to provide and manage common facilities.
4.9 We believe that this new approach would bring extra benefits. It would allow purchasers of subsidised home ownership flats to enjoy higher standards of design, finish, facilities and management than under the present PSPS. It would also provide a greater range of product, because of the involvement of a greater number of developers building flats to their own design, and therefore more choice for purchasers.
4.10 Subject to a detailed feasibility study and a pilot scheme, we propose that an increasing proportion of subsidised home ownership flats should be provided by way of mixed development. The Housing Society would be an appropriate body to be designated to carry out the pilot scheme.
4.11 We would welcome further ideas from the public on other methods to involve the private sector in meeting our public housing targets.
4.12 As a Government, we are committed to the principles of a free market economy. We are also committed to providing the regulatory framework necessary to ensure the fair and orderly operation of the private housing market. In accordance with our general economic philosophy, we aim to ensure that any market intervention is kept to the minimum necessary to remove distortion, ensure fair competition and protect the interests of genuine home buyers.
4.13 In June 1994, following widespread public concern at the rapid rise in residential property prices in 1993 and early 1994, the Government announced a package of measures designed to dampen property speculation in the short term, and to increase flat supply in the longer term. We believe that the anti-speculation measures have been successful. They have helped to ease the rate of change in property prices.
4.14 We will continue to monitor the operation of the private housing market and to take action, where appropriate, to protect the interests of consumers. In view of the recent concern over speculation, particularly in the luxury flats market, we have formed an inter-departmental group to collate information on the private residential property market and to monitor the situation closely. The group is led by the Housing Branch, with representatives from all relevant Branches and Departments.
4.15 Higher private sector investment in housing reduces the gap between supply and demand, and lowers the pressure on domestic property prices. We wish to encourage such investment by easing any supply constraints especially of land and labour, by streamlining and speeding up Government procedures for the approval of private housing projects, and by applying these procedures flexibly and pragmatically.
4.16 We also wish to maximise the potential contribution of the private sector towards delivering our public housing programmes. In addition to the existing PSPS, we propose that new forms of mixed development should be used to produce a proportion of subsidised home ownership flats. A feasibility study and pilot scheme will be necessary to determine in detail how this new joint venture concept will operate.
4.17 While seeking to make the fullest possible use of the resources and abilities of the private sector in fulfilling our housing policy objectives, we will also continue to monitor the operation of the private housing market and to take steps, where appropriate, to ensure adequate consumer protection.