1. In his 1998 policy address, the Chief Executive devoted a considerable part to the subject of housing. Some decisions were announced such as the suspension of the sandwich class housing scheme, but policy development in a number of areas has been left open. We would like to contribute our suggestions and comments to the debate.

Home Ownership Scheme

"We will consider the extent to which will continue to build such units - the bricks and mortar approach - as opposed to the alternative of offering home ownership loans." (Chief Executive's Policy Address)

2. As a matter of principle, we believe the government's role in public housing should be the provision of rental units for those in most need rather than the production of flats for sale. In regard to home ownership, this means government assistance through loan schemes is to be preferred to the sale of HOS flats. However, considering that the full abolition of HOS might result in market volatility, there may be merit in maintaining a small proportion of HOS flats as part of the overall housing stock.

3. Accordingly, we are of the view that the present production of HOS flats is excessive and the number should be reduced gradually. A reasonable number would be in the range of 10-12,000 annually.

4. If the role of HOS is confined to that of acting as a bridge between public and private housing, distortions in the market will be reduced as far as is possible. However, the criteria governing those eligible to purchase HOS should be reviewed in the light of changed market circumstances and the income limits on applicants reduced accordingly. At the same time, there should be a mechanism to restrict the length of occupancy of governmental rental housing units for those who are no longer in need of subsidized housing.

5. We recognize that the effect of the reduction in HOS supply will not be felt for several years. In order to minimize any uncertainty in relation to the supply of housing units by the private sector, the Government should work with the private sector to introduce a mixed development concept to ensure that supply will be adequate. One way to achieve this, when effecting future land grants, is through special lease conditions which would specify the number of units to be built and sold to government nominees upon completion.

6. In advocating loan schemes, we realize that there would be a cost implication. On the other hand, loan schemes would also generate cost savings in terms of higher income from land sales for land which would otherwise have been used for HOS or PSPS.

7. In the longer term, the pros and cons of the building society/housing bank concept as it relates to Hong Kong should be considered. This is especially so as the Hong Kong market becomes more mature. One way to move forward is to consider rationalizing the administration of financial assistance for housing through a central body, with the Housing Authority and the Housing Society as its agents. We note, however, that the banking members within the HKCSI are of the view that the market is well serviced by banks and they do not see the need to create a new body.

8. We note the recent announcement effectively to increase the level of loans from 70% to 85% through the involvement of the Mortgage Corporation. We understand this reflects a corrective measure rather than an increase in government intervention. It would be helpful if procedures could be simplified. In the longer term, however, the level of loan should be left to the bank to decide, and government intervention should be kept to a minimum.

9. The resumption of land sales should be gradual, and market and economic factors should be taken into consideration.

10. In order not to undermine confidence, it is crucial for the first land sale after the moratorium to be successful. The sale should thus be conducted carefully as the impact of misjudging the market would be significant. We suggest that a process combining bidding and tendering could be adopted, such that interested bidders are required in advance to indicate an upset price and to agree to commit an "earnest " deposit. The government could pre-qualify interest by issuing a list of a selected number of small lots of residential land and inviting expressions of interest from developers. If there was genuine interest, the land then could be offered for sale.

Urban Renewal

"We are now finalizing our initial proposals for an Urban Renewal Strategy and drawing up the suggested terms of reference, powers and operational guidelines for the new Authority."

11. Urban renewal is one of the most important challenges facing Hong Kong over the next generation. It has to be recognized that urban renewal is also a social issue and some projects may not necessarily be financially viable even though they have significant social value. The government should accept that urban renewal is a public objective and a political choice which may need to be funded, in part, through the public purse.

12. The Urban Renewal Authority should not just be an up-graded form of Land Development Corporation which has found itself inevitably constrained by the bureaucratic process when trying to operate on commercial principles. It should be given adequate powers and resources. Urban renewal schemes should be area-based, interdisciplinary, community-oriented and combine rehabilitation and redevelopment.

13. One key to the process of urban renewal is the speeding up of land resumption to create land supply. Since the ultimate exercise of resumption powers rests with the Government, we would question the merits of delegating resumption to an agency such as the LDC/URA which only serves to lengthen the process.

14. If the Government was to act as the land assembler, then it would have financially to carry the compensation in the short and medium term. This should be considered part of the social price of urban renewal and, in any case, that cost might be recovered by subsequent sale, especially in the case of those sites which have good prospects of being redeveloped in a financially viable manner.

15. Urban renewal and regeneration does not in itself mean that the only route is redevelopment. Much of Hong Kong's elderly stock is capable of refurbishment and renovation, but a much greater push is required by the Government than the current Rehabilitation Fund. Any scheme under which owners are legally required to have their buildings inspected periodically will require vigorous policing and meaningful penalties, if it is to be effective. Pilot refurbishment projects, partially funded by grants but matched by contributions from the Owners Incorporations should be considered.