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Compensation on Urban Renewal
Our Ref: SN/012
1 March 2001
Mrs Queenie Yu
LegCo Panel on Planning, Lands and Works
Legislative Council Secretariat
3/F Citibank Tower
3 Garden Road
Central, Hong Kong
Dear Mrs Yu
LegCo Panel on Planning, Lands and Works
I refer to your letters of 21 February 2001
and 1 March 2001 and would like to put forward the following comments as the Chamber's
Real Estate / Infrastructure and Real Estate Services Committees’ (the Committees) reaction to proposals set out in the information circular
issued together with the letter of 21 February 2001.
The Committees are very supportive of the
Government's proposals in regard to urban renewal and the establishment of the Urban
Renewal Authority and are keen to see these proposals implemented as soon as possible.
Whilst the Committees recognize the need to ensure that compensation proposals are fair
and equitable, it is equally important to ensure that the initiative does not become
stalled over this one issue and the momentum for urban renewal developed over the last 18
months is not adversely affected.
The Committees consider that the proposals
now put forward by the Administration as a result of the review requested by members of
LegCo should largely satisfy previous concerns regarding the adequacy and fairness of
compensation packages under the new Urban Renewal Authority Ordinance.
- The Committees endorse the proposals to provide affected
owners with adequate monetary compensation to purchase a reasonably modern replacement
flat in the same locality. However the Committees are concerned at recent suggestions by
the Administration that replacement apartments could be offered instead of monetary
compensation. This suggestion would seem to run contrary to the Administration’s stated policy of moving away from the production of housing units and
alternatively could lead to significant re-housing delays, if such units have to be
secured in the secondary market. It is important that there is certainty and a clearly
defined and understandable set of monetary compensation packages is the best way to
achieve this.
The Committees accept that there is a
significant difference between the value of a replacement flat of about 10 years old and
that of one of 7 years old and the Administration has clearly moved a long way to meet the
concerns of the community in this regard. However, the rationale for claiming that a five
year old flat is still generally regarded as “new”, whereas a seven year old flat is not perceived as such is, in reality, very
subjective and the Administration’s decision to adopt the
latter for compensation calculation purposes needs to be supported by clear transactional
evidence. From the figures tabled by the Administration it would appear that to adopt a
five year old standard as against a seven year standard would only involve an additional
acquisition/resumption cost of HK$1.5 billion over 200 URA projects, 25 unfinished LDC
projects and a twenty-year urban renewal programme.
It is not clear, at least from the
information provided to the Chamber, whether the Open Market Value of the replacement unit
in the case of an owner of a fully tenanted flat will be assessed on a “subject to tenancy” basis. The Committees
presume that this will be the case in that if a vacant possession basis is to be assumed
for the replacement unit the value of the Special Allowance to be paid to that owner could
be increased significantly but without justification. The Committees consider that this
aspect should be clarified.
It appears that there is some discrepancy
between statements in the text of the Paper to the Panel containing the proposed ex-gratia
allowances, namely between 12 ( c ) and 12 ( j ). Paragraph 12 ( c ) states HPA/SA will be
payable for a maximum of 3 flats whilst Paragraph 12 ( j ) states that no SA will be paid
for a third wholly tenanted flat. Notwithstanding the need for clarification if the
Administration intends to limit SA (only payable on tenanted flats) to two units, the
Committees would question the need and fairness of having any limit on the number of units
for which compensation claimed. The Committees accept the need to guard against abuse or
speculation but in the case of owner occupied units, the Administration already recognizes
that the number of owners who own and occupy more than 3 units is very few and a minimum
period of ownership – say since prior to enactment of the
URA Ordinance - could provide the necessary check and balance. In the case of tenanted
units, a similar “period of ownership” standard could be adopted, rather than attempting to control abuse or
speculation by a reducing or nil SA. The Committees are concerned that genuine small
investors should not be penalized by the loss of units bought in good faith for generation
of future income.
The Committees are pleased to note that the
proposed ex gratia allowance for owners and tenants of commercial properties is generally
more generous then the current ex-gratia allowance. Similarly they are pleased to see that
affected owners and tenants of commercial properties will still have the ability to claim
for business loss, removal costs and professional fees if they consider that the new
ex-gratia allowance does not represent adequate compensation.
Yours sincerely
Simon Ngan
Senior Manager
Economic and Legal Affairs
SN/ka
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