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Friday, Mar 31, 2023

Redevelopment of Hong Kong’s older buildings must be handled carefully

Redevelopment of Hong Kong’s older buildings must be handled carefully

Among the proposals in John Lee’s first policy address is lowering the threshold for facilitating redevelopment of older buildings. The government must act with care in these reforms, to avoid giving either owners or developers an unfair advantage.

There is so much material in this year’s policy address worth discussing in depth that it is difficult to know where to begin. One theme that emerges is the government’s desire to play a more proactive role in economic development.

For example, there is the proposal to create a Hong Kong Investment Corporation Limited to invest in strategic industries and attract and support businesses. This is a major departure from past practice and a step in the direction of the Singapore model of guided development.

Similarly, there are more targeted efforts to attract individual companies. Instead of just explaining Hong Kong’s advantages and helping those companies expressing interest, the government will pursue specific companies and offer tailor-made support packages. Proactively luring family offices and supporting efforts to re-industrialise are other examples.

Reviving the idea of an official think tank, under the revised name of the Chief Executive’s Policy Unit, is worth exploring. The “red team” concept, in which proposals are challenged and tested internally to iron out kinks before implementation, is also exciting.

The decision to set up a dedicated department to advance development of the Northern Metropolis is a clear signal this will be the major focus for the next decade. The Lantau Tomorrow idea is still breathing but under the revised name of Kau Yi Chau Artificial Islands, and with much less prominence.

There is recognition that Hong Kong needs talented people to implement these ambitious plans. In addition to nurturing and retaining our home-grown resources, we need to put out the welcome mat for the best and brightest from the rest of the world.

One word of warning: nobody from outside China will come to consider or explore opportunities in Hong Kong while we maintain our existing Covid-19 control measures. Repeated testing, having to register and prove vaccination status on entry to many premises and maintaining mask mandates even outdoors – all these serve as deterrents.

The government position that we are making progress towards elimination and that the situation is much better than before cuts no ice with outsiders. We must get back to making Hong Kong a place people want to come to see for themselves, then we can focus on making it attractive for them to stay.

All these are worthy topics, but in the end I settled on the plan to consider lowering the threshold for facilitating redevelopment of older buildings. The suggestion in the policy address is that the trigger for permitting forced sale, which was 90 per cent when the scheme was introduced in 1999 and cut to 80 per cent in 2010, should be further reduced to 70 per cent for buildings more than 50 years old, with a further lowering to 60 per cent for buildings more than 70 years old.

My fellow columnist Alice Wu touched on the issue recently on the grounds that it paid no attention to the condition of the building, only its age. I agree that this is an absurd proposition. My interest is twofold: I own a flat in a well-maintained block approaching its 60th birthday, and I plan to still be living in it at its 70th.

By chance, I was the subject officer for these matters back in the 1980s, dealing specifically with compensation. At that time, the suggestion was that an owner being forced out should get the value of a second-hand, seven-year-old flat of similar size in the same area. I argued it should be the value of a new flat. I had just bought my first flat in Hong Kong and suddenly saw things from a different perspective.

There is an argument for allowing developers to trigger a forced sale in some circumstances, for example, cases where a few owners could not be found as they had emigrated or died, ownership was being disputed and so on. The issue is where to draw the line to avoid giving either party an unfair advantage in negotiations.

Take the theoretical example of an old block with 40 flats on a site capable of holding 100. Developers and owners approach the subject from different perspectives. Developers see a major profit opportunity, owners see the loss of their homes. One views the existing property as a concrete box to be acquired and demolished as cheaply as possible, the other the largest single family investment and the centre of family life.

The location was chosen because it is attractive and convenient for work. The children go to local schools, the family shops in nearby markets, and so on. For all these reasons, the family might not wish to move at all because of the disruption.

The developer, probably using agents to hide their intentions, will seek to acquire flats close to market price. They will find willing buyers among those who wish to move for personal reasons, perhaps to a different flat or to emigrate. If they can’t reach agreement with 20 per cent of the owners, they must rethink compensation. We should not lightly change the balance between the parties or we risk social unrest.

Having given Chief Executive John Lee Ka-chiu a B grade for his first 100 days, I can do no less this time on the grounds of comprehensiveness and creativity alone. Depending on how some of these issues are pursued, there is scope for the grade to be adjusted. I have tried here to illustrate some of the pitfalls.

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