Hong Kong's profit-driven urban renewal policy needs a rethink
Carine Lai says the priority of our urban renewal policy needs to be shifted away from buying and selling buildings for sufficient profits
Three years ago, the Urban Renewal Authority announced a new "demand-led" strategy for urban renewal. Now, the strategy has stalled. Because of the unprofitability of small projects, the authority recently announced that it would no longer accept applications on sites smaller than 600-800 square metres.
While the authority has said that it will devote more effort to facilitating agreements between owners and private developers, this does not answer the question of how those developers would make a profit, when the authority itself - which is tax and land-premium exempt - cannot.
There is a fundamental flaw in Hong Kong's urban renewal policy. While the authority's stated mission is "to address the problem of urban decay and to improve the living conditions of residents in dilapidated urban areas", its powers and financing mechanisms under the Urban Renewal Authority Ordinance render these goals secondary to the objectives of buying and selling property.
The authority was set up as a machine for buying up old buildings using compulsory purchase powers, transferring the land to developers premium-free, sharing in the profits, then ploughing the money into the next project.
While it does carry out programmes of building rehabilitation, district revitalisation and heritage preservation, these are basically the icing on the property development cake. The sum it has earmarked for building rehabilitation amounts to about HK$260 million every year, which is less than what it spends on administrative expenses. Also, out of its total assets of nearly HK$32 billion last year, the total value of building rehabilitation loans on its books was only HK$65 million.
The results reflect this. Most of its completed projects end up as bland, luxury high-rises that push out small businesses and disperse residents, with a small area provided for sitting outside, or a few restored shop houses as an afterthought.
In the long term, this system is unsustainable because it depends heavily on boosting a site's gross floor area to the allowed maximum in order to generate sufficient profit. Project decisions are determined by finances, and not necessarily the safety and condition of the buildings.
The authority typically targets six- to eight-storey walk-ups in prime locations while overlooking 12- to 14-storey buildings, which would cost too much to acquire. When the pool of profitable sites runs out, who is going to redevelop bulky buildings like Tsim Sha Tsui's Chungking Mansions, or Jordan's Man Wah Sun Chuen?
Eventually, the government will need to overhaul its entire approach. This will include policies covering land premiums, compulsory sale, building inspection and maintenance, home-owner organisation and mortgage financing for old buildings to address the underlying causes of urban decay.
The government may also have to accept that redevelopment will sometimes be unprofitable, put its own resources into it, and perhaps carve out a larger role for non-profit bodies, such as the Housing Society. This will undoubtedly be a long and difficult process, but waiting for the URA to redevelop the entire inner city is no solution.
