Council meeting-Bills 2nd Reading- Landlord and Tenant Bill 2021

MR CHAN CHUN-YING (in Cantonese): President, rent control had been implemented in Hong Kong for more than 70 years, but in response to changes in the social environment, rent control and security of tenure were removed in 1998 and 2004 respectively. In those years, the target of maintaining the waiting time for public rental housing (“PRH”) at three years could largely be met.

Today, the waiting time for PRH has been further lengthened. As at June this year, the average waiting time for PRH has reached 5.8 years. The housing problem has also become increasingly serious. According to a survey conducted by the Task Force for the Study on Tenancy Control of Subdivided Units, the median monthly rent of subdivided units (“SDUs”) was $417 per sq m, which was much higher than that of lower-priced flats in the New Territories and Kowloon, and the monthly rent per sq m was also found to be much higher in a smaller SDU. The living conditions of SDUs are so deplorable that they have become a disgrace to this modern metropolis of Hong Kong.

Prior to the supply of public/subsidized housing units in sufficient numbers, protecting the interests of SDU tenants by way of legislation is a consensus in the community. I support the Landlord and Tenant (Consolidation) (Amendment) Bill 2021 (“the Bill”) in the hope that the legislation will at least help provide security of tenure for SDU tenants and set a cap on the rate of rent increase, thereby slightly alleviating the pressure on their livelihood.

I am a member of the Bills Committee on Landlord and Tenant (Consolidation) (Amendment) Bill 2021 (“the Bills Committee”). The Bills Committee has held six meetings, at which the biggest controversy with government officials was about the definition of SDUs. According to the Buildings Department, subdivision of a flat into the commonly-known SDUs generally refers to the subdivision of a flat as shown on the original approved plan of a building into two or more individual rooms. Meanwhile, the Census and Statistics Department had adopted a different definition of SDUs in the earlier surveys on housing conditions of SDUs. Regarding the Government’s interpretation of SDUs in the current Bill, members were generally concerned that it might extend infinitely to normal rental activities and become out of focus, causing some tenants who were living in medium or high-priced units to unnecessarily be given the same protection as SDU tenants.

In view of this, the Government eventually took on board members’ views and proposed an amendment to set out circumstances that are excluded from the scope of the Bill, such as the circumstances in which the landlord resides in the unit and sublets it whilst the tenant resides in the premises that are demarcated as a bedroom in the building plan. President, this legislation states, first and foremost, that it seeks to protect landlords and tenants of SDUs, but the definition of SDUs must be clear to prevent people from exploiting legal loopholes in the future; the Government should also keep in view the market changes upon the implementation of the new law to ensure no distortion of its legislative intent.

The Government’s original Bill proposes to restrict the level of rent increase upon tenancy renewal with reference to the movement of the relevant rental index of private domestic properties released by the Rating and Valuation Department and subject to a cap of 15% for a two-year tenancy, i.e. an average annual increase of 7.5%. The extremely high rate of increase met with opposition from all members. A survey revealed that the average rate of pay increase this year was only 0.4% and the underlying inflation rate in August this year was only 1.2%, but the cap on rent increase proposed by the Government in the Bill was 7.5%, which far exceeded the rates of pay increase and inflation, showing that the Government failed to take into account the objective economic conditions when drafting legislation. Although the Government has now taken on board members’ views and proposed an amendment to revise the cap on rent increase upon tenancy renewal to 10%, such work should have been done at an early stage to keep tabs on public sentiments.

President, the current Bill mandates the signing of a tenancy agreement by landlords and tenants of SDUs, and the tenancy term to prohibit landlords from overcharging tenants utility fees is believed to the most immediate protection for SDU households.

Ms Alice MAK introduced the Waterworks (Waterworks Regulations) (Amendment) Bill 2021 in the form of a private bill in May this year, with the purpose of prohibiting landlords of private properties, especially landlords of SDUs, from overcharging tenants for water. A person who violates the legislation shall be liable to a fine at level 3. The community has long been concerned that SDU tenants are required to pay unreasonable water charges to landlords, thus the aforesaid legislative amendment can relieve some of their financial pressure. However, as SDU landlords can charge additional fees under different pretexts, the current legislative amendment for introducing tenancy control on SDUs just fills this gap and prevents overcharging under pretexts such as maintenance fees and repair fees, which may bring additional burden to tenants.

The current legislative amendment sets out a new offence. If an SDU landlord requires the tenant to pay any additional charges other than the rent, deposit and charges for water, electricity, gas or communication services, the landlord shall be liable to a fine of $10,000, or $25,000 for a repeated offender. A landlord who charges the tenant utility fees (such as water and electricity charges) that exceed the costs shall also be liable to a fine. However, before the legislation formally comes into operation, I hope that the Government can step up publicity efforts to remind landlords and tenants of SDUs, such as urging the landlords to install separate water and electricity meters as soon as possible if they have not done so, otherwise they may breach the law inadvertently.

Besides, whether an initial rent should be set is also a relatively controversial issue in the Bills Committee. As the location, age, orientation and facilities of SDUs may vary greatly and most tenancy agreements of SDUs in the past were not stamped, it is difficult for the Government to grasp the data, and thus setting a standard initial rent is very difficult indeed. However, given that both parties will be required to sign and stamp the tenancy agreement in future, I suppose there will be sufficient primary data to conduct an objective analysis on the overall rental level of SDUs. It is hoped that the Government will start to examine the data collected after one or two years upon implementation of the legislation concerned, and review the feasibility of setting an initial rent.

President, the current legislative amendment concerning tenancy control can only solve some of the problems faced by SDU households. At present, there are some 110 000 SDUs in Hong Kong, with over 226 000 persons living therein, and I guess most of them are waiting for PRH. The Government has put forward a far-sighted planning vision in the Policy Address earlier, namely the Northern Metropolis Development Strategy to establish a new metropolis of 300 sq km to accommodate a population of 2.5 million, thereby raising the public housing ratio to 70%. Earlier, Secretary Frank CHAN has also described the housing construction processes of the Hong Kong Housing Authority as world class. However, distant water cannot put out a nearby fire. Given the long lead time for completing the large-scale public housing construction, the Government should increase the supply of transitional housing in the meantime. While the Chief Executive announced in her policy address that 5 000 additional transitional housing units would be provided, bringing the overall supply to 20 000 in the next few years, I think the Government should further explore ways to expedite the supply of transitional housing and gradually reduce the number of SDU tenants. Many members of the working population in the New Territories have chosen to rent SDUs in order to alleviate the burden of travelling expenses. If the development of the New Territories North goes well, there will be sufficient job opportunities for residents to work in the same district, thus reducing the SDU demand arising from the need to work in other districts. Noting that recently Ms Alice MAK had advocated in a seminar the provision of more transitional housing on Hong Kong Island and in Kowloon, and just now Mr CHAN Han-pan also proposed to study the provision of more transitional housing in industrial buildings in urban areas, I believe we will soon achieve the goal of reducing the SDU demand arising from the need to work across districts. I hope that the Government can consider the proposals.

President, it is imperative to adopt a multi-pronged approach to thoroughly resolve the problem of SDUs. The Government should also dare to face up to the problem, boldly put forward the goal of bidding farewell to SDUs in the long run―Ms Starry LEE has made a number of appeals just now―and then garner consensus in society, so that the disgrace of this modern city can be removed from Hong Kong as soon as possible.

I so submit. Thank you, President.