Submission on the Housing Bureau’s Consultation Document on the Regulatory Regime on Basic Housing Units

The Council is pleased to submit views to the Housing Bureau in response to its Consultation Document on the regulatory regime on basic housing units (BHUs) (BHU Regime). Unless otherwise stated, the same abbreviations have been adopted as in the Consultation Document and references to paragraphs are to paragraphs of the Consultation Document.

The Council welcomes the Government’s determination to eradicate substandard SDUs at root. Together with the current tenancy control regime under Part IVA of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 (Current SDU Regime), the imposition of statutory minimum safety standards and living conditions should serve to enhance the quality of life of BHU tenants.

Nonetheless, being mindful that SDU tenants might be underprivileged and vulnerable, the Council wishes to raise the following observations and suggestions to mitigate any adverse impact on them.

A. Other measures may be required to assist affected tenants

1. Whilst the BHU Regime seeks to provide safe and reasonable living conditions of SDUs (paragraph 3.1(a)), the Council shares the concern of other stakeholders that it may increase rent such as to render such SDUs unaffordable to current SDU tenants and/or reduce the market supply of SDUs:

• In the March 2021 Report of the Task Force for the Study on Tenancy Control of Subdivided Units (2021Report), it was identified that most SDU tenants are generally low-income individuals and families (paragraph 26 of the 2021 Report).  The Council notes that 60.7% of an estimated 110,000 SDU households have applied for or are eligible for PRH (paragraphs 1.1 and 2.2(b)(iv)).  For the remainder, some are ineligible for other reasons such as not holding permanent residency, suggesting that they might also be underprivileged.  
• On the other hand, according to a government survey in New Zealand_[1], the imposition of minimum standards of living conditions may result in higher rent.  The possibility of increased compliance cost being passed on to SDU tenants in the form of higher rent was also foreshadowed in the 2021 Report_[2]. In this regard, the Council notes that the BHU Regime does not seek to regulate the “initial rent” level (paragraph 2.9). 
• Further, old domestic buildings often carry genuine planning and design constraints, particularly those old tenement houses (唐樓) with deep footprint and narrow frontage _[3], and 26% of SDUs have less than the minimum floor space required for BHUs (paragraph 2.2(a)(ii)).  The conversion of an SDU flat situated in such a building to satisfy BHU requirements might result in a reduction of supply.  In addition, if the building suffers from safety defects, the Government might refuse recognition of all SDUs in that building (paragraph 3.13(a)).  As 87.9% of SDUs were in buildings aged 50 or above (paragraph 2.2(a)(iii)), the number of SDUs available in the market might thus be significantly reduced.  Given also that all SDUs would require some level of modification with 30% necessitating substantial changes (paragraph 3.18), it is possible that some SDU landlords might choose to leave the SDU_[4] or operate illegally.    

2. Other measures are thus necessary to provide timely assistance and mitigate the risk of affected SDU tenants, despite not their will, moving into worse housing conditions.  The Council proposes the following principles in the design of such measures:

• Whilst the Government has committed to assisting affected households in finding other rental accommodation (paragraphs 3.12(f) and 3.20) and tying in the eradication of substandard SDUs with the pace of public housing supply (paragraph 3.1(c)), a proactive monitoring mechanism upon implementation of the BHU Regime should enable timely detection of any adverse market or economic impact.  It is essential to incorporate communication channels for the public to readily seek assistance, such as online portals, hotlines, mobile apps and partnering community centers, and speedy responsive measures to provide timely assistance to potentially affected SDU tenants.  Such may include maintaining sufficient reserve of temporary housing (including THs and LPHs_[5]) based on prevailing statistics at reasonable rental rates to accommodate SDU households that are unable to afford a BHU_[6];
• In principle, current SDU tenants should still be able to enjoy the full 4-year tenure and rent protection under the Current SDU Regime.  The Government might review and clarify whether the proposed 12 to 18-month period for registration of SDUs and 12 to 24-month grace period for conversion of existing SDUs to BHUs (paragraphs 3.12(b) and (d)) would enable them to do so.  
• The Council agrees that in taking a pragmatic, risk-based approach, enforcement action should prioritize non-compliant SDUs with serious safety problems (paragraphs 1.7 and 3.18).  To enhance consistency, transparency and fairness in enforcement action, clear enforcement guidelines highlighting the priority of enforcement action with illustrative examples would be useful.

B. Enhancing minimum standards for BHUs and information dissemination channels for the elderly

3. As the safety of SDUs is paramount, besides the proposed BHU requirements on fire and structural safety (paragraph 3.14), minimum safety standards might also be prescribed for electricity and gas works and appliances, including installation and maintenance by qualified contractors.  Consideration should be given to the safety use of liquefied petroleum gas (LPG), as it is commonly used in more aged buildings and can pose serious fire hazard if not managed properly.

4. To reduce electricity charges payable by SDU tenants (thus mitigating to some extent the potential higher rent of a BHU) and encourage sustainable consumption, the BHU requirements might also require SDU landlords to supply (where mandatory) electricity appliances of at least Grade 2, if not Grade 1, energy efficiency.

5. To support the Government’s policies to develop the “silver economy”, BHUs serving the elderly should be required to have anti-slippery floor tiles, mats, armrest and shower chairs in bathrooms to avoid slipping injuries, which the Council’s study_[7] had shown were a common cause of household accidents for the elderly.  In addition, to facilitate children from grass-roots families in undertaking e-learning_[8] and with 16.3% SDU tenants aged below 15 (paragraph 2.2(b)(i)), BHUs serving families should have suitable infrastructure that allows each BHU to have affordable, convenient and reliable access to the Internet.

6. Further, dedicated, simplified information dissemination channels and resources should be devoted to assisting elderly people in understanding the BHU Regime, their rights and relocation as required.  Whilst only 8.6% of SDU tenants were aged 65 or above (paragraph 2.2(b)(i)), the number is likely to grow, with the Census and Statistics Department projecting the elderly population to soar from 1.64 million in 2023 to 2.67 million in 2043, representing 35 per cent of the total population_[9]

C. Inclusion of SDUs in industrial and commercial buildings in the BHU Regime

7. The Government proposes to exclude SDUs in “illegal” housing from the BHU Regime as they are in breach of existing legislation and/or government leases for which enforcement action will continue to be taken (paragraph 3.10, Illegal SDUs).  Nonetheless, the BHU Regime serves the different objective of enhancing the living standards of SDU tenants.  Indeed, following the recommendation of the 2021 Report, the Current SDU Regime covers Illegal SDUs situated in industrial/commercial buildings_[10] so long as they fall within the scope of the regime. 

8. The Council submits that it is in the interest of SDU tenants (including those dwelling in Illegal SDUs) for the BHU Regime to cover Illegal SDUs, driving a clear message that all SDU landlords must ensure safe and reasonable living conditions for their tenants in accordance with minimum BHU requirements.  Coordinated efforts may be taken between law enforcement agencies for more effective regulatory control of the entire SDU market.  To alleviate any concern that Illegal SDUs are thereby taken as “legalised” (paragraph 3.10), the BHU Regime could require proof of compliance with existing legislation and the government lease (c.f. paragraph 3.13(a)), or otherwise a temporary waiver be obtained.  At the same time, flexibility would be afforded in recognizing BHUs in other forms of housing in accordance with any change in the Government’s policies.

9. In the 2021 Report, an estimated 6,927 SDUs were situated in industrial and commercial buildings in 2020 (paragraph 16 of Chapter 3 of the 2021 Report).  As the Consultation Document recognized, using industrial buildings for residential purpose in contravention of the Buildings Ordinance and/or government leases poses significant safety risk to the inhabitants (paragraph 3.10(b)) and enforcement actions have been taken to ensure their safety.  The Council appreciates that by including Illegal SDUs in the BHU Regime, their tenants might eventually be evicted by such enforcement actions.  As such, the proactive monitoring and timely assistance proposed in Section A should provide (and if necessary prioritized) for such SDU tenants which may include maintaining sufficient temporary housing to accommodate affected households.

D. Public awareness and information transparency is paramount

10. The Council appreciates the efforts of the Government, NGOs and SDU concern groups in public education of the Current SDU Regime and assistance rendered to SDU landlords and tenants.  Given the wider impact of the BHU Regime, early and intensive promotion of the BHU Regime is imperative.

11. To this end, besides uploading information of registered pre-existing SDUs and BHUs to HB's website (paragraphs 3.12(e) and 3.13(f)), the following measures might be considered:

• A one-stop, comprehensive information portal on both the Current SDU Regime and BHU Regime to enhance information transparency and access for both SDU tenants and landlords_[11] alike, with dedicated information dissemination channels to cater for the elderly and ethnic minorities.  The public register should also include approved floor plans of BHU flats, in addition to addresses and recognition validity periods.   
• Close collaboration with the Council and other public and industry stakeholders on information dissemination is also important to assist the Government in educating the public.  It is also suggested that the BHU Regime should be publicized in Mainland China (including the Greater Bay Area), targeting Mainlanders intending to work or study in Hong Kong, as well as non-ethnic Chinese living in SDUs.  In this regard, the Council suggests that its recently published ”GBA Smart Guide” on residential properties (大灣區住房錦囊)_[12] would provide a suitable platform for information dissemination to Mainlanders.  
• As proposed in Section A, clear enforcement guidelines on risk-based approach (paragraph 3.18) should be published, focusing on safety and ensuring that SDU landlords prioritize the safety of their tenants at all times. 

In sum, the Council supports the BHU Regime as a necessary move to resolve the issue of substandard SDUs once and for all.  Nonetheless, measures and care must be taken to ensure that underprivileged and vulnerable residents are not thereby denied even the living conditions of substandard SDUs.  The Council looks forward to working with the Government on advancing the interests of SDU tenants.