Rent rise formula sparks controversy

PUBLISHED : Saturday, 26 May, 2012, 12:00am
UPDATED : Saturday, 26 May, 2012, 12:00am


How much tenants should pay for public rental housing should be a straightforward affair after a revamp in the rent adjustment mechanism in 2008. The Housing Authority has adopted a method that allows both rent increases and cuts according to changes in average household income. The first increase under the revised method, a moderate 4.62 per cent, was implemented two years ago without dispute. Since then, the income-based approach has been seen as a fair and acceptable way to determine rent adjustments. The second increase, however, has stirred controversy. Early this week, a subcommittee of the authority endorsed a 10 per cent rise, the maximum allowed under the law, for 700,000 households starting from September. This came after a survey found average monthly household income had increased 16.24 per cent over the past two years. The rise is partly due to the HK$28 per hour statutory minimum wage introduced last May.

The 10 per cent rent increase is no doubt a heavy burden for some tenants. Without the statutory cap, the increase would have been even steeper. Each household may pay an extra HK$25 to HK$352 a month. The increase has raised concerns about whether the mechanism should look beyond income and take into account other factors like inflation and household affordability. Public housing tenants are the lowest income earners in society, who cannot afford to pay the market rent for accommodation in the private sector. It is ironic that they benefit from a minimum wage on the one hand, but have to pay higher rent on the other.

The authority has decided to ease the tenants' burden by waiving one month's rent. This is on top of the two-month waiver granted in the budget earlier this year. The concession is inevitable in light of the political pressure arising from the Legislative Council election in September. That said, public housing is heavily subsidised by taxpayers. To ensure public resources will not be abused, the authority should not shy away from charging rents at an affordable level.

Like public housing, the minimum wage is meant to offer basic protection for the vulnerable groups. Officials and lawmakers probably did not envision the introduction of a minimum wage when the rent review mechanism was first proposed in 2007. As the minimum wage is also due for review at least once every two years, there are reasons to believe that the regular wage adjustment may propel public rent increases in the years to come. With inflation continuing to bite, there has been a suggestion that changes in the consumer price index should also be taken into account when gauging household affordability. This may be worth considering when the rent mechanism is due for a review.