The allowance, between $20,340 and $56,310 a month, can be spent on rents or mortgages. It is estimated more than 4,900 staff will benefit.

About 760 quarters for senior staff will be vacated over three years. A joint-institute working group has been set up to think of ways of handling the vacated quarters.

The Government hopes the scheme will help save $2.7 billion in the next 15 years by renting out surplus quarters, bringing back quarters from the private sector or by redeveloping land where quarters stood.

Heads of the institutes, who have residences provided, demanded at a recent meeting with the University Grants Committee that they be given the same benefits as their staff.

'They are also employees of the institutes and come across the same housing needs. So they believe the scheme should be extended to them,' a university source said. 'But this will be controversial. This may be seen as a double housing benefit and preferential treatment in relation to their civil service counterparts. This may attract criticism, especially when Hong Kong is suffering an economic slump.' The committee has promised to convey the request to the Government.

Latest figures from the eight institutes showed more than 1,000 staff had submitted application forms.

The Chinese University received most applicants. It has about 900 eligible staff and about 300 have submitted forms.

'We have approved 250 of the cases, the remainder are being processed. They will be notified soon,' a university spokeswoman said.

'We are still counting the number of quarters vacated. We hope in the future we can vacate at least a whole block of quarters so that we can turn it into student hostels or staff offices.' At the Hong Kong University of Science and Technology, more than 70 staff have applied and most have been approved. About 15 staff have moved out of staff quarters.

Some staff admitted recent low property prices had encouraged them to apply.