URA 'should hand job to developer after kick-start'
The government's top consultant on reforming the Urban Renewal Authority says the body should restrict itself to 'kick-starting' a project and hand over most of the responsibility to the developer.
But such a change, while allowing for new models of compensation for the people evicted, also carries implications for how the URA makes its money - it might lose its self-financing ability and instead require public funding.
The recommendation for a reduced role was made by Dr Law Chi-kwong, who has been hired by the government to lead the review of the URA. Law has been analysing submissions from the public about the reform and will hand over his recommendations to a steering committee under the Development Bureau this month. His views are his own, he says, and should not be confused with the public consultation.
Law suggests that by greatly restricting the role of the URA in redevelopments - in effect no longer making it a stakeholder in projects - the group will be more transparent.
Currently, the authority selects an area to be redeveloped, decides on the amount of compensation owners will get, often partners with a developer, and renovation begins. Once the project is completed, the authority can sell its stake, often generating large returns, but also attracting criticism that it is out simply to maximise profits.
Under Law's model, the URA would acquire the land titles and draw up development conditions. But it would no longer have a stake in the project. Developers would put forward prices, reflecting the redevelopment potential, and the highest one would win.
Owners of flat would also have more options for compensation. At present, the URA buys a shop or flat in the redevelopment zone with the price based on a flat of the same size nearby that is seven years old.
But some affected owners have questioned how 'nearby' is defined. And the compensation is less for people who rent out the flats than for those who actually live in them.
Under the proposal, owners would have several options. They could choose to sell their flat or wait and exchange it for a redeveloped flat, at which point they could sell it.
If they opt for compensation, the amount will be decided by their share in the total value of the development, no matter whether they are occupiers.
For example, if an owner has a flat valued at HK$2 million accounting for 2 per cent of the entire estate's value of HK$100 million, he will be given HK$4 million if the estimated value of the future development is HK$200 million.
The Lands Tribunal would decide whether the estimated value is fair.
The authority could also require developers to reserve a certain number of flats and shops for owners who opt to stay.
Law admits that such 'swaps' might not always be possible.
'The 'flat-for-flat' idea is a high-sounding slogan. In reality, however, it is almost impossible to compensate every owner with a shop or a flat of same value, as it is subject to many variables like age, size and location.
'Even if the owner is given a flat of the same value, his or her social network with neighbours may not remain the same, as many old districts in Hong Kong have less redevelopment potential now.'
The government's recent moves to reduce development density had lowered the redevelopment potential of some old districts such as Tai Kok Tsui, Jordan and Mei Foo Sun Chuen, where density was already close to the government's limit, he said. 'Fewer flats and shops will be seen in new developments, as developers will build larger and more expensive flats to recover the redevelopment cost.'
Law said the proposed redevelopment model would save the authority from the accusation that it maximises profits with developers, and holds their properties and sells them only when the market prospers.
In the case of The Masterpiece in Tsim Sha Tsui, the per-square-foot price exceeds HK$20,000.
But surrendering the developer's role would mean the authority could no longer be financially self-sustainable, implying more public money would be needed for future renewal projects.
Early this month, pressure group Professional Commons along with some redevelopment concern groups also urged the authority to give up its developer role.
They argued that it should only draw up business plans with affected owners and help them form a co-operative association to co-develop with developers.
'It will be a fairer game. Owners will make decisions collectively and they bear their own risks,' Professional Commons chairman Albert Lai Kwong-tak said.
The government's steering committee for the renewal strategy review is forming recommendations for further public consultation in February. The committee will decide on the future compensation scheme, the authority's roles and its financing model.
Moving forward
The history of the Urban Renewal Authority in numbers
Established: 2001
Redevelopment projects: 45
Preservation projects: 4
New flats provided: 17,000
Commercial space provided: 490,000 sqmetres
Population affected: 32,232
Net asset value*: HK$9.9b
Total accumulated deficit*: HK$135m
