Don't short-change shop owners in urban renewal

PUBLISHED : Wednesday, 27 October, 2010, 12:00am
UPDATED : Wednesday, 27 October, 2010, 12:00am

The possible forced closure of a half-century-old noodle factory in Sham Shui Po has reignited public debate over the controversial rules for compulsory land resumption to make way for urban redevelopment.

The owners of the Leung Faat Noodle Factory face the prospect of mandatory surrender of their property as the developer, the Lai Sun Group, successfully applied for compulsory land resumption under new legislative amendments that make it easier for private developers to demolish old buildings for redevelopment.

Founded in 1954, the factory first operated in Canton Road and moved to the current address in Ki Lung Street 36 years ago. The ground-floor shop has a floor area of 1,050 sq ft, which is 14 per cent of the building's total ownership.

The factory is the latest victim of amendments to the Land (Compulsory Sale for Redevelopment) Ordinance, passed in April, that allow developers to force the sale of the remaining units in a building once they have acquired 80 per cent ownership. The previous threshold was 90 per cent.

The Lai Sun Group is offering the owners HK$8 million in compensation, down from HK$10 million before the new rules were introduced. That comes to about HK$7,620 per square foot, far below the average price of HK$10,000 per square foot in the district.

No wonder the family has refused to budge and complained that the compensation is not enough for them to buy a similar unit in the neighbourhood. To be fair, no one can deny that urban redevelopment is a necessity because it provides an answer to urban decline. Renewal has had its successes and failures, but it is a significant step for a city's long-term development.

Redevelopment or gentrification can bring countless benefits to the community in terms of building safety, community hygiene and the quality of life. There are also ecological, social and economic benefits. In principle, urban redevelopment is a good policy as long as the negative impact on residents is kept to a minimum. The lowering of the compulsory sale threshold is a reasonable way to clear barriers.

But, in practice, the government should have been more flexible in weighing the interests of all parties concerned, because urban renewal is a highly sensitive and complex matter that involves many different stakeholders.

Before the lowering of the threshold for compulsory land resumption, many owners held out until the last minute, to negotiate a better deal. Some years ago, an owner received HK$20 million in compensation for a tenement unit in Causeway Bay.

Some developers resorted to unscrupulous tactics to control redevelopment, buying up a small handful of units in old buildings so they could manipulate the sale and prevent competitors from acquiring full control. Such opportunistic behaviour is obstructive, and detrimental to the welfare of the community.

The going rate for old buildings that come under urban renewal is about HK$7,000 per square foot in compensation for displaced residents. But the case of the noodle factory has highlighted a valid point: the price of a commercial unit should be set higher than that of a residential one.

The government has an obligation to protect property rights and the rights of owners to fair compensation. It should demand that developers make different compensation plans for shop owners. Urban renewal has far-reaching social and economic implications for the community: the government must tread carefully and take public accountability seriously in determining compensation.

Albert Cheng King-hon is a political commentator.