Call to review Housing Authority financing to avoid straining coffers
Pressure to meet government construction targets means public housing body could accumulate huge losses, warns task force
The financing of the Housing Authority should be reviewed to avoid imposing a huge burden on the city's coffers brought by ambitious government targets for new public flats and an accompanying increase in construction costs, a task force on fiscal planning says.
The statutory body, whose accounts are separate from the government's, might be staring at a deficit of up to HK$490 billion by 2042, the government advisers warned.
Covering the entire deficit by injecting government funds could strain long-term public finances, they said.
"The government should negotiate with the Housing Authority with a view to reducing the budgetary pressure on government finances in the long run," the working group on long-term fiscal planning, under the Financial Services and the Treasury Bureau, said yesterday.
The authority builds and manages public housing estates. It is self-financing, drawing revenue from the sale of Home Ownership Scheme flats, rent from public housing, and commercial leasing and investment.
Two months ago, the authority itself had warned that it might need cash from the government a few years down the road.
Its own budget forecast showed its cash and investment balance would drop from HK$68.1 billion this financial year to HK$28.3 billion in 2018, mainly because of rising construction costs, it said on January 7.
In the latest projections, the working group said the accumulated deficit could rise to between HK$130 billion and HK$490 billion from 2019 to 2042 as the authority sought to build 20,000 public rental flats and 5,000 HOS flats per year - targets set in Chief Executive Leung Chun-ying's policy address last year.
This would be equivalent to 0.3 to 1.5 percentage points of the nominal gross domestic product, it said in a report.
The projections do not take into account Leung's proposal in his policy address this year to further increase construction to 8,000 HOS flats a year.
Apart from reviewing the authority's financing model, the working group proposed adjusting the ratio of the number of new rental flats to the number of new HOS flats, taking out loans and turning the assets into securities.
The situation may not be so dire, Wong Kwok-kin, a member of the authority, and Lee Wing-tat, a former member, say.
"From past experience, revenue raised from the sale of each HOS flat can support two public rental flats," said Lee, chairman of land and housing policy think tank Land Watch.
"Once the authority sells new HOS flats again, it will have more revenue."
He advised against an assets sale, as the 2005 privatisation of its commercial properties via The Link Reit remained contentious to this day.
Wong opposed the idea of changing the ratio. "The construction of each type of public flat should hinge on the needs of residents," he said.
The possible money woes at the authority add to worries over fast-rising government expenditure, which the working group forecasts will total HK$1,700 billion to HK$2,949 billion by 2041, depending on how far public services are enhanced.
In the worst-case scenario - but following historical trends - spending would grow at about 3 per cent per year.
The economy needed to grow by at least 3 per cent each year to sustain improved services, the report said. It predicts the average annual growth rate will be only about 2.8 per cent.