Money, not a social mission, seems to be driving Urban Renewal Authority

Urban renewal body's move away from smaller, less profitable projects leads many to wonder if it is abandoning its mission to society

PUBLISHED : Thursday, 22 May, 2014, 11:26am
UPDATED : Friday, 23 May, 2014, 7:39am

The Urban Renewal Authority's move to scale down its commitment to small projects initiated by building owners begs the question: does the authority value its social mission over profit?

As Institute of Urban Design vice-president Vincent Ng Wing-shun put it, "profitable projects do not need the URA to step in".

The authority revealed on Wednesday that it would tighten the threshold for owners seeking help to take over and redevelop their buildings.

To eliminate less profitable projects, the URA is considering accepting only larger sites, raising the minimum plot size of 400 square metres to at least 600 or 800 square metres.

While reducing its commitment to the so-called demand-led projects, the authority will also consider expanding a facilitator scheme under which it acts only as an agent, helping to secure agreement from enough owners and introducing them to developers.

In such cases, it does not have to compensate owners or tenants.

A source from the authority also says it will not rule out offering lower compensation to owners who lose flats to redevelopment, by changing a rule under which they receive money equivalent to the value of a seven-year-old flat in the same district.

While the details are still subject to discussion by the URA board and the public, the proposed change in direction has sparked criticism that the authority is reneging on promises it made during a revamp of urban renewal strategy in 2011.

The revamp, based on a two-year public consultation, was to introduce a people-first, district-based and public-participation approach to urban decay.

Revisiting the history of how the demand-led scheme was set up may lead one to believe the URA's latest move - under the reign of chairman Victor So Hing-woh that began in June last year - deviates from that strategy.

The strategy was revamped after heavy criticism of the authority's top-down approach - affected residents would be informed their homes were being redeveloped on the day the URA made the announcement - and its tendency to set its sights only on profitable projects.

Under the new strategy to strengthen social responsibility, the public now has choices. Owners can initiate redevelopment by inviting the URA to step in, or ask the authority to act as an agent and identify a developer for their building.

Barry Cheung Chun-yuen, the URA chairman at the time the new strategy was launched, once said it gave the body a broader mandate to engage in or respond to schemes to help people in need.

Now, raising the bar of the demand-led scheme - especially by eliminating smaller sites - may leave some old buildings to rot as private developers will not find small projects profitable either.

Also, leaving them out just to maintain the authority's financial stability diminishes the importance of its social mission, critics say.

And the URA's financial concerns are hardly convincing, they add. It had an accumulated surplus of HK$16.2 billion as of last year, and has recorded only two years of deficits in its 13-year history, during downward economic cycles in 2004 and 2009.

While the URA Ordinance stipulates the authority should be financially prudent, it does not say it cannot take on projects that may lose money.

"It is indeed a regressive move," Ng, who helped revamp the strategy, said.

"Instead of scaling down the scheme, why can't the government inject further money into the authority to allow it to fulfil its social mission?"

He said the government should play more of a role because the authority, a statutory body, was under its remit.

"When devising the new strategy, we all knew the approach would lose money," he said.

Ng's views are echoed by another adviser who helped revise the strategy, Dr Law Chi-kwong, a specialist in renewal issues at the University of Hong Kong.

"Whether the authority should step in should not depend on the site size or its profitability," Law said.

"We should consider the building's conditions and the authority's public role."

He also proposed replacing the seven-year compensation rule with a more objective formula, similar to a reserve price set up by the Lands Tribunal in cases of compulsory sales.

In such cases, owners will be paid only an amount equivalent to the value of the future development, excluding construction costs and normal profit for developers of about 20 per cent of that future value.

The proposed formula would address a surge in construction costs and the limited increase in floor areas in already compact projects that made redevelopments less profitable, Law said.

"The seven-year rule is just a political compromise," he said. "It's not based on any scientific calculation."

James To Kun-sun, a non-executive director of the URA board and a Democratic Party lawmaker, objected to changing the rules of the demand-led scheme. Any change would require extensive public consultation, he said.

"The URA has accumulated some surplus. It has the financial capability to launch projects that will incur losses but are beneficial to residents," To said.

"Not a single project under the demand-led scheme has even been completed, and they are already saying the scheme is unsustainable. Is this reasonable?"

In 2001, the Finance Committee of the Legislative Council approved the seven-year compensation for all projects involving land resumption by the Lands Department and the URA. The government had proposed 10 years; the public suggested five.