Chief Executive Leung Chun-ying announced a HK$1 billion plan to build 3,000 hostel units where young people could live for a limited period, to address their need for independent housing.
Leung said his scheme enlarged a proposal raised by his predecessor, Donald Tsang Yam-kuen, while adding a construction subsidy.
Critics faulted the new plan as too expensive and generous, with some doubting that young people were the most deserving of taxpayers' aid.
'I am pleased to see many non-governmental organisations willing to use land granted to them earlier to build youth hostels, to let young working people have their own living space,' Leung said.
'The government proposes to fully subsidise the construction costs for these NGOs.'
Single people between ages 18 and 35 will be eligible if they earn no more than HK$17,000 per month and do not own property.
There will be a smaller quota for married couples, for whom the income cap is doubled.
Tenancy will be limited to five years, and rents will be set at no more than 60 per cent of the market rate in nearby residential properties.
The first stage of the programme will deliver 3,000 units, ranging from 160 to 215 sq ft, according to Secretary for Home Affairs Tsang Tak-sing, who said the scheme would encourage young tenants to save money to buy their own homes.
The Tung Wah Group of Hospitals, the Girl Guides Association and Federation of Youth Groups have expressed interest in the plan. They would have to cover operating costs under the proposed scheme.
A Federation of Youth Groups spokeswoman said it welcomed the full construction subsidy.
In an earlier version of the scheme, the organisation had hesitated to proceed when it thought it would have to shoulder all costs. The federation said it planned to build hostels in Tai Po and Tin Hau.
Josephine Pang Tsui Mei-wan, chief commissioner of the Girl Guides, said the group planned to build a hostel with a new headquarters at a site on Jordan Road. Tung Wah Group said it hoped to build an 18-storey hostel with 200 units within three to four years.
Lee Wing-tat, chairman of the Legislative Council's housing panel, said the HK$1 billion budget meant each unit would cost HK$333,000 to build, which he said was expensive.
'It's almost like building a 400 sq ft public rental housing unit, but these hostel units are much smaller,' Lee said. Priority for their use should be given to those who live in substandard conditions, like partitioned flats, ahead of those already in public housing, Lee added.
Lawrence Poon Wing-cheung, a spokesman for the Institute of Surveyors' housing panel, had reservations about the plan, asking: 'Should taxpayers help those who simply don't want to live with their parents?'
In a separate housing initiative, Leung said the government would launch a scheme in January to select 5,000 families who earn no more than HK$30,000 a month, to buy second-hand Home Ownership Scheme (HOS) flats at below-market prices. He presented this as an interim measure to help the middle class before new supplies of HOS flats were completed in 2016.
HOS owners selling their flats to the 5,000 families will have to pass on the discount they were given when they purchased their flat.
Meanwhile, the Labour Party yesterday renewed its call for rent controls to ease the burden on needy tenants living in partitioned flats. Party chairman Lee Cheuk-yan, who led a group of tenants to meet Secretary for Transport and Housing Professor Anthony Cheung Bing-leung yesterday, said they also asked for public units to be offered to those affected by the clearance of illegally partitioned units.
Lee criticised the measures announced yesterday for failing to address the housing needs of tenants of partitioned flats who found themselves without accommodation after the illegal units were dismantled.