The Urban Renewal Authority cannot afford to build only cheaper flats because it has to pay its own way under the government's new renewal strategy and needs revenue from luxury flats to stay in the black, Development Secretary Carrie Lam Cheng Yuet-ngor said yesterday.
Responding to criticism of sky-high prices at the authority's Queen's Cube project in Wan Chai and to calls for it to build more affordable flats, Lam said the statutory body had its limitations.
'The self-financing role of the authority will be upheld under the revised renewal strategy,' she said. 'It needs revenue to compensate the loss suffered in other projects. I can't just give it a new order that would affect its financial ability.'
But she said luxurious elements would be left out of the first of the so-called 'flat-for-flat' projects at Kai Tak, to be built to house people displaced by redevelopment, so that it would be affordable.
The Queen's Cube project raised eyebrows when a 401 sq ft flat went on the market for almost HK$6 million, or HK$14,888 per sq ft.
Under the new strategy put up for a two-month public consultation yesterday, owners will have the option of taking cash compensation or buying a flat built by the authority.
The buyers will pay the difference between the compensation - based on the value of an equivalent seven-year-old flat and the market price of the new flat - and will be allowed to resell the flats on the open market.
The chief executive announced on Wednesday that the first batch of such flats to be built by 2017 would be on a one-hectare site next to public housing in Kai Tak.
The first group to move in will be from Kowloon City as the district, with 1,088 buildings aged over 50, has been selected as the first area to be regenerated under the new strategy, which will take effect next year.
The flats will be sold to the owners at market price and they are allowed to be resold on the property market.
Lam said the authority would also require developers to reserve a certain number of non-luxury flats in future projects to compensate affected owners.
'I do hope the authority can provide no-frills flats as far as possible,' she said, adding that special tendering conditions could be introduced to prevent developers building luxury flats in every redevelopment.
The authority defines a no-frills project as one with no clubhouse and unnecessary facilities and a small parking area.
Chairman Barry Cheung Chun-yuen said the authority's board would soon discuss how it should engage developers.
Law Chi-kwong, a professor studying renewal issues at the University of Hong Kong, said there was room for the authority to build no-frills flats despite the requirement for it to be self-financing.
He said the authority's financial burden would be lighter in future as it would no longer take on conservation projects outside its regeneration areas. Also, social services for affected residents, such as counsellors, for which it now pays would be met by an independent trust.
He warned that compensation flats would not be affordable if the authority did not specify details, such as ceiling heights no more than nine feet, in the tendering process.
While compensation is mostly available only to owner-occupiers, the new strategy allows owners over 60 to claim full compensation even if they don't live in the flats - if they own only one property and the rental from it is a major part of their income.
A public consultation on the new urban renewal strategy began yesterday
The number of months that the government will accept public comment on the strategy: 2