In a desperate attempt to reduce mounting costs, the Housing Department yesterday made a surprise announcement that it would slash its workforce by more than 20 per cent, the most drastic downsizing exercise seen in the civil service. The department said it would cut 2,500 positions and 27 director posts in the coming four years. Together with last year's downsizing exercise, which already eliminated 1,000 positions, the department will have lost 30 per cent of its staff through natural wastage, saving $1.3 billion a year. The latest cost-cutting measure marks another attempt by the department to reduce the financial burden it has faced since sales of home ownership flats were suspended in November. At the end of this exercise, the entire allocation and commercial division of the department will disappear and about 1,000 contract staff will not have their contracts renewed. The 2,500 positions to be scrapped will come from various departments, including the development and construction division and the estate management division. Senior positions such as deputy director of housing (business development), and senior assistant director of housing (allocation and commercial) will go. Meanwhile, nine more top jobs of D2 level are set to be deleted, including assistant director of housing (information and community relations), and will be replaced by lower-grade jobs at D1 level. The first casualty will be the post of assistant director of housing (business development), scheduled to go next month. Those director-grade positions set to be scrapped will account for 35 per cent of the department's director grade. Director of Housing Leung Chin-man stressed that the exercise was aimed at avoiding layoffs and achieving savings through cutting contract staff, natural attrition and voluntary retirement. 'I don't want to see people becoming unemployed. There won't be layoffs.' He explained the streamlining exercise was necessary as demand for public housing had dropped in recent years, leading to a drop in revenue for the department. It is understood that the suspension of the home ownership flat scheme was also another factor behind the 'inevitable and essential' cost-cutting exercise. Mr Leung refused to guarantee there would be no furthering streamlining exercise, admitting there would be extra staff after the department sold its shopping malls and car parks. But he said redeployment would be his priority. Mok King-po, the convenor of the Alliance for Housing Department Staff Unions, said he doubted the target would be achieved in four years through voluntary retirement and natural wastage. 'We feel very bad. I hope the government will stop targeting us as there has not been one quiet day since 2000 when they decided to contract out estate management,' he said. 'About 3,600 people have left the department in recent years and now they say they will cut another 2,500 people. It shouldn't be difficult to imagine how we feel now,' he said. At present, the Housing Department has 11,411 positions, but only 10,687 have been filled. It has 1,673 contract staff and 9,014 civil servants. The department expects it will face a $5.5 billion cash deficit in two years and the deficit will jump to $12.4 billion in the 2006-07 fiscal year.