Subdued demand and oversupply in the property market have called into question the government's role as a 'bricks-and-mortar' supplier in the property market, particularly its provision of subsidised sale flats at a time when private flats have become increasingly affordable. For this reason, the government has recognised that it is necessary to clearly set out its long-term policy position to the public.

In response to diverse and increasingly complex housing issues, the government introduced major institutional reforms on institutional arrangements, policies and delivery of services.

The Secretary for Housing, Planning and Lands, Michael Suen Ming-yeung, stated clearly in November last year the positioning and direction of the government's housing policy and rationalised various policy goals and targets in the light of prevailing market conditions.

The government confirmed that the thrust of its public housing policy should be to assist low-income families that cannot afford private rental housing. On this basis, a number of other measures directly related to the work of the Housing Authority were also announced, including the cessation of the production of Home Ownership Scheme (HOS) flats and the suspension of HOS flat sales.

'All in all, the repositioned housing policy framework can facilitate a more clear-cut demarcation of the roles of the public and private sectors,' says Leung Chin-man, Permanent Secretary for Housing, Planning and Lands.

'The public sector could focus more effectively on providing basic housing facilities to needy families who cannot afford decent accommodation in the private sector,' he says.

'The cessation of the government's programme of subsidised sale flats will facilitate the long-term healthy development of the property market. This makes for a win-win situation.'

According to Mr Leung, the housing policy envisaged in Mr Suen's statement is based on three broad principles, namely caring for low-income families, minimal intervention and a stable operating environment.

The provision of basic housing assistance to those in genuine need will continue to be the focus of the government's housing policy. The government will ensure that all of those who cannot afford to rent adequate accommodation in the private market will have access to decent and affordable housing. The means of achieving this will be through the public rental housing programme. The rent allowance scheme, which was initially offered to elderly households, is being examined as a possible supplementary measure.

The government is committed to maintaining the average waiting time for public rental housing at an average of three years, and ensuring that there will be an adequate supply of public rental flats to keep the pledge.

In fact, substantial progress has been made in this respect. At the end of last year, about 2.1 million people, or 31 per cent of Hong Kong's population, lived in public housing estates managed by the Hong Kong Housing Authority or the Hong Kong Housing Society. In April this year, there were about 91,000 households on the waiting list for public rental housing, with an overall average waiting time of about 2.3 years (one year for single elderly people), compared to more than six years in 1997.

To maintain an average waiting time of three years, adequate public rental units will be built annually in the coming years. Instead of setting a rigid target for the construction of flats, the actual production will depend on the demand for housing from low-income families, the turnover of public rental housing tenants and the general acceptability of the contemplated rent allowance scheme.

The assessment takes into account all the relevant factors affecting the demand for public rental housing. These include the housing requirements of applicants, long-term population growth, household formation rate, and other sources of demand arising from the clearance of squatters and rooftop structures, urban renewal, redevelopment of old public rental housing estates, and compassionate rehousing.

On the basis of these factors as well as an estimated annual supply of more than 10,000 refurbished flats from the existing public rental housing stock, the government expects to maintain the average waiting time at about three years with an annual production of more than 20,000 public rental housing flats in the next few years. The government will minimise its intervention in the private property market and believes that home-ownership should essentially be a matter of personal choice and affordability, and should be pursued in a freely operating private market.

The government will maintain a fair and stable operating environment for the property market by ensuring an adequate supply of land and the provision of efficient support infrastructure to meet market demand.