Authority warns of far-reaching effects on budget if it loses court battles on public housing rents and Link Reit listing The Housing Authority expects its cash flow to worsen drastically and plunge into deficit from 2007-2008 if lawsuits seeking to lower public housing rents and derail its Link real estate investment trust (reit) are not resolved in its favour. 'We do have something up our sleeves' to help plug the expected shortfall in a worst-case scenario, Tam Wing-pong, the authority's deputy director of housing (strategy), said. Financing options included obtaining government loans and the securitisation of the authority's public housing stock, he added. The authority's finance committee chairman, Chung Shui-ming, said options would be explored if the surplus approached the 'prudent level' of about $9 billion, The authority has been struggling to stay afloat since the decision in 2002 to suspend the home ownership scheme in order to stabilise the property market. The authority's balance for this financial year is projected to be $13.2 billion. Lost income from lower rents is estimated at $2.5 billion a year, while the authority had expected to pocket $32 billion had the Link Reit listing gone ahead in December. If the authority won both court cases and the Link listed this year, the coffers could be boosted by more than $40 billion, Mr Chung said. But he cautioned: 'In the first place, it is not possible to ascertain the timing for the listing of the Link Reit. And secondly, the court's hearing on the Housing Authority's decision to defer the public housing rent review will cast a far-reaching effect on our budget.' Proceeds from a future Link listing may also be considerably lower than the initial projection of $32 billion, further undermining the authority's financial health. Although the management company set up under the Link divestment plan completed the takeover of commercial and car park assets in various public housing estates from the authority this week, concern remains over whether rent will be raised. Responding to rent concession questions raised in the Legislative Council yesterday, Secretary for Housing, Planning and Lands Michael Suen Ming-yeung noted that such concessions would be given to non-profit-making welfare agencies and kindergartens already occupying public housing space. The concessions would continue when a lease was renewed and for new non-profit-making tenants renting 'agreed premises' specified for such tenants. For this fiscal year, which ends on March 31, the authority expects to record a surplus of $501 million, reversing a $600 million deficit the year before. Much of the improvement stems from downsizing, as well as lower maintenance costs and interest expenses. The surplus would jump to $15.03 billion in 2005-2006, assuming the Link Reit lists by March next year and rents remain unchanged.