FOR the majority of people living in public housing who rent their flat, the main consideration when selecting a place is what they find affordable. The rent-to-income ratio is set at 18.5 per cent, but for people prepared to accept a smaller flat of 5.5 square metres per person, rather than seven sq m per person, it is reduced to 15 per cent. On average for the whole stock, public housing tenants only pay eight per cent of income on rent. The most expensive rents in the best new flats in the urban area are set at $45.20 per sq m, based on net floor area. This figure includes rates and management fees, and - for a 35 sq m flat occupied by three or four people - the rent will be $1,582, or 30 per cent of the market rent. Location is also important when choosing a place to live. Rents for the Harmony blocks in Tin Shui Wai are only set at $25 per square metre, because of their distance from the main urban areas, and flats on the islands are only $25.80 per sq m. However, converted blocks in the urban area, which are older and less comfortable, rent at $30 per sq m because homes in the urban area are more desirable. ''These are very affordable because, when we allocate flats, everyone wants new flats, and only about one per cent want cheaper flats,'' said the Housing Department's deputy director for housing management, Lim Yew-guan. ''Rents are affordable by the great majority, despite what they say.'' Rent reviews are carried out every two years, starting from the time a new block is substantially occupied. Rent increases are based on a census, rather than being geared to individual family income. Apart from affordability, inflation and trends in general household income are considered when setting new rent levels. Low income tenants, who might not be able to afford rents, can apply for help through a Rent Assistance Scheme. This provides relief for those unable to meet rent increases, or who cannot pay the existing rent due to a change in family circumstances. If the household rental income ratio exceeds 25 per cent, tenants may apply for a rent reduction of 25 per cent. If it exceeds 33 per cent, the reduction is 50 per cent. Rent reductions are granted initially for six months, and are renewable for a further six months. After this period, the option is to move into either a smaller flat on the same estate, or a refurbished flat with a lower rent in the same district. Only about 250 tenants have needed to apply for assistance, which provides further confirmation that rents are affordable, and cases of hardship almost non-existent. A more contentious decision - at least among the tenants who have to pay - are the rent increases for the wealthier households. These affect people who have lived in public housing for more than 10 years, and whose income exceeds subsidy limits. A committee was formed in 1985 to examine this problem, and it recommended that, rather than evict people, their rents should be increased. ''This policy is sound in principle and it was passed in the Legislative Council by a small majority,'' said Mr Lim. ''People whose incomes are double the limit are obliged to pay 11/2 times the net rent, plus rates. ''Those whose incomes are three times the limit have to pay double rent.'' Most households pay double rent, with only 12 per cent of those affected paying 11/2 times, and a review last year turned up no cases of hardship because of this scheme.