Ambitious plan to redevelop 3,300 buildings in heart of Hong Kong runs into financial problems
- Project that would add tens of thousands of public housing flats would entail HK$100 billion hit to authority
- Developers only interested in profitable projects, but the development density in the areas has already reached limits allowed, managing director says
A plan to redevelop more than 3,000 buildings in two densely packed districts of Hong Kong will be too costly to implement fully, the Urban Renewal Authority has revealed.
The concerns came as the semi-public body recorded a massive drop in its surplus for the past financial year and estimated it would run a HK$100 million (US$12.9 million) deficit in the current one, raising fears over its long-term sustainability.
“We have a budget deficit for the coming financial year, but there’s no need to be overly concerned,” URA chairman Chow Chung-kong told the media on Wednesday.
“We are hopeful that there will be cash inflow arising from some new sites [put] out for tender next year. But in the near future, as we will be planning for larger and more extensive redevelopment projects, there might be shortages of cash flow and the authority might need to look for ways to finance ourselves by that time.”
The authority has been working on redeveloping parts of Yau Ma Tei and Mong Kok, involving 3,300 buildings, 80 per cent of which are three decades or older, to make better use of the land and generate housing.
Three options are being considered: one where the population after renewal stays around the current level of 220,000; another where the population drops by 14 per cent; and a third where the population falls by 28 per cent.
“Even if we pick the plan where the population remained the same, the authority could incur a loss of nearly HK$100 billion to redevelop, whereas for the other two plans, the authority estimated there would be a loss of HK$200 to HK$300 billion,” said URA managing director Wai Chi-sing. He earlier estimated the cost of the project would reach HK$1.1 trillion.
Developers would only be interested if it is a money-generating project
“Developers would only be interested if it is a money-generating project. But over the past two decades, there were not many [private] redevelopments in the two areas as most of the plot ratio has been used up,” he said. Plot ratio refers to the development density permitted under current planning rules.
Under the scheme keeping the population the same, a total of 2 million sq ft feet of new floor space for residential and other uses would be built, while the number of public housing flats would increase from the current 2,000 to 26,000.
Green areas would double to 45 hectares (111 acres), while improved road planning would help alleviate traffic congestion.
The other two options reducing the population level were backups only, given their high cost and insufficient land available for relocation, Wai said.
“We will select some smaller parts out of the whole area to carry out technical surveys, but eventually it has to depend on our financial situation in the coming years to see if we could implement [the redevelopment],” he said.
The body has amassed net assets worth HK$47 billion from government funding and previous surpluses, including HK$11 billion in cash and the rest from real estate subjected to market fluctuations. But it was expected to spend HK$60 billion on redevelopment projects in the coming five years, excluding the Yau Ma Tei and Mong Kok project.
Urban Renewal Authority to focus on bigger Hong Kong homes instead of studio flats
Ivan Ho Man-yiu, former vice-president of the Hong Kong Institute of Urban Design, said he believed more discussion would be needed between the authority and the government to decide how to proceed with the project with sufficient capital.
“It’s good that the authority takes initiatives to study the area, but urban planning – especially in old neighbourhood in a developed city – is a long process that we cannot rush,” he said. “There are ownership issues and there is the bustling vibe in the neighbourhood … more discussion with the community is necessary.”
He said the government should step in and consult the public before moving forward.
