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(a) Statutory Restriction of Rents.
2. As disinterested witnesses of importance have unanimously testified, the great difficulty inherent in a statutory restriction of rents is to devise an equitable basis upon which a standard rent may be assessed. If the level obtaining immediately before the present rise in rents commenced be taken, then as we have shown the effect will be artificially to continue the depression as regards house property owners and to deprive them of a living income. The evidence of a European banker on this point is worth considering in some detail. "If you are going to restrict rents, what guarantee in return are you going to give the landlord? Are you going to guarantee payment of his rent in bad times?.
.If a man has property and you restrict his resources
..if you start On the same point
so that he cannot pay his bank interest, there will be a crisis.. banks calling in mortgages, then you will have a serious crisis." a prominent Chinese stated: "Inability to pay interest induced by any legislative action may result in foreclosure (which word we think he used to describe all mortgagees' remedies) which would mean depression of market values to the great detriment of the Colony's prosperity." Bearing in mind the quotation we have already made from the Economic Commission's Report, these are words of grave significance. Legislation which will further undermine the already depreciated value of investments constituting "a very large portion, if not the bulk, of the wealth of the Colony" can only work against the best interests of the community as a whole. The ruin of private enterprise with holdings on so vast a scale must lead to repercus- sions the extent of which it is difficult to exaggerate. It is especially worthy of note that we have evidence that large corporations controlled by both Europeans and Chinese, including Chinese banks, have been forced to borrow from European banks in connection with their dealings in house property.
3. If the level of rents obtaining before the depression be taken as the standard, then in our view no benefit will be derived by the tenants, for we consider that the increases now proposed seldom restore the present rents to the level then obtaining. If rents be limited to a certain reasonable net percentage return on capital outlay, again the tenants will not benefit as against the majority of landlords, for we are satisfied that landlords as a class will not derive an undue revenue from their invest- ments even when the proposed increases are taken into account, and such a measure would invite fraudulent valuations of property. No one with any experience of con- veyancing in this Colony will question the possibility of such fraudulent valuations. It may be objected that rent restriction is still in force in England, and was at one time in force in this Colony, to which we reply that the circumstances in which such restrictions were imposed bear no comparison with those which we are now considering. In this Colony rent restriction was imposed in 1921, which was a period of great prosperity, and there was no hardship in limiting the landlords' rents to the level obtaining in 1920. The time at our disposal does not allow us to consider the details of earlier legislation. We must content ourselves by observing that the distinction between the state of the property market then and now is vital and sufficient, and that official records show that it was considered both at the time when the earlier legislation was permitted to lapse and when_suggestions of its reintroduction were made, that it had largely failed in its object. We can only reach the conclusion that the statutory restriction of rents is an impracticable measure in present conditions
4. Legislation prohibiting evictions alone without at the same time restricting increases of rent would prove useless. It might, for example, be evaded by the device already referred to of raising the rent beyond the tenant's means, but in our view the time is not ripe for intervention until the rent actually charged exceeds a figure which is fair in relation to the class of property in question.
(b) Inception of Rapid House Construction Work.
5. The solution of rapid building, apart from its necessarily slow consummation, is attended by many difficulties. It is necessary to restore confidence in the pro- perty market before much development can be expected at the hands of private enter- prise. "Who to-day", asked a witness, "will develop property in Hong Kong"? We