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income from its ventures should be designed to cover. other hand we did also in para. 9 emphasise the point that the money available under Hong Kong's Colonial Development and Welfare allocation, which the Governor proposed to devote to housing for the lower paid strata of Hong Kong's population (i.e., about £600,000), should not simply be spent on building so many houses but should be looked upon rather as money available to set in motion a much larger development; we mentioned in this connection pilot schemes, surveys, research, etc. There seems to me little doubt that despite the fact that we had not specifically envisaged the money as being spent on site development the Governor's proposals in (1) opposite fall within our general suggestions. The Governor argues forcibly that owing to Hong Kong's peculiar position and the already congested nature of the areas, within easy reach of industry and commerce, in which it is desired to build most of the Colony's low rent housing for the lower paid part of the population, the cost of site development, if it were included as part of the expenditure which any housing scheme had to meet from its income, would force up the rents which would have to be charged to a level too high for that section of the pop- ulation for which the housing is being designed and the whole object of the scheme would thus be defeated.
5. Whilst agreeing in principle that the housing which is undertaken must be planned so as to be self-supporting, the Governor wishes to exclude the cost of site development and to treat this as a non-recoverable outlay to be met from C.D. and W. funds. It seems to me that this form of use of C.D. and W. money can legitimately be looked upon as using the C.D. and W. money to "set in motion larger developments". Further it also seems to me (though Finance Department will no doubt advise on this that no complications will arise, if the money is used in this way, over the point which we raised with Hong Kong in the telegram at (7) on 12818/17/50. The expenditure of money on site development can in my view be looked upon as an essential pre-requisite to an important self-supporting development scheme in the Colony; without such expenditure the scheme cannot come to fruition. Alternatively, if it is any easier from the Finance Department point of view in the light of what was said in (7), we can view expenditure on site development as part of the cost of a housing scheme in which of necessity the resulting flats must, owing to conditions in the Colony, be let at an uneconomic rent. The difference is only one of approach and I am sure Hong Kong would fall in with the alternative suggestion I have made above if it is considered more appropriate, since the plain fact remains that without C.D. and W. assistance, in the form of a grant, the housing development which is envisaged in (1) opposite cannot go ahead.
6. The actual application made in (1) opposite is only a small one and the C.D. and W. assistance sought only £13,500 and the number of flats to be produced only 370. The scheme is, however, a pilot scheme and we are warned that other similar schemes involving applications for C.D. and W. assistance total- ling nearly £250,000 will be forthcoming in due course; this programme will produce about 2,500 small flats.
This programme in itself is only a first instalment in a large development designed to meet the Colony's housing needs. With a vigorous Director of Public Works like Mr. Bowring we can, I think, expect things to go ahead rapidly. In any event it is, I think, clear that we must take all our decisions of principle on this matter now, as schemes following the small one at (1) opposite will be on similar lines; indeed we are specifically asked in (1) for our approval in principle to the proposal that Hong Kong should proceed on the lines indicated in (1).
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