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HK RENT INCREASES : restoring the balance

When free enterprise is stretched to the point where it becomes virtually a licence to print money, and when that licence deleteriously affects a large mass of the community, then even a free- enterprise-oriented Government must take action.

Thus the Hong Kong Government has been obliged to cry Halt to the bandwagon of overload- ed rent increases that has encircled the Colony during the past few months. As January ended, it rushed through an ordinance to freeze rents and safeguard tenancy rights.

When it acted, it did so with admirable speed. Laudable too is its intention to introduce a detail- ed bill to regulate landlord-tenant relations in the future. Even so, there is no doubt that the Colony is in for a running battle between the two camps.

Caught between a vociferous section of tenants and an equally articulate lobby of property owners seeking their fair returns, or pound of flesh, ac- cording to the viewpoint the Government has been pushed into an inescapable double-think. In introducing the Security of Tenure (Domestic Pre- mises) Ordinance, the Colonial Secretary, Sir Hugh Norman-Walker betrayed an ambivalence that is not going to please either the tenants or the land- lords wholly.

On the one hand, Sir Hugh said, 'nor do we be- lieve that they (the tenants) should be allowed to bear the burden of immoderate or extortionate rent increases'. On the other hand, he also said, 'There are fundamental objections of economic principle to interfering with the market forces in this field'. Viewed against this background, the ten- tative nature of the Government's legislation is both explicable and exceptionable.

An obvious infirmity of the present legislation arises from the dilatory motions through which the Government went before making up its mind. In that interval, shrewd property owners demanded and extracted unconscionable increases. Whether by prior information or fortuitous coincidence, they managed to beat the Government at the post

- by a matter of hours in some cases.

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Those tenants who, on pain of eviction and in the absence of alternative accommodation, were saddled with extortionate increases are now left in the lurch. It would therefore be in order to suggest that the permanent bill be made effective retro- spectively, say from the beginning rather than the end of January.

Secondly, the Government might ponder seri- ously over a highly objectionable waiver clause that is frequently written into some tenancy agree- ments. One such clause, in a typical contract offer-

ed by a leading real estate agency company in Hong Kong reads: 'The tenant shall waive and shall not avail itself of any protection against ejectment or otherwise which is or may be afforded by the Landlord and Tenant Ordinance Cap.255 of the Revised Laws of Hong Kong 1950, or by any amendments there to or by any similar ordinance for the protection of tenants in so far as such pro- tection now tection now or at any time may be lawfully waived.'

However favourably the eventual legal inter- pretation of this omnibus rider may be, this kind of extinction of tenancy rights, now and forever, may well prove suicidal to unwary tenants. Many misdemeanors have been committed in the name of free enterprise, but the attempts of a section of property owners to give a new dimension to the concept of laissez-faire must be scotched explicitly in future legislation.

In all forms of business, the cost of products and services is always considered subject to ceilings imposed by what the market can bear. If investors who have the means to build restrain their enthu- siasm, for reasons of their own, they are in fact dis- torting the natural balance in their own favour, creating an artificial scarcity and trying to grab as much as they can. On the other hand, nobody denies that the investor has a right to earn a fair return on his investment which, in the case of housing, is totally different from risk capital.

But, considering the surplus funds in Hong Kong itching to find investment outlets in a boom- ing stock market, it is very hard to believe that there is not enough money around for new build- ing and construction. And any incentives to them need not be in the shape of increasing rents alone. Government must know of other fiscal means to attract investment in housing.

Much of the foregoing applies with equal force and validity to the plight of small enterprise, the backbone of Hong Kong's strength, which is likely to be confronted with an increasing scarcity of in- dustrial land and factory premises. After all, in small-scale operations as well as in family budgets, rents constitute a substantial slice. It is in the con- tinued viability of both sectors that the prosperity of Hong Kong lies.

In these circumstances, Government must not only do justice but be seen to do justice. The hold- ing legislation has many loopholes which vitiate this principle and it is to be hoped that the forth- coming bill will plug these loopholes to ensure that neither the landlord nor the tenant is denied a semblance of equity.

Far East BUILDER, March 1970