TNAG-1029-FCO40-1279-Visits-by-FCO-officials-to-Hong-Kong-1981 — Page 30

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DOMESTIC RENT CONTROL

Position

Line To Take

The report of the committee (chaired by the Secretary for Housing) set up in March 1980 to review the existing rent control and security of tenure legislation was published on May 10. The committee made a number of suggestions concerning legal and administrative aspects (including one for the expansion of the jurisdiction of the lands tribunal to provide for mediation between landlords and sitting tenants of premises to be excluded from control). The main recommendation was that as soon as circumstances permit and subject to economic and social conditions, rent control should be phased out. The Government proposed that the existing law (to expire on 18.12.81) be extended by two years with the following revisions :

(1) raising the maximum permitted increase from

21 per cent to 30 per cent bienni ally (the review committee recommended 35 per cent);

(ii) excluding from control (a) premises in buildings

issued with an occupation permit after the commencement date of the amending legislation, and (b) premises with a current rateable value of $80,000 or more with effect from 18.12.81 and premises with a current rateable value of $60,000 or more, with effect from 18.12.82.

Public opposition to the relaxation of rent control comes mainly from two quarters from workers unions (including the left-wing Federation of Trade Unions) who criticised the higher increase ceiling, and chambers of commerce who predicted foreign enterprises would pull out of HK because of the high cost of housing their staff in 'luxury' flats. There was also criticism that by relaxing control the government was negligent of the difficulties of the small man in meeting rising living costs.

Extending the control law and at the same time introducing the revisions was aimed at striking a balance between the interests of landlords and tenants. The rent control mechanism (factor system) introduced in December 1973 was designed to bring controlled rents up to market rents over a pre-determined span of time (10 years) without allowing increases to affect tenants too harshly. However the very large increases in rents which occurred in 1979 ruled out the possibility of decontrol and in February 1980 legislation was introduced to cover certain tenancies previously excluded. It had always been hoped,

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