TNAG-1574-FCO40-2147-Housing-in-Hong-Kong-1986 — Page 3

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While it would be desirable to bring the level of rents of these 52 estates to those of comparable new estates, i.e. in the range of $18.30 to $21.20

to $21.20 per m2 depending on location, it would entail rather drastic increase averaging $5 to $7 per m2 2 or 40% to 49% over existing rents. The Housing Authority Management Committee has therefore proposed a moderate level of increase ranging from $1.00 to $2.80 per m2, subject to no increase exceeding 25% of the existing rent.

Effects of the proposed increase

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Over 95% of the flats affected by this rent review will have their rents increased between $26 and $110 per month, and the rent increases for the vast majority (94%) will be below 21%. Of the 137,868 flats, only 414 flats or 0.3% will have an increase over $150 per month, but all these are larger premises with an area exceeding 50m2. Detailed information giving the proposed rent increases in money and percentage terms is at Annex C.

Tenants' affordability

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After the proposed rent increases, tenants would pay 9% to 13% of their income as

as rent (based on the Fourth Quarter 1985 General Household Survey). This rent to income ratio should diminish as the majority of the tenants household incomes increase over the next two years,

while the new rent remains unchanged. The proposed new rents are deemed affordable by tenants.

Financial implications

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The annual additional revenue from the proposed rent increases will be $131 million per annum, of which $7 million will be absorbed by additional rates and $7.6 million is rates arrears recovered from tenants. Following implementation of the rent increases, the deficit position of

of the Authority's Estate Working Account for domestic properties would

would be as forecast in Annex B. The deficit will be offset by income from commercial rents which are set at current market levels

as far as possible.

Consultation

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As in the case of the last three rent increase exercises, District Board Members will be briefed prior to the issue of notices to the affected tenants.