Hong Kong should reintroduce rent controls for subdivided flats, says task force, with some members wanting to limit what landlords can charge

Gigi Choy
·4-min read

Rent controls for subdivided flats which were scrapped 17 years ago should be reintroduced and a standard contract imposed as measures to protect poorer families, according to a group looking at regulating the sector

The Post has been told the government-appointed task force was considering two recommendations from its members, including introducing priority renewal rights for tenants of subdivided units, and capping the rent rise on lease renewal at 15 per cent of current rent.

Briefing lawmakers on Monday on the group’s progress, the Transport and Housing Bureau noted the task force, which is expected to submit a final report in March, “had a relatively clear consensus that a standard tenancy agreement for [subdivided homes] should be devised”.

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According to the bureau the agreement should, “set out the rights and obligations of both the landlord and the tenant, the term and period of tenancy, rent, notice period for early termination of tenancy, the arrangements concerning electricity and water charges and other miscellaneous charges”.

It continued: “As regards the tenants’ right to renew the tenancy, the task force has to further discuss and deliberate on whether a certain degree of security of tenure should be offered to … tenants and whether some form of regulation should be enforced on the rate of rent increase upon tenancy renewal, et cetera, as well as the possible options.”

A person familiar with the task force’s work said the first option would allow tenants to enter a two-year fixed lease with the landlord – as opposed to one year which is common in the market – during which they could not be evicted or leave. On expiry, the tenant would be able to renew their lease under the same terms for another two years.

Another source said fixed lease terms of different lengths were also being considered.

The second suggestion was to limit the landlord’s right to raise rent by no more than 15 per cent after the initial two-year fixed lease expired.

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A member of the task force, who asked to remain anonymous, said they favoured the “two [years] plus two” option because it strikes a balance between landlords and tenants.

“It gives more stability to tenants because they don’t need to look for other subdivided flats once their lease is almost up,” they said. “At the same time, it also gives protection to the landlords because they can choose whether they want to continue renting to the tenant.”

But Shea Hing-wan, chairman of the Hong Kong Owners Club, which represents more than 20,000 landlords, said the suggestions were biased towards the tenants, adding he had received complaints from landlords over the behaviour of some renters.

“These types of policies only help the tenants, but what about protection for the landlords? If the tenant uses the unit for illegal activities or causes problems with other occupants, we will be bound by the contract and forced to continue renting to them,” he said. “It’s unfair to us.”

Cheung Wong-tim, 71, said he would spend his day in the air-conditioned municipal centre and night in neighbourhood parks to avoid the stuffiness in his windowless room in an old building in Sham Shui Po. Photo: Sam Tsang
Cheung Wong-tim, 71, said he would spend his day in the air-conditioned municipal centre and night in neighbourhood parks to avoid the stuffiness in his windowless room in an old building in Sham Shui Po. Photo: Sam Tsang

Shea, who is also a member of the task force, noted that landlords had slashed rents amid the coronavirus pandemic and questioned whether the extended fixed leases would help those who need the rental relief.

He also objected to long-term fixed leases, and compared the relationship between landlord and tenant to dating.

“You should be able to see if the relationship works well first,” he said. “You shouldn’t immediately be signing a marriage licence.”

Subdivided units are often found in run-down buildings, and are regarded as the last housing resort for the needy.

The average waiting time for a flat in public housing in Hong Kong is 5.6 years, according to the latest figures from the Housing Authority. Many in the queue have no choice but live in subdivided flats during the long wait.

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Such flats usually have haphazard sewage systems, unauthorised structural alterations, and are generally unsuitable to be lived in. Recently, health authorities have designated mandatory testing zones in Yau Tsim Mong and Sham Shui Po, areas with many old subdivided buildings and a rising number of Covid-19 cases.

Tenancy controls have been implemented before in Hong Kong – from 1921 to 1926, and from 1973 to 2004 – as a short-term measure to counter unusually high rent increases during housing shortages.

But research carried out in 2014 concluded that imposing tenancy controls again would trigger a lot of controversy, and may result in unfavourable consequences for the tenants who are meant to be protected.

This includes reducing the incentive of landlords to lease out their premises, which could reduce supply and in turn drive up rent and displace tenants to even poorer living conditions.

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