Should Hong Kong’s URA tie compensation to building condition? Analysts say yes
Lawmaker Andrew Lam says URA acquisition prices should exceed private sector values
The cash compensation for Hong Kong homeowners affected by redevelopments should take into account the physical condition of buildings to encourage better maintenance, observers have said, as the renewal authority reviews its policy to address financial challenges.
The cash-strapped body is expected to complete a review of its acquisition regime next year, with some of the proposed directions including considering homeowners’ maintenance efforts when calculating the compensation and offering better rehousing options.
Ryan Ip Man-ki, vice-president of think tank Our Hong Kong Foundation, said the authority needed a review due to its structural financial problems, but it should remain aware of its status as a statutory body and its objective of improving living conditions.
“As the authority is entitled to acquire properties, their compensation should be higher than the acquisition price offered by the private sector,” he told a radio show.
“The mechanism should also be linked with the flat conditions, as owners currently receive the same acquisition cost and have no incentive to improve their flats.”
Under the current regime, owner-occupiers are provided with payouts equivalent to the market price of a comparable seven-year-old home in the same district.
They can also opt for the flat-for-flat scheme, under which owners receive compensation and may purchase a designated home developed by the body.
The authority faces increasing financial challenges amid a sluggish property market, with the number of private buildings aged 50 or above projected to rise from 8,700 in 2020 to about 13,900 in 2030, according to the Buildings Department.
The government earlier reserved three sites in the Kwu Tung North and Fanling North new development areas for the authority to consider for building replacement flats under the scheme.
Ip said the authority should review its compensation amount and offer rehousing options for affected homeowners, noting that flats in new towns could offer more space with an improved living environment.
Lawmaker Andrew Lam Siu-lo, deputy chairman of the legislature’s development panel, said the authority should offer incentives for owners to opt for replacement flats in the future.
He told the same radio show the body should not only consider providing larger homes but also strive to shorten owners’ waiting times for their new flats after selling their properties.
Lam said he believed the acquisition mechanism could become more complicated if building conditions were included after the review.
He urged the authority to set out guiding principles for stakeholders to participate in the design of the new regime.
Lam stressed that the mechanism should be able to send a clear message of encouraging maintenance, as he observed that many flat owners would slow down their repair efforts once the authority announced its redevelopment plan.
“If there is a slight difference in compensation, it can offer incentives for owners to do their job, as they can recover their repair costs and increase their property value,” he said.
But the authority’s acquisition price should be higher than what the private sector offered and replacement flats should also have higher values than the acquired properties, Lam said.
Lawmaker Chan Hok-fung, the authority’s non-executive director, echoed the idea of including building conditions in future acquisition assessments, as some owners would neglect their repair duty to boost their chances in redevelopment.
He also said the authority could consider offering homes designed for the elderly, with the buildings also housing providers of medical and social services, to encourage owners in older districts to move to new development areas.
The authority has recorded an annual deficit since the 2022-23 financial year and is not optimistic about balancing its books next year.
The government has also increased the authority’s borrowing limit to HK$35 billion, two years after it boosted the ceiling from HK$6 billion to HK$25 billion.
Borrowing boost for Hong Kong urban renewal body as third deficit in row recorded
Urban Renewal Authority’s borrowing limit has been increased to HK$35 billion
The cash-strapped statutory body also said on Monday that it would review and introduce a more comprehensive compensation mechanism to cut its acquisition costs for redevelopment and provide better rehousing options for affected owners.
Authority chairman Chow Chung-kong said he was “not too optimistic” about profits in the current 2025-26 financial year ending next March, while the body recorded a deficit of HK$2.72 billion in 2024-25.
The figure comprised an operational deficit of HK$41 million and HK$2.68 billion in impairment provisions as a result of the market downturn. The body recorded a net asset value of HK$43.6 billion and a cash flow of HK$21.2 billion.
“The body is still financially sound ... We will take forward projects that have relatively small scale ownership but provide greater planning benefits when combined with other ongoing projects,” Chow said.
Managing director Donald Choi Wun-hing said the authority had immediately checked the market situation last week after the government revealed that it would increase the body’s borrowing limit from HK$25 billion to HK$35 billion.
