End greed cycle for brownfield payouts

Editorial | 18 Apr 2017

It's high time brownfield sites are tapped for home development.

So, it's nice to hear Financial Secretary Paul Chan Mo-po say the government is now prepared to resume such sites to provide the kind of housing that has become all the harder for even the middle class to afford since Leung Chun- ying was sworn in as chief executive in 2012.

While skeptics may find it intriguing for officials to propose buying out businesses located on such sites in the final months of its term, this policy direction should be encouraged.

There are an estimated1,192 hectares of such sites in Hong Kong, of which 340 hectares are located in Hung Shui Kiu in Yuen Long, Yuen Long South and Kwu Tung in northeast New Territories. The three districts have been marked for major development to provide housing for tens of thousands.

Under current policy, many of these businesses do not qualify for statutory compensation since only those on private land and surveyed in 1982 may be eligible in the event of land resumption. Others falling outside the scope - like container depots, garages and recycling plants - have to go through a lengthy procedure to make a claim, which can take years.

The government is proposing to change this policy so that businesses that have been in operation on agricultural land for 10 years will also be compensated.

That's a generous proposal. If approved by the legislature, taxpayers will have to pay HK$390 for every square meter of open space for up to 5,000 sq m, or HK$1.95 million.

Covered structures get even more, with HK$116,000 psm to be paid for the first 25 sq m and HK$2,310 psm thereafter.

Isn't that potentially lucrative for these businesses?

If all 1,192 hectares were to be recovered on an open-space basis, the bill could potentially be up to HK$4.65 billion. Needless to say, the bill goes up if covered structures are included. The 340 hectares in Yuen Long and Kwu Tung alone may cost up to HK$1.33 billion.

Due to the housing scandal involving soft lobbying by movers and shakers controlling such sites in Wang Chau as well as the Kwu Tung land controversy involving Chan's family, it will be crucial for the government to proceed on this issue with extreme care to show to the public there's no collusion involved.

The proposed compensation scheme has to be totally transparent and each case must be audited by a credible authority - if the administration doesn't want its successor to be accused at a later stage of bailing out vested interests.

While the scheme is designed, for example, to cap the limits for open- space claims at 5,000 square meters, or HK$1.95 million, per application, there should be safeguards against attempts by landlords to maximize the payouts by dividing up large sites into parcels of land that are just up to 5,000 square meters each.

After being slow to plug a loophole that investors had exploited to bypass the 15 percent stamp duty for non-first- time property buyers, officials must not let similar abuses be repeated under the new compensation scheme.

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