22 March 2019
The Urban Renewal Authority and the Hong Kong Housing Society had in 2016 offered assistance to facilitate the redevelopment of CBS flats, but the initiative has seen little success so far. Photo: URA
The Urban Renewal Authority and the Hong Kong Housing Society had in 2016 offered assistance to facilitate the redevelopment of CBS flats, but the initiative has seen little success so far. Photo: URA

Redevelopment of CBS flats: The potential 19th land option

As public discussions over the 18 land use options put forward by the Task Force on Land Supply are underway in full swing, Chief Executive Carrie Lam Cheng Yuet-ngor has said recently that she would be more than happy to put her resort mansion in Fanling on the list as the 19th option.

She may have been indulging in some empty rhetoric, but there is, in fact, a potential 19th land-related option that many of us may have overlooked: flats developed under the Civil Servants’ Co-operative Building Society Scheme (CBS).

The scheme was first introduced in 1952 by the former colonial administration as a form of housing welfare available to civil servants.

Under the scheme, land lots would be granted to cooperative societies formed by qualified civil servants at around one-third of the market price in order to allow them to build residential apartments for their own use.

Titles to such quarters belong to the cooperative societies, which are also responsible for managing and maintaining their properties. CBS then set up leases with the individual civil servant members.

Many of these CBS flats are lying on premium locations across the city, in areas such as To Kwa Wan, Tai Kok Tsui, Sham Shui Po, Sai Wan Ho, Shau Kei Wan, and North Point.

Mostly 5-storey high, these CBS apartments are usually 40 to 50 years old and lack basic facilities such as elevators. As a result, quite a lot of retired civil servants have already moved out of these premises.

And since under the provisions of the scheme, CBS flat owners aren’t allowed to sell or rent out their properties freely, the overall vacancy rate of these flats has remained quite high over the years, thereby constituting an enormous waste of valuable land resources.

The CBS scheme was terminated in the mid-1980s. And according to government figures, as of early 2016, a total of 238 cooperative societies were formed by civil servants and the CBS flats they built were occupying 30 hectares of land, with the total numbers of remaining occupants standing at only around 500.

Although there have been calls among the public for the government to redevelop these CBS flats in order to fully utilize their potential, over the past 20 years, only 12 among the total of 238 cooperative societies, or just 5 percent of them, have successfully reached agreements with private real-estate developers under which the latter agreed to acquire the properties and rebuild them.

And the main reason why only so few cooperative societies are willing to rebuild their CBS flats is because under the existing regulations, they must first repay the government the remaining two-thirds of the market price of their properties as land premium before they can redevelop them.

Besides, if members of these cooperative societies wanted to increase the total gross floor area or use part of the site for non-residential purpose when redeveloping their CBS flats, they will have to seek amendment of their land leases and pay the government another sum of land premium.

As the entire procedure could take years to complete, and given that many cooperative societies simply cannot afford to repay the huge land premium sum, there is lack of motivation for them to redevelop the CBS flats.

In 2016, the government commissioned the Urban Renewal Authority and the Hong Kong Housing Society to co-launch a pilot scheme and provide intermediary services to facilitate the redevelopment of CBS flats.

Unfortunately, the initiatives achieved little success, not least because of the fact that many CBS flat owners were unable to reach a consensus either on the amount of land premium or the acquisition price of their properties.

In my opinion, the government should adopt a new mindset when it comes to redeveloping CBS flats.

To put it more precisely, the administration should provide more redevelopment options for CBS flat owners as long as the options don’t violate the principle of fairness.

This article appeared in the Hong Kong Economic Journal on Aug 15

Translation by Alan Lee

[Chinese version 中文版]

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