House of Cards

The collapse last week of a residential building in the heart of Hong Kong is focusing long-needed attention on the often sleazy muddle which passes for development policies in the city. But the official response could be again to reward the big developers at the expense of the public in general and the poor in particular.

Four people died when the 50-year old tenement building in a run-down but centrally located area of Kowloon suddenly collapsed while renovation work was in progress. Adjoining buildings have had to be evacuated and the mostly poor residents given government accommodation far from schools and workplaces.

It transpires that that the Buildings Department, the government agency responsible for building inspections and structural changes, had inspected the property only a few weeks previously and had not noted any major structural problems. It remains uncertain whether the collapse was caused by subsequent building work such as removal of a load-bearing wall.

The building, like many in this formerly industrial district where most housing dates from the 1950s and 1960s, had been the subject of numerous orders in the past to carry out repair works, remove illegal structures and otherwise conform to building codes. But the reality is that most such orders go unenforced. Instead of closing down properties where owners have failed to keep up with orders, people are allowed to live in buildings which are unsafe or lack proper sanitary facilities.

Some claim that this is partly because of a lack of manpower. But a more fundamental reason is that the government has failed to complete much needed amendments to legislation identified more than a decade ago. Its indolence is partly out of favor to developers and partly because tackling the problem would expose another glaring issue: the lack of housing for low-income people in central locations.

The reality is that these many of these buildings are warrens. They have been subdivided into tiny flats and cubicles and most have additional illegal structures such as enclosed balconies and rooftop flats. Here live tens of thousands of mostly poor people, many old, some students, some new unskilled migrants from the mainland. Conditions are squalid and through rents appear low they are, in practice, high on a per-square-meter basis and considering the very basic toilet and other facilities. Some of the buildings feature the so-called cage homes, where the poor and elderly live cooped up like battery chickens.

Some of the buildings are partly owner-occupied, mostly with old people sub-letting part of a flat as an income source. Some are owned by individual small local businessmen who may have a shop on the ground floor. But increasing numbers have been quietly bought up by big developers. In many cases these are not obvious but hidden behind corporate names that have to be tracked back through nominees, lawyers, accountants and property agents.

In the case of the collapsed building the corporate ownership appears to be controlled by one woman. However it is widely believed that she is largely a front and that ultimate beneficial ownership rests with a major developer who prefers not to reveal its identity. By minimizing maintenance and collecting rent the developers can make a handy profit while they gradually accumulate enough properties to make a whole site redevelopment viable. They then kick out the inhabitants and develop new high rise flats with club houses and other facilities for high income people.

Hong Kong's government body the Urban Renewal Authority (URA) is charged with redeveloping old districts. But its record to date has mostly been one of cosy deals with big developers to tear down old buildings in more valuable districts on Hong Kong Island to put up high rises which can be sold at immense profit.

Using these methods, they have wiped out once-vibrant sections of the territory such as the Wedding Card Street section of Wan Chai, often in the face of opposition from neighboring residents who oppose the increases in density and traffic congestion that come with inflating the developers' profits, and against the wishes of owners quite prepared to spend money to upgrade old, low-rise properties. Another section in Wan Chai is about to go with the inevitable destruction of several blocks so that Gordon Wu and his Hopewell Holdings can build a massive hotel that appears certain to choke the traffic in all directions.

The situation is different in the crowded low income areas of Kowloon such as To Kwa Wan, Mongkok and Shamshuipo. Some old properties are already large so redevelopment may not be very profitable. The big developers remain focused on gradually acquiring sites where they can, thanks to a Town Planning Board which often appears in their pocket, put up 40-storey offices or luxury flats – many now being sold to mainlanders laundering the proceeds of corruption. Renovation of many of their buildings, mostly of five to 10 stories is quite possible. But owners tend either not to have the money, and current tenants are unable to pay the rents which would be charged for modernized buildings.

The expectation that the URA will buy up dilapidated buildings at above-market values further stymies natural redevelopment. These compensation schemes reward owners of dilapidated properties rather than force them to maintain them under the threat of losing occupation permits.

In the case of To Kwa Wan it appears from local newspaper reports that the URA looked at the district and decided not to attempt any renewal schemes because many buildings were already wholly or partly owned by corporations not individuals. It would be more expensive to buy them out them than individuals. In the case of individual owners compensation terms are different.

The South China Morning Post put it thus: "Buying flats from developers usually costs much more than compensating individual owners. Instead of paying the value of a seven-year-old flat, the authority would have to compensate developers for the forsaken redevelopment opportunity".

This is yet another example of how the bureaucracy benefits the already mega-rich developers, the very same groups which offer high paying jobs to former civil servants with influence in key departments, and finance the Chief Executive's campaigns for office. The implicit corruption is obvious to many – but not to the so-called Independent Commission Against Corruption, which is very effective at rooting out small kickbacks to policemen but has never fingered any of the big developers despite myriad examples of "mistakes" by civil servants which yield huge profits to the developers at the expense of the public purse.

Meanwhile third-world housing conditions in the older areas of Kowloon remain a vivid example of how government by and for the rich leaves a huge and growing underclass in a city which claims to have a per capita income equal to western Europe.

The To Kwa Wan tragedy could well make matters worse, giving the government an excuse to speed up the joint efforts of the URA and the big developers to make big money from clearing old areas to make way for high rises for middle and upper income earners while dumping the existing populations to remote developments in the New Territories, far from workplaces, schools and medical care and lacking the community spirit which prevails in the older districts.

The URA is in the process of reviewing its Urban Renewal Strategy. The public engagement stage is supposed to have finished although the report has yet to be issued. The question remains whether the URA will continue to run on commercial principles, sharing profits with the developers, with any excess probably spent on salaries and bonuses for URA top management -- who decide the terms of the joint ventures. It is unlikely that that will change despite the fact that it goes against the interests of those who need low-cost housing and results in redevelopment schemes which create densities far above a district's carrying capacity.

Hong kong's governance system is looking as decayed as the concrete of those To Kwa Wan tenements. Until it is modernized, expect more handouts to developers at the expense of the public.