CEO's Review of Operations

Over the past year, the challenges that Hong Kong people faced were unprecedented. The social unrest and the coronavirus outbreak had cast a pall over the society and sent tremors throughout the economy, but in no way put a brake on our momentum to create homes and revive communities.

The year 2019/20 remained a fulfilling one as we saw progress in leaps and bounds with the wealth of initiatives and projects covering estate redevelopment, subsidised sale flats, dedicated rehousing estates and transitional housing, to name but a few. Our housing projects are looking up, as we expect to complete an all-time high of 18,000 units over the next five to ten years, which is more than double the 8,000 units launched during our last construction peak during 1995–1999.

As we continued to speed ahead on an upward trajectory with innovative projects and quality construction, our commitments and efforts in building a sustainable community are solidly made. A lot have been done during the year to support the community through a variety of programmes and events. These initiatives, which cater to the elderly, the younger generation and the community at large, not only help to improve their wellbeing but build a better neighbourhood and a more sustainable future together.

In the depths of Hong Kong’s economic recession due to a double whammy of social unrest and the coronavirus outbreak, we rolled out successive rounds of relief measures during the year for both domestic and commercial tenants worth over HK$100 million to stand shoulder to shoulder with the community.

As part of the measures, we waived the rental of about 1,000 residents living in Group B rental estates by two-thirds for the month of January 2020. We also deferred the biennial rent review of rental estates for the years 2020–2022, so as to take into account of the declining economy downturn which is seen to be taking place.

We also offered most of the commercial tenants and all carpark operators a 50 per cent discount on the rental for a period of six months starting from October 2019 to support their businesses while safeguarding the jobs of Hong Kong people.

Responding to the Housing Needs of the Community

Rental Estate Redevelopment

The redevelopment of rental estates has been at the top of our agenda in recent years, given that a significant portion of our 20 rental estates are over 40 years or even 50 years. While land shortage has been a longstanding problem facing Hong Kong, the Housing Society faces the same challenge in finding suitable sites for rehousing the affected residents before the old estates could be demolished and redeveloped.

We are deeply grateful to the Government for the decanting sites granted over the past several years which helped to kickstart a number of our rental estate redevelopment projects, namely Yue Kwong Chuen, Kwun Tong Garden Estate and the impending Chun Seen Mei Chuen.

For the redevelopment of Yue Kwong Chuen, planning study was underway, whilst construction for the decanting site at Shek Pai Wan had begun and was making good progress, which would provide 600 rental units upon completion in 2024. For Kwun Tong Garden Estate, construction works of the decanting site at Ting On Street would soon start, with completion targeted for 2024. As for the new site in Kai Tak Area, which had attracted much attention for its prime location, planning process was nearing completion.

Meanwhile, the two towers in the Phase I redevelopment of Ming Wah Dai Ha were already topped out and the new rental units are expected to be ready for handover to the residents by the second half of 2020. Accordingly, flat allocation arrangements were being made to facilitate tenants moving to their new homes. As always, we maintain close communication, during the preparation stage, with the residents and stakeholders through various channels, and render our full support.

Maintaining a Healthy Stock of Rental Estates

As the estates become aged, so are the tenants living there. Substantial resources have been continuously allocated for the upkeep and renovation of aged estates, with the goal of maintaining the living environment safe and comfortable, and in line with modern standards.

To this end, we committed over HK$120 million for the implementation of improvement works in our rental estates, a significant portion of which was carried out through the Voluntary Building Assessment Scheme.

To facilitate easy access and convenience for elderly residents, particularly those with mobility issues, we have been stepping up improvement works particularly on the vertical transportation in aged estates. Apart from leveraging the latest technology like machine roomless lifts in expanding lift access, advanced technology was also adopted in the upkeep of our rental estates.

For example, the anti-rust cathodic protection system had been installed in the major building structures of some aged rental estates such as Kwun Lung Lau, Lai Tak Tsuen, Moon Lok Dai Ha, Lok Man Sun Chuen and Healthy Village, all of which were built in the 1960s and 70s. The system provides the benefit of forestalling corrosion in reinforced concrete structures, a factor causing cracking and spalling of concrete, thereby increasing the lifespan of buildings.

Subsidised Sale Flats

With the ever increasing aspiration for home ownership, the provision of subsidised housing serves to address the need of Hong Kong people and offers an additional means to climb up the housing ladder.

Way back in 2016 and 2017 when the Housing Society launched the presale of the Subsidised Sale Flats (SSF) projects of Greenhill Villa, Mount Verdant and Terrace Concerto, massive over-subscriptions were recorded. Home buyers will soon be able to take over these units as the three projects are ready to be delivered in the second quarter of 2020, providing a total of 1,640 units.

We are currently embarking on another three SSF projects to increase the supply of affordable housing. The sites at Jockey Club Road and Anderson Road Quarry would complete the land grant process while the site at Kai Tak was in the final stages of planning. It is anticipated that construction for these three projects, which together provide around 3,800 new flats, will commence between 2020 and 2021, and complete between 2025 and 2026.

Dedicated Rehousing Estates

As a close partner of the Government, we have been supporting the development of Dedicated Rehousing Estate (DRE) for residents affected by Government’s development clearance exercises or redevelopment projects in urban areas. Currently, four DRE projects are earmarked for the purpose.

The Pak Wo Road site in Fanling, being the first one under this category, had started foundation work and is scheduled for completion in 2024, providing around 1,500 rental and sale units.

In Hung Shui Kiu, the site for DRE will be developed by three phases. Being the first project to apply full Modular Integrated Construction (MiC) in concrete, construction of the first phase is expected to commence in the second half of 2020.

For the DRE project at Kwu Tung North, discussions with the Government regarding the design and flat mix of the project are underway. With respect to Kai Tak Area 1E Site 1, where some 2,000 units are to be provided, about 1,000 units will be earmarked for the purpose of DRE. Site acquisition process has been initiated and the foundation work is ready to take off in the latter half of 2020.

Elderly Housing

The year 2019 marked the 20th anniversary of the Housing Society’s pioneering efforts in elderly housing. Having two decades of experience in building homes for the seniors, the Housing Society has been at the forefront of providing housing solutions for seniors in Hong Kong, enabling them to age in place with grace and dignity, and with minimal dependence on institutional care.

During the year, our dedication to elderly housing was manifested in a number of elderly housing projects designed to accommodate the varying needs of seniors across the income spectrum.

At Jat Min Chuen, we decided to deploy MiC for building a ten-storey tower for the elderly by making use of the unused plot ratio of the estate. It will be our first project to apply MiC in steel, offering around 60 age-friendly rental units upon completion in 2022/23. To enable ease of mobility for the seniors and connectivity with the community, the block will be built with covered walkways providing convenient access to Jat Min Chuen.

Our third Senior Citizen Residences Scheme (SEN) project will be developed in Lee Kung Street, Hung Hom, providing 300 SEN units. The foundation works had made smooth progress and completion is scheduled for 2022.

The Tanner Hill, our first quality retirement living development, had by far garnered a waitlist of about 1,500 applicants who wish to spend their golden years in a private residential setting integrated with full range of healthcare and related support services. Meanwhile, the Residential Care Home for the Elderly (RCHE) at The Tanner Hill, which provides seniors with quality elderly care services, opened its last floor for operation in anticipation of keen demand from the local market.

This flagship elderly housing project of the Housing Society has continued to attract visitors from overseas and local alike to exchange knowledge and share experience. Our intention is to establish a business model so as to encourage more similar products in the market for serving Hong Kong people.

Transitional Housing

In support of Government’s policy to increase the number of transitional housing projects, we rolled out our “T-Home” in Kwun Tong Garden Estate where some 20 units of the estate pending redevelopment were converted into transitional housing for families waiting for public rental housing, following similar arrangement of 200 odd units in our Yue Kwong Chuen last fiscal year. Maximising the use of existing housing resources, the units were renovated with basic amenities before opening for applications in February and the first batch of residents is expected to move in by May 2020.

Another “T-Home” project at Trackside Villas, premises of MTRC, is set to kick off after an agreement to be signed with the railway company on the terms of collaboration. The first batch of about 180 units are ready for residents’ intake in the third quarter of 2020.

Other Initiatives to Optimise Housing Resources

In face of land and housing shortage in Hong Kong, optimal use of existing public housing resources to address housing needs in the short and medium-term is a viable option. Apart from our “T-Home” projects, we have explored other means to optimise housing resources for people in need.

The “Flat for Flat Pilot Scheme for Elderly Owners” launched in October 2019 has offered elderly owners who have owned their subsidised sale flats for ten years or more, an additional option to sell their flat without payment of premium for a smaller unit in the Secondary Market of either the Housing Society or the Hong Kong Housing Authority. This would achieve a win-win situation: on the one hand, the elderly owners may gain more financial flexibility with the proceeds from selling a larger flat and buying a smaller one which better suit their needs; and on the other, it helps to free up the original flat for larger households, rendering more efficient use of public housing resources. As of end of March 2020, seven applications have been received, of which three Trade Down Permits were issued and the other four were rejected for not meeting the eligibility criteria.

Following the heels of the launch of Pilot Scheme for Elderly Owners, we launched another initiative in October 2019 with a view to optimising the use of housing resources. The enhanced “Letting Scheme for Subsidised Sale Developments with Premium Unpaid” allows owners who have owned subsidised units under the Housing Society or the Hong Kong Housing Authority for ten years or more to let individual bedroom(s) or the whole flat to eligible public rental housing applicants without having to pay premium. An online platform had been set up for owners and prospective tenants to match up with each other. The enhanced Scheme was well received, with 282 and 506 applications from owners and tenants respectively, and 181 Owner Certificates issued by the end of March 2020.

Leveraging Innovation to Build Better Homes

In a fast changing landscape of construction technology, where MiC and Building Information Modelling (BIM) are increasingly adopted around the world in the development of buildings and urban landscape, we are moving ahead at the same pace.

With the benefit to achieve quality, speed and cost savings by off- site factory assembly of modular units, the MiC has been widely promoted by the Government across the industry in a drive to boost housing supplies with lower cost, faster and safer construction. To render full support to the Government, we are exploring to implement MiC of various types across our forthcoming construction projects and developments.

The ten-storey building for the elderly at Jat Min Chuen will be the first to engage full MiC in steel, while partial application of MiC in concrete with volumetric precast bathrooms and kitchens will be applied in our upcoming housing projects, including the developments at Ting On Street, Shek Pai Wan, Anderson Road Quarry and Kai Tak. Full application of modular construction in concrete is being contemplated for the dedicated rehousing project at Hung Shui Kiu.

Along with the application of MiC, we will be adopting BIM throughout the cycle of project implementation from planning to completion, encompassing design study, tender documentation, as well as contract processing. When the project is completed, the information model will help facilitate building maintenance. The rental projects at Ting On Street and the dedicated rehousing project at Kai Tak will be the first projects to be implemented and built with BIM.

Fostering Ties with the Community

We placed great value on the communication with the public and stakeholders as their support and understanding are vital to the success of the Housing Society. As a public organisation serving Hong Kong people, public opinion and acceptance are important indicators to reaffirm the right direction of our service strategy. Valuable source of feedback helps us better understand customers’ needs, encourage our continuous improvements, and ensure our business sustainability.

To garner the support of the general public and stakeholders, we engage the public with a diversity of channels. On the front of public communication, we continued to leverage social media, including Facebook, YouTube and Instagram, among others, to provide updates about our business initiatives and commitments in corporate social responsibility, and with timely response to suggestions. We also launched a variety of branding initiatives to raise public awareness and understanding of our work and achievements.

To enhance public understanding of the housing issues and challenges facing Hong Kong, our Housing Society Exhibition Centre has been set up to serve as an education centre and gallery showcasing the historical development and housing portfolio of the Housing Society.

In the same vein, the Hong Kong Housing Society Academy Alumni Club was launched to provide a platform through which the scholarship and bursary awardees of the Housing Society were engaged to learn about the housing issues confronting Hong Kong, and reciprocate by volunteering their expertise and time to serve the community, particularly the elderly in need of care. By means of this, we strive to foster cross-generational harmony towards the building of an inclusive and caring community.

It may take time and considerable resources for all these efforts to reap tangible results, but it is worthwhile as these will help to bring us closer to the community, and foster a better mutual understanding.

Enhancing Capabilities

To make our operations sustainable and reach further miles, we regularly reviewed our governance structure, capacity and infrastructure in order to keep pace with the evolving landscape and rise up to the challenges.

A comprehensive Corporate Governance Review was conducted during the year to evaluate the effectiveness and efficacy of the existing governance model in an effort to enhance operational efficiency and cope with the challenges of increased activities. A number of issues were examined and revisited, including the roles and responsibilities of the Two-tier Board, the composition of the Board and Committees, the engagement of Members in setting direction and strategies. The purpose was to identify areas for improvements and enhance Members’ engagement. All in all, the results of the review reflected that the existing governance structure, which had been running since 2000, was generally healthy and effective, with some areas of improvement identified.

Internally, a review has been undertaken on the structure and manpower of the Projects Division and the Development and Marketing Division, with particular respect to their setup and manpower, in light of the massive workload brought by the increase in housing projects in the next couple of years. As a result, the capacity of the divisions was strengthened to meet project needs responding to the different stages of project implementation.

We have been studying the options for e-tendering so that an electronic platform would help to streamline and enhance the transparency of the procurement processes while improving the management of tendering procedures. We advocate a paperless tendering process to achieve a greener office.

To further step up the efficiency of business operations, we have been leveraging the use of more IT tools. A digital system was implemented to render the pre-handover inspections and rectification works much faster and more efficient. IT applications would be used for owners to report defects and monitor the progress of rectification work after taking over the new flats. At the same time, a new cloud-based accounting system was in place to provide speedier and safer access regardless of time and place.

Apart from implementing new technologies for project operations and management, we have been beefing up the cyber security for our internet system to cope with the ever changing landscape of cyber threats.

Financial Performance

Our financial performance was adversely impacted by the weakened economy in Hong Kong and the financial market meltdown due to the coronavirus outbreak. With the rent concessions provided for our tenants and the rising operating costs, our operations turned into a deficit of HK$143 million for the year of 2019/20.

Separately, the investment portfolios had recorded a deficit of HK$887 million or a loss of 2.76 per cent for the year. Net deficit was HK$1,030 million, which deteriorated by HK$2,115 million compared to last year. Anticipating a tough year ahead with a more volatile market, we had adopted a prudent approach in de-risking both the medium and long- term portfolios to cater for future funding needs.

Vote of Thanks

2019/20 was such an unforgettable year for Hong Kong, as we had experienced social unrest as well as the coronavirus outbreak. Yet, our business operations were relatively unscathed. Most of our projects were delivered on time and targets achieved. Our financial performance had remained robust and spending contained within budget.

It is with a sense of pride and contentment that I conclude this operation review, which was my last one after more than 25 years of service at the Housing Society. It was the most rewarding journey that I could have asked for, as I had seen the organisation grow from strength to strength. What started 72 years ago as a housing organisation with the building of rental estates as its core business has grown into one with a portfolio encompassing a diversity of housing typologies spanning across 17 districts, and providing homes for more than a hundred thousand people from all walks of life. I take pride in working with an organisation that had established itself as a “housing laboratory” by introducing to Hong Kong people various housing prototypes that not only helped to meet the housing needs of the people but also redefined the frontiers of market demand and supply.

Moving forward, the challenges are abound in view of the ever evolving landscape of housing needs and development on top of the political environment, but I firmly believe the resilient and innovative spirit of the organisation as manifested in its unwavering efforts and commitments to serving Hong Kong people over the past 70 years, supported by committed members and professional and dedicated management team, would take the Hong Kong Housing Society to new heights.

Last but not least, I must express my deepest appreciation towards our Chairman and to our Members, especially members of our Supervisory Board, Executive Committee, and other Committees for providing their guidance and unfailing support for the Housing Society. I am also thankful to the Management and all of our staff for their unwavering dedication and unrelenting commitment to achieving excellence all along.

Wong Kit-loong

Chief Executive Officer and Executive Director

31 March 2020