The Housing Authority's Subsidised Housing Committee has decided not to pursue a rent allowance as a means to help families in need of housing assistance.

A detailed subsidy analysis has found the monetary cost of a rent allowance is two to 4.4 times higher than that of public rental housing. After a committee meeting today to discuss the issue, the authority said although a rent allowance can help improve cash flow in the short term due to savings in initial construction, it will drain the authority's finances in the medium to long term due to its snowballing effect.

A wide application of rent allowance will therefore further deteriorate the financial position of the authority.

Members also considered there is no strong case to embark on rent allowance as a stopgap measure to help households on the waiting list pending their eventual re-housing. The authority said the overall average waiting time currently stands at 1.8 years, which is well below the Government's policy pledge of keeping it at around three years.

Having regard to the number of live applicants and the projected production of housing units in the coming years, it is envisaged the authority can continue to meet the pledge over the coming years.

Potential land value

The meeting noted a major portion of subsidy under public rental housing is in the form of potential land value foregone by the Government, but it can only be realised if the concerned sites will actually be put onto the open market for disposal. Flooding the market with a lot of public rental housing can dampen land prices.

The authority said introducing a rent allowance can substantially increase the demand for rental assistance from those households who are not interested in public rental housing. It is also doubtful if there will be an adequate supply of suitable rental units in the private market.

It said unless this precondition is met, introducing rent allowance on a substantial scale will likely push up rents, thereby further increasing the total subsidy that will be incurred.

The meeting expressed concern that a rent allowance may not help improve the living conditions of the beneficiaries, which is another key reason why the committee decided not to pursue it as a means of providing housing assistance.

The feasibility study was done in response to the government's invitations to the authority in 2000 and 2001 to examine the feasibility of providing rent allowances in lieu of public rental housing to waiting list applicants to address their housing needs. 

In July 2001, the authority introduced a pilot rent allowance scheme for elderly applicants, which was terminated in September 2003 having regard to the unenthusiastic response and ample supply of public rental housing units.