Industrial building revitalisation 2.0: Optimising social efficiency

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Optimising the use of industrial buildings should not go against inclusive development of communities.

(Photo credit: Bryan Ho)

The scheme of revitalisation of industrial buildings was implemented by the Hong Kong government in April 2010. It allowed owners of industrial buildings that were aged 15 years or more to be deterred by the requirement to pay full market premium for lease modification for redevelopment into the likes of offices, hostels and art workshops.

Under this scheme, a total of 151 applications accounting for almost 20 million square feet of floor area were submitted to the government. With such a vast floor area, almost HK$100 billion of premium would have been waived at a rough estimate of HK$5,000 per square feet. But only property owners emerged beneficiaries of such a costly policy. Those tenants who were originally there, meanwhile, were forced out of the place and have had to seek alternatives with higher rents.

The controversy surrounding the government’s handling of Hidden Agenda was partly a result of prolonged discontent from industrial building tenants against the revitalisation scheme. The original intent of the scheme was to provide, through revitalisation, more refurbished space for Hong Kong’s transforming social and economic needs. On the contrary, people from the cultural and creative industry, those who would have been benefited from the scheme, were among the most vocal opponents displaced due to surging rents.

Paul Chan Mo-po, the then Secretary for Development, announced on 16 August, 2015 that the revitalisation scheme would stop taking applications on 31 March, 2016. Exactly two years since Chan made the announcement, our new Chief Executive Carrie Lam Cheng Yuet-ngor proposed a new way of thinking to handle industrial buildings. Here it comes the second wave of revitalisation, and it seems a steadfast one.

Should the revitalisation scheme be revitalised, it will have to place social efficiency as its core, with details taking into account social needs from all sides.

The previous scheme had served the interest of property owners at the expense of the tenants. Those industrial buildings revitalised are now mostly offices, business units and hotels. The ‘gentrification’ of properties resulted in sky-high rents, which was great for the owners and not so much for the public.

In light of this, the new scheme should include a clause prioritising revitalisation applications that would install community facilities, such as space for traditional local businesses, NGOs offices and recycling centres. Notable example includes the revitalisation of the Nan Fung Textile Mill into a site that inherits the district’s legacy, enables cultural and creative industry to boom, and offers public space for the surrounding community.

If a building was revitalised with the creative industry as its focus, then its rents in the first ten years should be discounted – say at a fraction of the market price – so that the benefits of the government’s premium waiver could be better shared among those other than the property owners.

Outdated legislation is another issue provoked by the Hidden Agenda saga. As the industries and businesses using industrial buildings now and back then are already poles apart, the authorities should redefine what it means by “industrial use” to allow more kinds of activities to operate legally as long as fire safety, structural safety and sanitation requirements are met. This can help foster relevant industries and alleviate the high demand for office and shop spaces.

The government should also forbid property owners from divesting the revitalised buildings under stratified titles. As the value of a building would logically appreciate after revitalisation, the aforementioned suggestion can prevent property owners from making short term profit through flipping, hence securing a more stable supply property units in the market.

The new scheme should also include individual units that can comply with safety and sanitation requirements so that property owners can obtain a temporary grant to relax user restriction without having to go through the Town Planning Board procedure. A lot of hostels were allowed to run in commercial properties in the past seemingly not fulfilling town planning requirements. By injecting a level of flexibility into the scheme, more individual unit owners can be benefited from the policy.

In short, given the wealth disparity in Hong Kong, any policy that serves, and only serves, the rich would spawn greater public discontent. Henceforth, the government should make sure that the new revitalisation scheme will take social efficiency into consideration, allocate resources and benefits more evenly among all social groups. By doing so, it is hoped that social harmony can be facilitated.