A Hong Kong politician’s attempts to meddle in the commercial operations of Link Reit appears to be foundering after officials described a proposed rent cap on the trust’s malls as out of line with basic law.
Three months ago, lawmakers Regina Ip and Alice Mak, released draft legislation recommending rent caps for shops in public housing estates and a vacancy tax on stores untenanted for more than six months. It was the latest in a long line of attack son the listed Reit, a privately-run business which took over 180 properties in 2005 from the Hong Kong Housing Authority, including shopping centres, markets and carparks of public housing estates through Link. Since then a number of properties have been sold as the publicly listed property company optimised its portfolio in line with normal business practice.
“The deputations worry that further sales of these properties by Link in recent years would induce further rental increases,” said a Legco spokesperson at the time. “They have also expressed concerns about the tenancy arrangements following Link’s further sale of the shopping centres and markets. Hence, they lodge complaints with LegCo members.”
Ip’s New People’s Party claims rents for shop space at Link malls increased 132 per cent – from HK$25.40 (US$3.24) to HK$58.90 per sq ft – between 2005 and 2017, compared with a rise of 72.8 per cent in the broader market. However those calculations apparently fail to compare the level of rents being charged back in 2005 compared with those of more commercially run businesses.
Last Friday, the Transport and Housing Bureau (THB) submitted a paper to the Legislative Council citing Basic Law, the city’s mini-constitution, saying lawmakers should not intervene in the rents matter.
“[If] the government is to introduce a new vacancy tax, it will need to set up a new regime for assessing and levying the tax concerned, as well as preventing and taking action against tax evasion, which will incur additional expenses,” the bureau said.
The paper also pointed out that the bill encroached on several complex policy areas, including those on divested properties, the free market, the fair competition system of Hong Kong and the implementation of tenancy control.
“[We] must strike a balance between the public benefits of such measures and the protection of private property rights,” the paper read.
The THB said there was insufficient grounds for the government to support the measures in Ip’s bill and it doubted it would work.
Feedback from legislators was mixed, the paper said, with one describing the proposed law as “communist”.