Treating the Symptoms - A Critical Review of ... - Civic Exchange

The URA’s BeginningsThe URA’s predecessor was the LDC, which was set up in1988. The government wished to set up an independentbody to tackle the problem of urban renewal becauseit did not wish to spend public money. The governmenthad attempted to get directly involved in urban renewal inSheung Wan and Sai Ying Pun in the late 1960s and 1970s,but those schemes were beset by serious financial problemsdue to the expense of land acquisition and an economicdownturn in 1975. 32 The government and LegCo lost theirappetite for direct urban renewal. This eventually led to thedecision that the LDC would be self-financing. The LDCwas required by its ordinance to operate under “prudentcommercial principles”, and was offered only a start-uploan of HK$100 million from the government. (In practiceit only borrowed HK$31 million). 33The LDC was to buy properties from private owners at afair market price, partner up with a private developer (forupfront capital), redevelop the site, share the profits, andthen use its earnings to acquire more land and rehouseaffected tenants. This meant that not only did its projectshave to be commercially viable, they had to be extremelylucrative. The LDC tackled low-rise sites that offered alarge plot-ratio gain, located in central urban areas whichwould generate high property values. It was also extremelysensitive to fluctuations in the property market, and had towait to buy during market troughs and sell during peaks.During twelve years of operation, it managed to commence30 projects, but completed only 16, covering just 2.8hectares of land. 34 It left another 25 projects announcedbut not completed. 35 The government clearly saw this asinadequate. In 1998, its Urban Renewal Strategy studyidentified another 500 projects in need of redevelopment,of which 200 were accorded high priority. 36The government believed the reason that the LDC’s workprogressed too slowly was because the LDC lacked sufficientpower and resources. The situation was exacerbated by thesevere property slump following the Asian Economic Crisisof 1997. The slump not only affected the LDC, but privatedevelopers lost interest in renewal projects. It was decidedthat the LDC should be replaced with a more powerfulURA.15