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

Why can’t Hong KongMaintain itsOld Buildings?32The previous section outlines the main reasons whyprivate developers find urban redevelopment financiallyunattractive. That still leaves unexplained the reasons why somany 40-year old buildings in Hong Kong have deterioratedto the point where redevelopment is necessary. There is acommon assumption in Hong Kong that buildings over 30years old are ripe for redevelopment, yet other cities aroundthe world manage to retain buildings for many decades, oreven centuries. Why is Hong Kong seemingly unable tokeep its older buildings in good condition?While it is often written that many buildings constructed inthe 1950s and 1960s were of poor quality and consequentlyhave short lifespans, many of the problems are not physicalbut human in origin. Given proper maintenance, thelifespan of Hong Kong’s older tenement blocks can beextended to 80 years. Instead, the problems lie in lack oforganization structures, inadequate enforcement of policies,and perverse economic incentives.Inadequate management ofbuildingsWhen buildings are held under multi-ownership, buildingmanagement, repair, and renovation are by necessitycollective enterprises involving dozens if not hundreds ofhomeowners. This can easily lead to a classic “free rider”situation where each individual wishes to benefit fromresources held in common (in this case, the building)while minimizing their own contribution towards itsupkeep. If even a minority of owners refuse to contributetowards repairs, this will disrupt the other owners’ effortsand the building’s condition will deteriorate. Buildings areespecially susceptible to poor management if their residentsconsist primarily of tenants and not owner-occupiers, or ifthe owners are uninformed, elderly, or poor.Structures must be put in place in order to ensureparticipation, enforce compliance, and organize themaintenance. However in 2009, out of some 39,000private buildings in Hong Kong, only about 16,200 hadowners’ corporations, and about 10,600 had no form ofmanagement whatsoever. 109While in the 1970s the government encouraged theformation of mutual-aid committees and kaifongassociations in high-rise multi-owner buildings, 111 thesebodies did not have any basis in the law, so there was noobligation to participate nor were their membershipsclearly defined. 112 The Buildings Management Ordinancewas passed in 1993 enabling homeowners to set up legallyrecognized homeowners’ corporations, and required certainmandatory provisions to be included in all existing andfuture DMCs so that they could no longer be a barrierto setting up owners’ corporations. The legislation wasstrengthened in 1998 and again in 2000, most notablyempowering the Home Affairs Department to order theowners’ corporations of poorly-managed buildings toappoint a professional building manager from a list ofapproved agents.The Home Affairs Department and the non-profit HousingSociety also provide legal advice, logistical support, andprofessional expertise such as accounting and buildinginspection. 113 This assistance is very valuable to flat ownerswho lack the knowledge to organize an owners’ corporationon their own and has helped many property owners torefurbish their buildings independently of the URA.In theory, most private buildings are governed by deeds ofmutual covenant (DMCs). This is an enforceable contractdrawn up between the developer, the building manager, andproperty buyers delineating the rights and responsibilities ofall parties with regard to the management and maintenance,and are binding on not just the first buyer but on allsubsequent owners. In practice, many older buildings didnot have DMCs at all, while many existing DMCs areineffective. Developers drafted them to minimize theirown responsibilities while simultaneously retaining formalcontrol and preventing residents from forming their ownowners’ corporations. 110However, it is still not mandatory to form an owners’corporation. While the Home Affairs Department maycompel a dysfunctional management committee of anexisting owners’ corporation to appoint a professionalbuilding manager, it cannot force residents to form anowners’ corporation if none exists.