Section B: Estate Management and Rent Policy Chapter 1: Domestic Rent Policy Characteristics of Domestic Rent Domestic rents are inclusive of rates and management fees, and have all along been maintained at a low level because of the provision of premium-free land and capital injections by the Government to the Housing Authority (HA). Rents are calculated on the basis of internal floor area (IFA). Apart from a few exceptions, rents per m2 IFA are uniform for all the units in the same block irrespective of floor levels and orientation. Currently, the HA's housing stock of over 180 estates provides a broad range of flat types and rent levels for different groups of tenants.       New Rent Adjustment Mechanism In January 2007, the Government introduced the Housing (Amendment) Bill 2007 to replace the statutory 10% median rent-to-income ratio in the Housing Ordinance (Cap. 283) with a new rent adjustment framework for public rental housing (PRH) that provides for both upward and downward rent adjustments according to changes in PRH tenants' household income.  The Housing (Amendment) Ordinance 2007 was passed by the Legislative Council in June 2007 and would come into operation on 1 January 2008. Under the new rent adjustment mechanism, a review of PRH rent would be conducted once every two years.  The PRH rent would be adjusted either upward or downward according to changes in the income index, which reflect changes in PRH tenants' household income and would be computed by the Commissioner for Census and Statistics.  For downward rent adjustment, the PRH rent shall be reduced according to the rate of reduction of the income index.  In case of upward rent adjustment, the PRH rent shall be increased by the rate of increase of the income index or 10%, whichever is less.  To provide a new starting point for the income-based rent adjustment mechanism to operate effectively, the Housing Authority reduced the PRH rent by 11.6% starting from August 2007.  The new rent adjustment mechanism provides a more flexible framework that matches more closely tenants' affordability and helps promote the long-term sustainability of the PRH programme.       Rent Setting For New Estates The HA conducts two rent fixing exercise annually to determine the rent for newly completed PRH estates.  For rent setting purpose, the HA divides the territory into six broad districts.  The rent of newly completed estates is fixed according to the so-called "best rent" for each district, which is expressed in terms of per m2 of IFA and is determined having regard to the location and value of the estates concerned.  With the introduction of the new rent adjustment mechanism, the Housing Authority reduced the "best rent" for all districts by 11.6% with effect from August 2007.  The same income index adopted under the new rent adjustment mechanism would also be applied to determine the future adjustments of the "best rent" for newly completed PRH estates.

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