PAPER NO RHC THE HONG KONG HOUSING AUTHORITY Memorandum for by eddie22

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									PAPER NO.

RHC 8/2003

THE HONG KONG HOUSING AUTHORITY Memorandum for the Rental Housing Committee 2003/04 Business Plan for Rental Housing Business

PURPOSE To seek Members’ endorsement of the 2003/04 Business Plan for the Rental Housing Business.

BACKGROUND 2. The Housing Authority (HA) Strategic Plan 2003/04 was approved by the Strategic Planning Committee on 13 Dec 2002 vide Paper No. SPC 46/2002. As part of the corporate planning process, we have formulated the 2003/04 Business Plan (the Plan) for the Rental Housing Business at the Appendix. The Plan will be incorporated into the HA Corporate Plan and Budget and Forecast for HA’s endorsement before publication.

BUSINESS OBJECTIVES 3. The strategic objectives of the HA as set out in the Strategic Plan are shown at Annex A of the Plan. To support these strategic objectives, the business objectives of Rental Housing Business are developed as detailed in paragraph 2 of the Plan.

KEY INITIATIVES 4. To achieve the business objectives, key initiatives are identified at paragraph 6 of the Plan.

- 2 -

PERFORMANCE MEASURE AND REVIEW 5. Targets and key performance indicators for 2003/04 are set out in paragraph 7 of the Plan. The mid-year performance review of business performance in 2002/03 has been reported to Members vide a separate Paper No. RHC 10/2003.

DECLASSIFICATION 6. We propose that this paper be declassified upon endorsement of the Plan. We will place the Paper on the HA homepage when this paper is declassified.

DISCUSSION 7. At the meeting of the Rental Housing Committee on 27 January 2003, Members will be required to endorse (a) (b) the 2003/04 Business Plan for the Rental Housing Business; and the declassification of the paper (paragraph 6).

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File Ref. : HD (MB) M 31/150/5 Date : 23 January 2003

Appendix

Business Plan for Rental Housing Business 2003/04

Rhc 8-03_Appendix.doc

CONTENTS

Section

Page

1. 2. 3. 4. 5. 6. 7.

INTRODUCTION DESCRIPTION OF BUSINESS BRIEF REVIEW OF PERFORMANCE IN 2002/2003 KEY BUSINESS INITIATIVES KEY PERFORMANCE INDICATORS BUDGET & FORECASTS ANNEXES
A: Housing Authority Strategic Objectives 2003/04

1 1–2 2 3–9 9 – 10 11 – 12

B 1-2: Rental Housing Operating Accounts

Rhc 8-03_Appendix.doc

INTRODUCTION This Business Plan presents the objectives and key initiatives of the Rental Housing Business for 2003/04 together with the associated budgets and forecasts. 2. The business objectives of the Rental Housing Business, developed to support the corporate strategic objectives of the Housing Authority (HA) as shown in Annex A, are as follows (1) To achieve efficient allocation of public rental housing to eligible applicants. (2) To maximize the rational allocation of housing resources. (3) To manage and maintain our assets with a view to maximizing their economic life and contribution. (4) To make effective use of private sector resources in the delivery of estate management services. (5) To work in partnership with customers and other stakeholders. (6) To make the fullest use of human and financial resources and information technology (IT) to meet corporate goals. (7) To contribute actively and positively towards sustainable development and environmental friendliness. (8) To develop new and innovative business opportunities.

DESCRIPTION OF BUSINESS 3. The Renal Housing Business is responsible for the allocation, management and maintenance of the domestic rental properties of the HA. As at 31 March 2002, we had a stock of some 652,100 housing units comprising 639,600 rental flats and 12,500 interim housing units. This rental stock is expected to increase by 43,500 units over the next five years as shown below -

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Financial Year Opening Stock Rental Estate Production (+) Rental Estate Redevelopment (-) TPS Sale (-) Total Stock

2002/03 652,100 18,800 (6,500) (14,800) 649,600

2003/04 649,600 17,600 (5,200) (10,700) 651,300

2004/05 Forecast 651,300 20,300 (500) (16,200) 654,900

2005/06 Forecast 654,900 23,100 (7,700) (600) 669,700

2006/07 Forecast 669,700 23,400 0 0 693,100

4. The key business activities of the Business can be classified into the following five areas: • • • • • property management and maintenance; tenancy management; community building and relations; application and allocation; and redevelopment.

These activities are undertaken by the Estate Management Division (EMD) in collaboration with the Allocation and Commercial Division. Owing to the implementation of the Voluntary Department Scheme (VDS) and other initiatives, the strength of EMD has been reduced to 5,534 staff members, against a total of 8,087 in 2000/01.

BRIEF REVIEW OF PERFORMANCE IN 2002/03 5. The progress of implementation of the key initiatives of the Business, as outlined in the 2002/03 Business Plan, has been satisfactory in the first six-month period. Of the 29 initiatives, eight have been successfully completed, 19 are on schedule or on-going, one has been re-scheduled and one is behind schedule. We have full confidence in accomplishing on schedule most of the initiatives pledged for 2002/03. The mid-year performance review for the 2002/03 Business Plan has been reported to Members via Paper No. RHC 10/2003.

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KEY BUSINESS INITIATIVES 6. We plan to implement the following initiatives in 2003/04 to achieve our business objectives Business Objective (1) To achieve efficient allocation of public rental housing to eligible applicants Key Initiative B1-K1 To achieve the target in waiting time for WL applicants through effective management of the WL B1-K2 To shorten the turn-around time of housing offers B1-K3 To work out a new process to streamline the procedures of one-stop registration for elderly Waiting List (WL) applicants Implement the new mechanism for one-stop registration and initial vetting February 2004 90% refusal cases returned 3rd Quarter of within 14 working days with 2003 reasons for refusal identified Maintain an average waiting time at 3 years by allocating 22,000 flats to WL applicants On going Performance Goal Time Goal

Business Objective (2) To maximize the rational allocation of housing resources Key Initiative B2-K1 To examine the feasibility of Submit recommendations for Within 2003/04 extending the rent allowance Committee’s consideration scheme to eligible non-elderly public rental housing applicants Performance Goal Time Goal

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Business Objective (2) To maximize the rational allocation of housing resources Key Initiative B2-K2 To carry out the annual review Complete the review and submit recommendations on income and asset limits for WL applicants B2-K3 To review the mechanism for determination of domestic rents upon conclusion of the judicial review Submit the recommendations of the Ad Hoc Committee on Review of Domestic Rent Policy for HA's consideration (action being withheld pending the result of judicial review) Subject to the result of the judicial review March 2004 Performance Goal Time Goal

B2-K4 To relieve overcrowding by taking advantages of increased supply of large-sized rental units Conduct three Territory-wide Overcrowding Relief Exercises in 2003/04 Within 2003/04

Business Objective (3) To manage and maintain our assets with a view to maximizing their economic life and contribution Key Initiative B3-K1 To upgrade electrical installations Complete electrical reinforcement and rewiring works for 14 blocks in 3 estates March 2004 Performance Goal Time Goal

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Business Objective (3) To manage and maintain our assets with a view to maximizing their economic life and contribution Key Initiative B3-K2 To reduce the failure frequency of underground services and to enhance the quality of estate roads B3-K3 To improve the quality of fresh water for tenants' consumption Complete re-plumbing works in about 56 blocks Within 2003/04 Complete road reconstruction works in 3 estates 1st Quarter of 2004 Performance Goal Time Goal

Business Objective (4) To make effective use of private sector resources in the delivery of estate management services Key Initiative B4-K1 To establish benchmarks with Management-Buy-Out (MBOs) and Property Services Companies (PSCs) with a view to achieving optimum liberalization of rules and regulations December 2003 Establish optimum and consistent benchmarks between estates managed by the Housing Department and the MBOs/PSCs Performance Goal Time Goal

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Business Objective (5) To work in partnership with customers and stakeholders Key Initiative B5-K1 To enhance partnership with Estate Management Advisory Committees (EMACs) for better identification of tenants' views and needs Organize 5 sessions of theme-based workshops for EMACs May - June 2003 Performance Goal Time Goal

Business Objective (6) To make the fullest use of human and financial resources and information technology to meet corporate goals Key Initiative B6-K1 To establish the new Estate Maintenance and Management System (EMMS) for enhancement of service quality, efficiency and staff productivity B6-K2 To further promote e-Business and utilization of IT Full implementation of the initiatives on e-Tendering and application of handheld devices Complete the studies on BPR for the following a. Responsive maintenance in estates b. Delivery of tenancy management services under District Tenancy Management Offices c. Procedures of handling complaints d. Procedures of handling contract payment December 2003 Complete tender specifications December 2003 for EMMS Performance Goal Time Goal

B6-K3 To conduct business process re-engineering (BPR) for estate maintenance and tenancy management services and to streamline procedures of handling complaints and contract payment

October 2003 November 2003

December 2003 March 2004

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Business Objective (6) To make the fullest use of human and financial resources and information technology to meet corporate goals Key Initiative B6-K4 To enhance management information support to facilitate effective implementation of BPR a. Further enhance the Housing Accounting and Financial Information System (HAFIS), Maintenance Division Management Information System (MDMIS), Maintenance Infra-structure Information System-Frontline (MISIS-Frontline) to enable timely and accurate exchange of maintenance and improvement expenditure data b. Utilize web technology to provide up-to-date comprehensive financial information for each cost centre March 2004 Performance Goal Time Goal

February 2004

B6-K5 To enhance rent collection system with a view to fully automating the collection and related accounting procedures Implement the pilot scheme on March 2004 new Rent Collection System in 5 estates

Business Objective (7) To contribute actively and positively towards sustainable development and environmental friendliness Key Initiative B7-K1 To promote environmental friendliness through application of the latest biotechnology to maintenance works Install biochemical deodorizing systems to refuse collection rooms in not less than 20 estates March 2004 Performance Goal Time Goal

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Business Objective (7) To contribute actively and positively towards sustainable development Key Initiative B7-K2 To enhance energy management and saving December 2003 a. Implement optimum energy management measures on lighting in estates b. Install photocell control for Within 2003/04 corridor lighting system in 10 estates c. Complete tariff conversion On-going application to power companies within one month Performance Goal Time Goal

B7-K3 To upgrade the standard of the Achieve an additional greening area of 110,000m2 existing landscape facilities through Landscape Improvement programme B7-K4 To enhance visual appearance Enhance the visual appearance of 50 slopes by applying green treatment to hard surfaced slopes and improving Chunam surface with hydroseeding, stone pitching and toe planters Within 2003/04 Within 2003/04

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Business Objective (8) To develop new and innovative business opportunities Key Initiative B8-K1 To partner with the private sector to roll out e-Estate portal and community IT kiosks Implement a pilot scheme in 5 estates December 2003 Performance Goal Time Goal

KEY PERFORMANCE INDICATORS 7. We have developed the following key performance indicators (KPI) to keep track of the progress in achieving the service objectives and in implementing the key initiatives KPI (a) Average Direct Management Cost1 per PRH unit, Average Actual Maintenance Cost1 per PRH unit (b) 2002/03 Target Below $4,4002 annually, 2003/04 Target Below $4,4002 annually,

Below $3,300 annually Below $3,200 annually

Average Waiting Time for 3.5 years by the end of 3 years PRH 2003, make offer for all elderly applicants registered on the WL before 1 April 2001 Percentage of overcrowded families (at 5.5m2 per person or below) against total PRH families Vacancy rate Below 2% Below 1.7%

(c)

(d)

Below 1.5%

Below 1.5%
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KPI (e) (f) Average void period of vacated PRH Average turnaround time for vacant flat refurbishment Volume of waste paper collected for recycling Rent arrears3

2002/03 Target Not exceeding 10 weeks

2003/04 Target Not exceeding 10 weeks

Not exceeding 50 days Not exceeding 50 days

(g)

At least 23,000 tonnes At least 23,500 tonnes

(h)

Below 2.5%

Below 3%

Note 1: Note 2:

VDS Payment is excluded in this calculation. Based on the projected operating result, the calculated average direct management cost should be about $4,600 per unit. However, with the implementation of various efficiency saving initiatives and the savings from Phased Service Transfer scheme, the Department has anticipated that the average direct management cost can be kept at below $4,400 per unit. It should be noted that the direct PE cost should be lower than the current level. However, as less than expected number of staff (e.g. artisans, estate assistants, and etc) has been transferred to the Allocation and Commercial Division following the recent management duties transfer exercise, this has resulted in more direct PE cost being absorbed by the Rental Housing Business.

Note 3:

The six-month average actual rent arrears ending September 2002 was 3.49%. In view of the current economic situation, it is considered that the rent arrears next year will not be easily reduced. However, the management has undertaken to accept the challenge of pitching the target at 3%.

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BUDGET AND FORECASTS 8. The 2002/03 Revised Budget, 2003/04 Proposed Budget and the Financial Forecasts for 2004/05 – 2006/07 are shown in Annex B1-B2. A summary of the 5-Year Budget and Financial Forecast is presented below 5-Year Rental Housing Business Operating Accounts ($ Million)
Revised Budget 2002/03
9,754.2 10,956.9 (1,202.7)

Year
Income Expenditure Operating (Deficit) before Exceptional Item Exceptional Item – VDS Payment Operating (Deficit) after Exceptional Item

Proposed Budget 2003/04
10,687.2 11,711.2 (1,024.0)

Financial Forecast 2004/05
10,951.5 11,918.1 (966.6)

Financial Forecast 2005/06
11,573.0 12,907.3 (1,334.3)

Financial Forecast 2006/07
12,013.3 13,065.9 (1,052.6)

530.5

662.8

26.8

9.5

0.0

(1,733.2)

(1,686.8)

(993.4)

(1,343.8)

(1,052.6)

2002/03 Revised Budget 9. The 2002/03 Revised Budget Operating Deficit before Exceptional Item as shown in Annex B1 is $1,202.7M, a decrease of $372.9M or 24% when compared with the 2002/03 Approved Budget of $1,575.6M. After taking into account the Exceptional Item – VDS Payment of $530.5M, the Operating Deficit becomes $1,733.2M, which is $533.0M or 24% lower than the corresponding Approved Budget deficit of $2,266.2M.

10. Compared with the Approved Budget Total Income of $9,354.0M, the Revised Budget Total Income at $9,754.2M shows an increase of $400.2M or 4%. This mild increase is mainly attributable to the increase in tenants being rehoused to flats of larger sizes under the overcrowding relief and transfer arrangements and the increase in tenants required to pay additional rents under the Housing Subsidy Policy.

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11. The Revised Budget Total Expenditure is $10,956.9M, which is closely in line with Approved Budget Total Expenditure of $10,929.6M. The increase in Maintenance & Improvement works has offset the favorable budget variance of most expenditure accounts.

2003/04 Proposed Budget 12. The 2003/04 Operating Deficit before Exceptional Item as shown in Annex B1 is $1,024.0M, a decrease of $178.7M or 15% when compared with the 2002/03 Revised Budget of $1,202.7M. After incorporating the Exceptional Item - VDS Payment of $662.8M, the Proposed Budget Operating Deficit becomes $1,686.8M, which is $46.4M or 3% lower than the Revised Budget 2002/03.

13. The Proposed Budget Income at $10,687.2M, which is higher than the Revised Budget by $933.0M or 10%, is mainly attributed to (a) less rental income was received in respect of the first three quarters of 2002/03 following the Rates Concession exercise and (b) full year rental effect of the new production completed in 2002/03. 14. The significant increase of expenditures by $754.3M or 7% is mainly due to the lower payment in rates in respect of the first three quarters of 2002/03 following the Rates Concession exercise. It is assumed that full payment of rates will be effected in 2003/04.

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Rhc 8-03_Appendix.doc

Annex A Housing Authority Strategic Objectives 2003/04Note (a) To facilitate the cost-effective provision of quality public housing and other housing assistance. To maximize the rational allocation of housing resources. To facilitate low-income families to acquire home ownership. To manage and maintain our assets with a view to maximizing their economic life and contribution. To make effective use of private sector resources in the delivery of housing and related services. To work in partnership with customers and other stakeholders. To make the fullest use of human and financial resources and information technology to meet corporate goals. To contribute actively and positively towards sustainable development. To develop new and innovative business opportunities.

(b) (c) (d)

(e)

(f) (g)

(h) (i)

Note : Subject to approval by the Housing Authority in March 2003

Rhc 8-03_AnnexA.doc

Annex B-1
HONG KONG HOUSING AUTHORITY Rental Housing Operating Account

(i)

(ii) Approved Budget 2002/03 $M

(iii) Revised Budget 2002/03 $M

(iv) Proposed Budget 2003/04 $M

(iii) - (ii) Increase / Decrease of Revised Budget Over Approved Budget 2002/03 $M %

(iv) - (iii) Increase / Decrease of Proposed Budget Over Revised Budget 2002/03 $M %

Actual 2001/02 $M INCOME Recurrent Income Domestic Rental Other Income TOTAL INCOME EXPENDITURE Personal Emoluments Rates & Government Rent Maintenance & Improvements Other Recurrent Expenditure Depreciation Share of Administration and Supporting Services Expenses TOTAL EXPENDITURE Operating Deficit Before Exceptional Item EXCEPTIONAL ITEM VDS Payment Operating Deficit After Exceptional Item

8,884.4 25.1 8,909.5

9,328.2 25.8 9,354.0

9,741.5 12.7 9,754.2

10,669.9 17.3 10,687.2

413.3 (13.1) 400.2

4% -51% 4%

928.4 4.6 933.0

10% 36% 10%

2,316.6 982.8 2,865.9 1,972.3 2,557.7 67.3 10,762.6

2,294.4 623.9 2,602.5 2,233.5 3,070.4 104.9 10,929.6

2,291.0 461.9 3,040.8 2,319.8 2,728.8 114.6 10,956.9

2,120.2 1,254.9 2,888.2 2,448.0 2,877.7 122.2 11,711.2

(3.4) (162.0) 438.3 86.3 (341.6) 9.7 27.3

0% -26% 17% 4% -11% 9% 0%

(170.8) 793.0 (152.6) 128.2 148.9 7.6 754.3

-7% 172% -5% 6% 5% 7% 7%

(1,853.1)

(1,575.6)

(1,202.7)

(1,024.0)

372.9

-24%

178.7

-15%

592.7

690.6

530.5

662.8

(160.1)

-23%

132.3

25%

(2,445.8)

(2,266.2)

(1,733.2)

(1,686.8)

533.0

-24%

46.4

-3%

Rhc 8-03_AnnexB.xls

26/02/03

Annex B-2
HONG KONG HOUSING AUTHORITY Rental Housing Operating Account

Revised Budget 2002/03 $M INCOME Recurrent Income Domestic Rental Other Income

Proposed Budget 2003/04 $M

Forecast 2004/05 $M

Forecast 2005/06 $M

Forecast 2006/07 $M

9,741.5 12.7

10,669.9 17.3

10,941.7 9.8

11,563.9 9.1

12,005.5 7.8

TOTAL INCOME EXPENDITURE Personal Emoluments Rates & Government Rent Maintenance & Improvements Other Recurrent Expenditure Depreciation Share of Administration and Supporting Services Expenses TOTAL EXPENDITURE

9,754.2

10,687.2

10,951.5

11,573.0

12,013.3

2,291.0 461.9 3,040.8 2,319.8 2,728.8 114.6 10,956.9

2,120.2 1,254.9 2,888.2 2,448.0 2,877.7 122.2 11,711.2

2,122.8 1,281.6 2,717.3 2,510.4 3,166.6 119.4 11,918.1

2,135.1 1,309.4 3,291.4 2,632.2 3,419.9 119.3 12,907.3

1

2

2,115.3 1,349.2 3,410.6 2,728.3 3,344.1 118.4 13,065.9

Operating Deficit Before Exceptional Item EXCEPTIONAL ITEM VDS Payment Operating Deficit After Exceptional Item

(1,202.7)

(1,024.0)

(966.6)

(1,334.3)

(1,052.6)

530.5

662.8

26.8

9.5

0.0

(1,733.2)

(1,686.8)

(993.4)

(1,343.8)

(1,052.6)

Note: 1. The sharp increase in maintenance and improvements in 2005/06 is because of no more write-back of M-Fund after the launch of sales of TPS Phase 6B in 2004/05. 2. The increase in depreciation is due to more new stock and planned improvement work for aged estates.

Rhc 8-03_AnnexB.xls

26/02/03


								
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