Left Behind

“How long do we have to wait? The government keeps giving us hope that it is going to happen,” said Ah Mei, an old woman in her seventies living with her husband in one of seven residential blocks in Bairro Iao Hon. What she longs for is the redevelopment of these buildings, which have been completed for nearly five decades, just like the government promises.
“Look at this iron, it’s dangerous,” said Ah Mei, pointing to an exposed bar on the ceiling of the staircase of her building. The housing complex she lives in is commonly known as a ‘multi-no’ building – translated as no property management, no homeowners committee, no checks on public facilities, and so on. In other words, the buildings are left to decay.
“If we could we would move away but we don’t have the money,” the old woman said. “That’s why we had high hopes of the government but it has failed us.”
Her frustration is not uncommon among the residents, in particular the elderly, of the district, as the authorities first proposed a blueprint to rejuvenate old neighbourhoods like Iao Hon more than a decade ago. Recent discussions about lowering the percentage of ownership needed to reconstruct old buildings could give the residents some consolation but observers believe there is still a long way to go with many unanswered questions regarding the issue.
After more than a year of discussions, the Urban Renewal Committee – a government-appointed council established last year to advise the authorities on urban renewal policies – reached a preliminary consensus in March that the approval percentage of flat owners needed to redevelop a building could be lowered to facilitate the rejuvenation of old districts such as Iao Hon and some other areas on the Macau Peninsula.
Describing the preliminary consensus as “a breakthrough,” U Kin Cho, vice co-ordinator of a sub-body of the Committee, said in March that they had initially agreed the percentage approval required for buildings of 30-40 years of age would be cut to 90 per cent, while it would be lowered to 85 per cent for buildings aged 40 years or more. In the event of major public interest or the buildings being demolished, the approval ratio could be changed to as low as 80 per cent, he said. Under the present legal framework, any redevelopment of a building must get the approval of all owners of a building.
The decision takes into consideration the protection of citizens’ rights of private property and the redevelopment of old neighbourhoods, he said, noting they have also looked into examples in other jurisdictions. For example, the approval percentage ranges from 80 per cent to 90 per cent for redevelopment in Hong Kong. It is a proposal that the government could consider when drafting the relevant laws and by-laws to support the reconstruction of old buildings, Mr. U added.

Private rights
The government has indeed drafted such regulations for a long time but with hiccups. After the launch of the drafting process of a bill on the rejuvenation of old neighbourhoods in 2006, the Administration tabled the bill to the Legislative Assembly for review in 2011. However, it scrapped the bill in 2013, which it said did not reflect the rapid changes in society. Officials have since proposed a new concept – urban renewal – that includes the idea of the redevelopment of old districts and which has re-ignited discussions.
Albeit there was criticism by legislators about the quality of the scrapped bill at the time, one of its highlights addressed the share of ownership required to kick-start redevelopment. The bill mandated that 80 per cent of approval of owners was necessary for the reconstruction of a building while the approval ratio was reduced to 70 per cent for a government-led project. At the time, some legislators refuted the premise that lowering the ratio could endanger residents’ ownership rights of private property.
Regarding this matter, legislator Cheang Chi Keong recently voiced his concerns once more. In a Legislative Assembly session last November Cheang stressed that the city’s mini-constitution – the Basic Law – clearly states that the rights of property ownership of residents must be safeguarded.
“The current laws say any redevelopment requires approval from all owners . . . and it’s true that any owners declining to do so will hinder the process,” he said at the time. “But you can’t demolish a building with an objection from an owner, who has the right to say no.” He added that lowering the ratio might lead to social instability due to the discontent of some flat owners.
Some in society are also worried that Hong Kong precedents – where some homeowners are forced to relocate when the contractor gathers enough approval to reconstruct a building to unleash better property values – might be replicated here.
There is no official estimate of the property value of the old neighbourhoods but some private studies in 2010 put a price tag on residential supply in those areas following redevelopment at a possible MOP50 billion (US$6.25 billion). Taking into account a hike of nearly 180 per cent in home prices since 2010, the value of properties post-redevelopment in the old districts could total some MOP140 billion.

Biggest hurdle
Acknowledging the importance of protecting residents’ right of private property, Lok Wai Tak, president of the Real Estate Development Chamber of Commerce, said the dilapidated state of some old buildings could affect the public interest. “Requiring approvals from all owners for reconstruction simply makes the process almost impossible,” said Lok, who also sits on the Urban Renewal Committee. “There is also a consensus in society that such a ratio should be lowered.”
Like Ah Mei, many residents in the Iao Hon district have been demanding action from the government for years. “Every one of us here hopes the government can put forward the redevelopment plan and regulations as soon as possible,” said fellow Iao Hon resident Mr. Wong, who only wants to be identified by his family name.
“We’ve been waiting for the redevelopment for a long time and the government should definitely lower the ratio [of ownership approval necessary] if this can help quicken the process,” he said; in his sixties, he has been living in the district for nearly 20 years. “The living conditions here are poor: there are problems of falling cement, water leakage and other woes from time to time.”
The residential blocks in Iao Hon are not alone in the city that could be subject to deterioration. According to figures provided by the authorities, over 4,000 buildings in Macau are 30 years or over, of which more than 1,000 are 40 years or more, while some 200 buildings are 50 years or older. The General Union of Macau Neighbourhood Associations, one of the most prominent grassroots groups in the territory, has estimated that about half of the old buildings in the territory are left unattended and could pose future risk.
As the current laws mandate approval by all owners for redevelopment, the city has so far only seen three delapidated buildings in old neighbourhoods successfully reconstructed by their flat owners – namely, Edificio Fok Neng, Edificio Koi Fu in San Kio, and Edificio Meng Heng in Ilha Verde.
Leong Keng Seng, founding president of the Macau Property Evaluation Association, who assisted in the three projects, said bluntly that the biggest challenge they had to overcome during the process was to acquire approval from all owners. “It was difficult to get in touch with some owners, who may not reside in Macau, and some flats were involved in inheritance cases,” he said, citing that it took more than three years to acquire approval from all the 29 flat owners in the Fok Neng case.
“Even though the approval percentage is lowered to as low as 80 per cent it is not easy to push forward the redevelopment of old neighbourhoods such as the Iao Hon district that involves with more than 2,000 flats,” he continued. “This means you still have to get the approval of at least 1,600 flat owners.”

Tax breaks
He proposed the redevelopment of Iao Hon be divided into several phases to make the process of acquiring approval from owners easier. According to a survey by the Land, Public Works and Transport Bureau in 2012, nearly 50 per cent of the 2,428 households in seven residential blocks of Bairro Iao Hon were tenants, 28 per cent were flat owners, while the conditions of the remainder were unknown. The Bureau admitted at the time that the uncertainties clouding the ownership of flats in the residential complex could pose challenges during the redevelopment process.
Not only does the approval percentage affect the reconstruction of old buildings but also many other issues. “Another problem is the double taxation arising from the redevelopment process that increases reconstruction costs and the burden of flat owners,” Mr. Leong highlighted.
Under the current legal framework, owners have to transfer their property rights to a contractor prior to construction, with stamp duty levied upon the contractor, which is regarded by the government as having bought all the flats. After redevelopment, the contractor will transfer back the property rights to the owners, in which the contractor will be deemed as a seller and levied a special stamp duty of up to 20 per cent, while the flat owners will be regarded as buyers and levied a stamp duty.
For example, the redevelopment cost of Edificio Koi Fu only amounted to some MOP8 million but the flat owners had to pay a construction fee of MOP700,000 and a stamp duty of MOP200,000-MOP300,000 each.
“This [double] taxation is pretty unfair to flat owners as no real transactions actually take place in this process,” says legislator Kuan Tsui Hang. “This will only enhance the economic burden of the owners and [dampen] their willingness to redevelop their old buildings.”
As it may still take time for the government to produce any concrete blueprint concerning the urban renewal policies, Ms. Kuan suggested authorities first offer tax breaks and propose other measures that could help encourage owners of some old buildings to consider redevelopment.
The land and public works bureau said in a statement in early January that a draft bill of a tax break for redevelopment projects, such as the exemption of stamp duty for old or delapidated buildings, has been completed. The legislative process could start in the first quarter of this year, the Bureau said at the time, but no news has since been heard.

More questions
Mr. Lok of the Urban Renewal Committee agrees that the high construction costs might turn some owners off redevelopment. The construction cost of Macau is the second most expensive in Asia and fifth most expensive in the world, according to a report published by architecture consultancy Arcadis in March.
“The Monetary Authority [of Macau] and local banks should think of some new means to provide loans for flat owners during the redevelopment process . . . as some owners may have financial difficulties,” he said. The plot ratio of some old buildings could be raised for redevelopment to attract contractors to participate in the projects, he added.
Besides the approval percentage, the Urban Renewal Committee is discussing ‘temporary housing’ whereby the government provides residences for flat owners of old buildings during the redevelopment or will financially compensate owners due to the lack of land resources for temporary homes. But there are no details for such a concept like the number of temporary houses provided and where they are located.
The government also revealed last year it would set up a fully-owned company to push forward the urban renewal of old neighbourhoods, saying this would give them more flexibility to handle all the matters arising from the redevelopment process. Following a recent meeting in March, Alfred Wong Seng Fat, another vice co-ordinator of a subcommittee of the Urban Renewal Committee, only said they will study the structure of such a company, its composition, capital amount, goals and powers, while no timeframe was provided when such a firm would be set up.
With so many questions still clouding the redevelopment of old districts, Ah Mei only has one wish: “I hope my husband and I can move to a new home here with better [living] conditions before we die,” she sighed.

[Box]

Redeveloping old neighbourhoods

Early 2004 — Then Chief Executive Edmund Ho Hau Wah says in his Policy Address that the redevelopment of old neighbourhoods is included in the working agenda of the Administration
Mid 2004 — Redevelopment of old districts is one of the key pledges made by Mr. Ho whilst running for his second term as the city’s Chief Executive. Then Secretary for Transport and Public Works Ao Man Long says a cross-departmental team has been set up with the redevelopment mainly targeting buildings aged 30 years or older
End 2005 — Mr. Ho signs a dispatch to approve the establishment of an advisory body on the rejuvenation of old neighbourhoods
2006 — The cross-departmental taskforce starts drafting a bill on the redevelopment of old districts while it works closely with the advisory body to collect public opinions on the matter
2007 — The first draft of the bill is completed, and the advisory body sets up a website for communication with the public. Areas such as Iao Hon, the Border Gate, Areia Preta, Ilha Verde, Fai Chi Kei, Patane, Barra, the Inner Harbour and San Kio on the Macau Peninsula are considered as old neighbourhoods in need of redevelopment or restructure: Iao Hon is chosen as a pilot area for redevelopment, while San Kio is the pilot area for restructuring
2008 — The advisory body holds more than 50 meetings with the government taskforce on the draft bill, with more than half of the articles in the bill revised. The draft bill is ready to enter the legislative process by year-end
2009 — The taskforce further amends the draft bill based upon opinions from different government departments and it also drafts three by-laws to support the draft bill
2010 — The advisory body holds 34 meetings to discuss the drafts of by-laws
March 2011 — The draft bill is finally submitted to the Legislative Assembly for review and deliberation after several delays. It is approved by the legislators on its first reading
2011-2013 — A subcommittee of the Assembly holds dozens of meetings to discuss the bill but some legislators criticise its quality
Aug 2013 — The government announces the bill will be withdrawn from the Assembly as it does not reflect the changes society is undergoing. The Urban Planning Law, Land Law and Cultural Heritage Law are approved by the Assembly in the same year and can address some of the problems covered by the old neighbourhood bill, it adds
2014 — During the election seeking another term in the city’s top job, Chief Executive Fernando Chui Sai On proposes the concept of urban renewal to facilitate the redevelopment of old neighbourhoods
2015 — The advisory body on the redevelopment of old neighbourhoods is scrapped, while Mr. Chui confirms the concept of urban renewal will replace the concept of the redevelopment of old neighbourhoods in the official agenda. Secretary for Transport and Public Works Raimundo do Rosário says urban renewal is not only limited to redevelopment of old buildings but also buildings in need
2016 — The advisory body on the matter, the Urban Renewal Committee, is set up and holds several meetings to discuss measures for reconstruction of old buildings, such as lowering the percentage of approval of flat owners needed for reconstruction. Mr. Chui says the government will provide temporary housing for flat owners during the redevelopment process, and it will set up a fully-owned firm to facilitate the redevelopment
Now — The Committee is still discussing the relevant measures, with no timeframe when any of the measures might materialise or be implemented . . .

Sources: Government Information Bureau; Land, Public Works and Transport Bureau; Policy Addresses; Legislative Assembly