TAIPEI (Taiwan News) – Taipei City councilors and TPP candidates on Wednesday called on the central government to intervene in the financial troubles of Chao Chi Property Management Consulting and protect investors, landlords, and tenants.
TPP Taipei City Council candidate Wu I-hsuan (吳怡萱) said Chao Chi used expected revenue from its participation in government social housing programs to issue and repay corporate bonds, per ETtoday. She said investors were drawn to Chao Chi and its subsidiaries, Hermit Crab Rental and Zhao Ji Investment, because of Chao Chi’s involvement in government housing programs and the awards it had received from the Ministry of the Interior.
Wu questioned whether the government adequately reviewed companies bidding for social housing rental-management contracts and called for greater oversight of major operators.
An investor surnamed Chin (金) alleged that Chao Chi founder Li Chien-cheng (李建成) knew the two subsidiaries were experiencing financial problems but allowed employees to continue issuing bonds. He also questioned Chao Chi’s efforts to distance itself from the subsidiaries.
Hermit Crab Rental and Zhao Ji Investment are chaired by former Chao Chi executives. The company said Monday that it has no connection with Hermit Crab Rental and holds a 30% stake in Zhao Ji Investment, per Tai Sounds.
Investors have urged the government to conduct a thorough investigation and take responsibility for resolving the fallout, per Liberty Times.
A court on Saturday approved prosecutors’ request to detain Li. Hermit Crab Rental Chair Lin Yu-jen (林佑任) was released on NT$2 million (US$62,162) bail, per ETtoday.
Li is suspected of using NT$700 million of the NT$1.8 billion in Chao Chi corporate bonds issued in 2020 to purchase cars and cover other luxury expenses, according to prosecutors. He faces allegations of breach of trust.
Acer, which owns about 20% of Chao Chi, moved to stabilize the company last Wednesday, per PTS. However, the company withdrew its appointed Chair and General Manager Li Wen-hsiang (李文詳) and its representatives from Chao Chi’s board on Friday.
The National Housing and Urban Regeneration Center said Monday that it had begun transferring Hermit Crab Rental’s rental-management services to other operators because the company was no longer able to operate, per Mirror Daily. Interior Minister Liu Shyh-fang (劉世芳), responding to lawmakers’ concerns, said the ministry’s priority was to ensure that neither landlords nor tenants were adversely affected, per SETN.
Liu acknowledged that the rental-management industry is too concentrated among a small number of operators and said the government is considering ways to address the issue. She also said the government was considering legislation that would allow it to take over rental-management companies facing serious operational problems.
Housing market expert Lee Tung-jung (李同榮) said the Chao Chi crisis highlights potential risks in the government’s social housing policy, per Liberty Times. He said the government’s emphasis on subsidies, reliance on a small number of operators, and insufficient oversight and risk management could allow the financial problems of major companies to develop into broader policy risks.
Lee called for stronger oversight mechanisms, including risk assessments and financial reviews, to ensure that the expansion of social housing does not outpace the government’s ability to monitor its operators. He said the Chao Chi controversy should prompt a broader review of the government’s housing policy.
Housing expert Su Ming-chin (蘇明俊) noted that before Chao Chi, Yong Sheng Rental Housing Management had served as a model operator under the government’s rental-management policy before leaving the market because of financial problems, per Business Weekly.
Su said the capital required to operate rental-management services would naturally push the market toward a small number of large operators. However, he warned that asking private companies with limited capital to assume the liquidity risks associated with paying landlords, delayed tenant payments, property management expenses, handling disputes, and potential delays in government payments across tens of thousands of rental units is not viable in the long term.
Su said having a second landlord in social housing is not uncommon, but it is unusual for private companies to take on that role. He cited Ireland’s Rental Accommodation Scheme as an alternative model, under which local governments sign contracts directly with landlords and act as a second landlord before renting the properties to more vulnerable tenants.
