Hong Kong's anti-corruption watchdog said Thursday it had arrested a minister for allegedly abusing his housing allowances, plunging the new government into scandal.

The Independent Commission Against Corruption (ICAC) said it had arrested four people including a minister and a senior civil servant for allegedly violating their government housing allowances.

Public broadcaster RTHK identified the officials as development minister Mak Chai-kwong and Tsang King-man, an assistant highways director. An ICAC spokesman declined to comment when contacted by AFP.

The arrest came shortly after officials said Mak, who only last week took charge of a portfolio overseeing housing matters, had resigned with immediate effect.

The 62-year-old minister has been dogged by allegations that he and Tsang misused public funds for "cross-leasing" flats to each other in the 1980s while they were claiming government housing allowances.

Chinese-language newspaper Apple Daily News cited land registry documents to show they had bought adjacent flats and leased them to each other.

It said Mak had claimed a total of HK$250,000 ($32,250) in civil service tenancy allowances from 1986 to 1988, but the minister has denied any wrongdoing.

"I gave (the civil service bureau) all the facts, and I don't think I breached any regulation," Mak told local radio according to The Standard daily.

"I have followed regulations and I don't think the matter involves my personal integrity," he added.

Mak has not commented publicly on the reasons for his resignation.

The scandal is a blow to newly installed leader Leung Chun-ying, who took power as chief executive on July 1 after promising to restore government integrity in the eyes of an increasingly sceptical public.

"He wants to present a strong reform-minded government, but it has certainly lost its shine," City University political analyst Joseph Cheng said.

"His administration is certainly in a bad situation when so many figures from the chief executive himself to so many members in the governing team have been involved in these scandals and troubles.

"In the eyes of the public, this is the first resignation and won't be the last."

Leung has faced calls for his resignation and a legal challenge to his rule over his failure to declare illegal structures at his home, a sensitive issue in the crowded southern city of seven million people.

Leung's new health and education ministers have also carried out unauthorised improvements to their homes, according to media reports.

Former chief executive Donald Tsang ended his term in disgrace in June after admitting to accepting inappropriate gifts from powerful tycoons in the form of trips on luxury yachts and private jets.

Meanwhile three of the city's richest men, the property developing Kwok brothers, have been arrested on suspicion of corruption in a case also involving a former top bureaucrat in Tsang's government.

Leung said it was "not appropriate" for him to comment on the arrests, when he was swamped by reporters during a visit to a local theme park.

A poll released by the Chinese University of Hong Kong last month showed Leung's popularity rating falling to 51.5, down 4.2 points from a month earlier, with nearly 40 percent of people saying they did not trust the government.

Leung's first day in office was marked by the city's biggest pro-democracy protest in nearly a decade.

The former property consultant was chosen by a 1,200-strong electoral college packed with pro-Beijing elites, but he has promised to usher in full suffrage for the next chief executive vote in 2017.