HDB flats rental and ownership – Govt’s mistaken assumption fuel debate
The government’s assumptions that house rental and ownership is binary is mistaken. Instead, it should accept that the two are “a spectrum between absolute ownership and short-term rental arrangements.”
And “by feeding this assumption, the Govt is creating problems for itself down the road,” said former associate dean of the Lee Kuan Yew School of Public Policy, Donald Low, in response to the ongoing debate on the status of HDB flats.
Questions have been raised of whether public housing flats are owned by owners, or if they are merely rented, given that flats are sold on 99-year leases, with declining value as they age.
While such questions have been raised in the past, the latest controversy was sparked by the Prime Minister’s announcement in his National Day Rally speech of the new Voluntary Early Redevelopment scheme (Vers).
Vers, which will only be implemented in 20 years, allows homeowners to sell the remaining lease to the government when the flat reaches 70-years old. Details of the scheme will be announced next year.
Government ministers have defended the scheme and the Housing and Development Board’s (HDB) asset enhancement programme introduced in the 1990s.
Vers, they say, is part of the government’s commitment to include Singaporeans in having a stake in the country’s progress.
With Vers, however, PM Lee had cautioned in his NDR speech that compensation will not be as generous as that of the SERS programme, leaving many to speculate on the quantum the government would offer.
PM Lee on Friday reiterated the government’s long-standing position that homeownership is a “key national policy” which “has improved lives significantly for all.”
He also rejected the suggestion that a 99-year lease is merely “extended rental”, and not a sale.
“HDB lessees have all the rights over their flats that owners of such leasehold private properties have,” he said. “You can live in it, you can transact it, you can bequeath it to your children – it is yours.”
PM Lee’s argument echoes that of the Minister for National Development, Lawrence Wong, three days earlier.
Mr Wong, responding to a question at a public forum on Tuesday, compared HDB ownership to the purchase of a car.
“When you buy a car, how long can you use a car for?” he asked. “Is it a rental car, or your car? A 99-year lease is far longer than 10 years. It is yours. It is an asset. It is owned by the homeowner.”
In March last year, Mr Wong’s remarks that HDB flat homeowners should not expect their flats to undergo the SERs programme revived concerns that the value of flats will diminish to zero.
“As the leases run down, especially towards the tail-end, the flat prices will come down correspondingly,” he said last year.
On Tuesday, however, he struck a more optimistic tone.
“There is a high likelihood that over a period of time, if the economy does well, if incomes rise, then property values will appreciate together with the fundamentals of the economy, and your stake in the nation – your home – can also appreciate in value,” he said.
On Friday, PM Lee also said that HDB flat owners in fact “enjoy extra privileges”, compared to private homeowners, “because their flats get upgraded from time to time with generous government funding.”
But are such comparisons of HDB flats to private homes reasonable?
Professor Low said the problem with this in that the two are actually quite different.
“[It] is clearly the case that there are things that owners of private apartments can do with their developments that owners of HDB flats can’t,” he said on his Facebook page. “[For example], the former can organise their own en bloc sales at any time, the latter can’t.”
He said that “[by] insisting that both are essentially the same, the Govt is inviting comparisons between the two.”
“And when some of the differences become (politically) salient, people will accuse the government of being untruthful,” he explained. “It can all be avoided if the Govt simply said that the private apartments and HDB flats are close but different points on the ownership-rental spectrum. So the rights are not exactly the same.”
“In any case,” he added, “there’s no such thing as absolute ownership in Singapore. Even if you own a freehold property, the state can still acquire it compulsorily.”
Veteran architect Tay Kheng Soon, brother of former Education minister Tay Eng Soon, also explained another difference between a HDB flat and that of a private condominium.
“In the case of private condos, many are on 99-year leases but all the units have a strata title,” he said on his Facebook page on Wednesday.
“A strata title defines the unit size and its undivided share of the land. For example, let’s say there are 100 units in the condo, therefore each unit strata owner has a 1/100 share of the land should the condo be en bloc to a new developer.
“Say there are 50 years left of the lease. The new developer pays to SLA a top-up sum based on a formula to bring the lease back up to its original 99-year tenure status. Usually developers do en bloc purchases because URA has assigned increased plot ratio. This enhanced plot ratio is a privilege that has to be purchased. It is not an entitlement.
“In the case of HDB, flats ‘owners’ have only purchased a 99-year lease. They have no share of the land unlike private condos sold under strata title. The simple difference is one is a strata title and the other is only a lease even though both lands are 99-year leases. It will be interesting how the compensation will be computed in VERS.”