Extending leases for older HDB flats 'will have serious trade-offs'.
Amid calls for automatic lease extensions for older public flats, Minister for National Development Lawrence Wong has said that the issue involves serious trade-offs and ramifications.
One key matter is that despite the government's best efforts at planning, "we are still severely constrained by space in Singapore", he said in Parliament on Thursday.
"If there is no more land to recycle for future public housing, then what will happen to our children and grandchildren? How will they have access to subsidised housing in the future?" he said.
Another issue is that of the maintenance needed for older flats. This will be costly for residents, he said.
It should also not be assumed that everyone wants lease extensions, he said, describing the issue as "not a straightforward matter".
The minister said: "It will be easy for me to give you a politically expedient answer now and try to wave away the problem. But there are serious trade-offs and ramifications to consider."
He said the Government must grapple with these difficult questions, study the matter and "do the responsible thing".
"Our duty is not just to the the current generation who already own homes, but also to the future generations - those not yet voting, and those not yet born, whose lives and future depend on us making the right decisions on their behalf."
He said that at the end of the day, the Government wants to ensure every generation will be able to have an affordable and quality home in Singapore.
Mr Wong also said he was glad many MPs who spoke about the issue recognised it to be a complex matter. Several MPs such as Cheryl Chan (Fengshan) and Alex Yam (Marsiling-Yew Tee ) had offered suggestions. The Workers' Party's Leon Perera also spoke about this, and the minister said he looked forward to the opposition party's suggestions on this matter, as well as from all parties and Singaporeans.
"I recognise that it's a matter that all Singaporeans care about, and we want to listen to your views and feedback."
Mr Wong noted that HDB leases are for 99 years, which "is a long time. It covers two generations".
He said the oldest Housing Board flat today is around 50 years, and that the majority have more than 60 years remaining on their leases. He stressed that lease extension is not an immediate issue and "we still have time to do this work".
Older HDB flats became a concern after Mr Wong cautioned in a blog post in March last year that not all old flats will be eligible for Selective En-bloc Redevelopment Scheme (Sers) and that those not selected will eventually be returned to the state when the 99-year lease matures.
Since then, there have been calls for the Government to consider options such as automatic lease extensions.
On Monday, Ms Chan also suggested allowing private developers to top up the lease in selected precincts in mature towns.
Mr Wong on Thursday said that homeowners are "overly anxious" about how much their older flats can fetch in the resale market.
This is a reversal of the trend previously, when people were speculating in older HDB flats hoping to get Sers benefits
He reassured them, saying: "There is still value in older HDB flats - value which can be unlocked for retirement."
He cited examples of how people have managed to buy smaller flats from sales proceeds, as well as programmes such as the Lease Buyback Scheme, where homeowners can sell part of the remaining lease to the Housing Board. They can also rent out a bedroom.
"So the monetisation schemes we have are in place, and they are working; we will continue to review and enhance the schemes, and help our elderly unlock the value of their flats for retirement," he said.
He also made reference to online speculation that the Government would stop the use of CPF savings entirely for the purchase of HDB flats.
This stemmed from a Straits Times report last week highlighting a suggestion from an academic. Singapore University of Social Sciences labour economist Walter Theseira had suggested a redesign of the Central Provident Fund (CPF) so that people no longer need to pay for housing out of CPF, by cutting contribution rates to focus on retirement and health.
As the values of homes may dwindle as they age, this would mean less retirement assets for people, said Dr Theseira.
Some people had taken the article, which initially did not fully reflect the academic's views, to mean that the Government intends to stop the use of CPF savings for the buying of HDB flats.
Said Mr Wong on Thursday: "Let me be very clear about this. We are not stopping the use of CPF for HDB flat purchase. Even for older flats, CPF can still be used but under certain conditions to safeguard homebuyers' retirement adequacy."
Restrictions on CPF usage kick in when the remaining lease is less than 60 years. A homeowner can use his CPF money if his age plus the number of years left on the remaining lease of the property is at least 80 years, but subject to restrictions. No CPF money can be used if the remaining lease is less than 30 years.
Mr Wong reiterated that the Government wants to make the resale market work better for potential buyers and sellers, and that the HDB resale portal has simplified and expedited the resale transaction process.
"We will provide more information on the available flats in the market; help buyers and sellers transact more smoothly and make more informed housing decisions."
Mr Wong said the Government is also "watching the private housing market" and that it "cannot control or fix prices".
"We recognise that there may be over-borrowing in a very low interest rate environment, and that sharp price changes that run ahead of fundamentals can be destabilising to the broader economy," he said.
Adapted from The Business Times, May 18th, 2018.