Ensuring Equitable Outcomes in Housing Redevelopment

ADJOURNMENT MOTION

The Leader of the House (Ms Indranee Rajah): Mr Speaker, Sir, I beg to move, "That Parliament do now adjourn."

Question proposed.

Ensuring Equitable Outcomes in Housing Redevelopment

5.46 pm

Ms Nadia Ahmad Samdin (Ang Mo Kio): Mr Deputy Speaker, Sir, in Mandarin, for my residents, please.

(In Mandarin): [Please refer to Vernacular Speech.] Since the announcement of SERS in April, I have spoken with a number of residents about the effect of SERS on their lives.

I have a total of 606 households affected by SERS. Each of these units tell different stories – a single mother who worked hard to move out of a rental unit into a resale flat after her divorce; an elderly uncle who hopes to continue to live in a same sized flat so that his grandchildren can continue to come over and stay; a resident who recently used her life savings to renovate because they had no choice due to spalling concrete of their old flat.

Two elderly sisters bought flats adjacent to each other in the hopes of being able to look after each other in their old age. The older sister told me that her salary earned her barely enough to get by and she had just paid off her loan. Now she doesn’t know what to do; when she was talking to me, she almost broke into tears.

I would like to share the concerns of my residents. They wrote to me, "Upon hearing the news on SERS, we are constantly worrying over our housing issue." My residents are worried; I am also very worried because most of them are senior citizens and retirees.

Despite that, they still say that they will work together with the Government to achieve a win-win situation so that the residents can retire in a stress-free environment, and that the land can be better utilised for our future generations.

(In English): First, Mr Deputy Speaker, Sir, I would like to sincerely thank our residents in Cheng San-Seletar for their trust in sharing their worries and concerns with my team and I, as well as the HDB team, who have been willing to listen to these concerns and also have taken steps to propose options for residents. It has been many sleepless nights on either side.

Since the announcement in April, I have had the opportunity to speak with my residents who live in the four blocks been identified for the Selective En bloc Redevelopment Scheme (SERS). I have spoken to some residents during my house visits, at the Meet-the-People Sessions, on the phone, via email and other means.

In past SERS exercises, words, such as "windfall", or "the lucky ones" were used. But SERS can be seen as a bane. It depends on the circumstances of each individual household and the sites which have been identified.

I have encountered different reactions. Some look at it as an opportunity to replace an old flat with a new one that will likely appreciate in value. Meanwhile, for others, it is a destabilising event. Beyond financial reasons, some are reluctant to move as they saw themselves growing old for the rest of their lives in the current unit.

These perspectives are informed by factors like age of the home owners, health, employment status, ability to take on debt and the financial implications of the large difference in market value between their old flats and the price of the new ones.

This Adjournment Motion is motivated by the Ang Mo Kio SERS exercise in the constituency that I serve. However, as redevelopment is a fact of life in land scarce Singapore, I hope that the context of the issues raised and potential solutions proposed will be given consideration in the broader pursuit of achieving equitable outcomes in housing redevelopment.

Sir, with more than 80% of our population today living in HDB flats, home ownership continues to be a cornerstone of our public housing system. As our flats continue to age creeping towards year 99, redevelopment has become an even more important part of being able to fulfil the housing needs of future generations.

I would like to take a moment to briefly look at the rationale for the 99-year lease.

In the 1950s, living conditions were a far cry in the settlements than what they are today. And to remedy this, in the 1960s, the HDB was established. From its formation, it was clear that in land scarce Singapore, the constant development of new towns, further and further out from the core, was not going to be tenable. And, as explained in National Day Rally 2018 by Prime Minister, the 99-year lease was introduced to be fair to future generations too. At the crux of this is the ability to be able to, upon the end of the 99-year lease, reclaim the land and build new flats for the next generation of home owners.

This makes sense. Demand for new public housing is steep as earmarked by the oversubscriptions generally each time HDB releases a new BTO project from the many Meet-the-People Sessions appeals that my fellow hon colleagues face every week.

Redevelopment programmes like SERS were introduced as part of a broader strategy to meet this demand by ensuring that land is used more effectively. SERS is a selective scheme limited to precincts with high redevelopment potential. We have heard that this applies to only approximately 5% of all HDB estates and that most projects have already been selected.

I ask that we consider how best to mitigate the chasm between the needs of the future and the needs of the present. SERS is blunt in its application affecting all residents of the identified estates, but given the variety of the home owners and complexity of the housing schemes, the solutions offered cannot be based on a one-size-fits-all approach. In this regard, HDB has over the years introduced new policies to cater to a diverse customer base, sensitive to needs and refined provisions to suit changing circumstances.

The implementation of redevelopment programmes like SERS faces inherent challenges, exasperated by factors like an ageing population and the financial burden inherent to a decaying lease.

To illustrate this, the SERS flats in this Ang Mo Kio are approximately 43 years old, with around 56 years left on the lease as of the date of the announcement. At the same time, more than half of my residents are over the age of 55.

Take the case of Mr S, a retiree who shared that he has lived there for over 40 years – he is the original owner. He has paid off the loan for his flat and has been living on his savings since he first retired. His daughters and grandchildren visit frequently and they see this time and space together as a retreat.

He is in his 70s and so, can no longer take out a new loan, which means that he will need to use his savings to pay for the replacement flat. Due to the difference in lease values of the old and new flat, according to him, HDB's conservative estimates were that he might have to pay $135,000 if he chooses a comparable unit of the same size.

And many residents who showed me their estimated financial plans were worried that just to maintain a flat of the same size at the replacement site, could involve a top-up of $70,000, $80,000 or $90,000, which meant dipping into their retirement savings, or trying to find a new loan. In the alternative, they could move to an area where houses are cheaper, or accept a smaller unit. But given that they did not ask to be rehomed, or that they were interested in a unit with a a new lease in the first place, these outcomes are, to put it plainly, shocking to them.

For this reason, I do welcome the recent announcements by HDB to offer alternative lease options and I sincerely thank those involved in bringing this to fruition as I know that such shifts in policy require much deliberation.

But even with these options, there are still gaps to cross as needs vary greatly across our resident demographics.

While I understand that it is improbable in policy making that every single circumstance gets accounted for, I think Members of this House will agree that the goal is to strive towards making sure that home owners do not get disadvantaged by redevelopment programmes like SERS. And since value will be unlocked, I hope that this can be shared with residents

I have some clarifications. I will begin with rehousing options, focusing on the options for a new replacement flat.

Two days ago, HDB announced some bold additions to the rehousing options available, which also meant changes in my speech.

In the discussions I have had with residents, a significant number indicated that they did not need or want to buy a new 99-year lease. They just want to live out their retiring years in peace. I am glad that residents now have this option of a 50-year lease. During house visits on Saturday, Mdm Loh and Mr Cang, in their 60s and 70s, were appreciative that this option was now available, allowing them to move to a brand new flat of a similar size, for roughly the same number of years left on their current lease by the time the replacement site is completed.

But there may still be barriers standing in the way of achieving the intended positive effects.

Notably, the Bala Curve: the financial value of leases decay in an accelerated fashion towards the end of the lease.

In simple terms, what this might mean for SERS residents is this: 50% of the lease does not mean the 50% of the listing price. Every 99-year leasehold land in Singapore is pegged to 96% of freehold land's value. As the lease starts to be used up, the value of the land as a percentage of the freehold land decreases.

Estimates drawn up by HDB naturally make certain assumptions. Residents will be able to use all their CPF refunded sums to buy a new flat, they are eligible for a SERS grant of $30,000 and there is no outstanding loan for their current home.

Based on these assumptions, I understand that residents who decide to purchase homes on a 50-year lease will generally see positive proceeds from the sale of their flats.

In the same examples provided by HDB, should the current home owner pick the 99-year lease option for a replacement 4-room flat, they could be $55,000 out-of-pocket, as an estimate.

But what percentage of residents actually meet all these assumptions?

I seek the Ministry's assurance that no resident will have to top up further funds should they choose this proposed 50-year lease option. And if it is not the case, then what will HDB's approach be to ensure no resident is disadvantaged?

As a part of HDB's homes for life strategy, this option is only granted to home owners over the age of 55. And I ask if the HDB will consider extending this option to younger home owners on a case-by-case basis, if they find it more affordable.

I also note that home owners who purchase this 50-year lease will be able to sell or rent out their flats in the future. And given the young age that this applies to, I think this is a good idea. However, I seek some clarity.

For example, a 46-year-old resident who may go through a medical emergency in 10 years after moving into the new home which causes a lot of financial strain, to the point where her family may need to downsize their house to receive cash on hand for treatment.

I understand that it is not possible for HDB to know what the housing market will be like in the future, but I wonder if the market for such shorter-lease homes will be a ready and favourable one for sellers. How will they be priced and what will happen once the full 50 years run out given that the rest of the estate will have until 99 years? In the future, this estate may pose a curious mix of flats with varying leases, potentially creating price distortion in the market and I would like to ask if HDB has considered these implications.

Sir, one other change which HDB has proposed is to permit eligible residents to participate in the Lease Buyback Scheme (LBS) with their existing flat. Previously, flat owners could no longer apply for the LBS after their flat has been announced for SERS and would have to fulfil a five-year minimum occupancy period (MOP) on their replacement flat.

Given that many living in these SERS blocks are seniors, a significant portion will qualify for this. However, the take-up rate of LBS is low, is fairly small – 1,636 households in 2019 and 1,528 households in 2020.

There are both emotional and financial reasons given for this. Some wish to hand their homes down to children, some prefer to sublet as rental income, some would rather the cash be realised on hand rather than going into CPF and some feel there is uncertainty if they outlive the length of the lease.

Through this SERS exercise, I fully empathise with the concerns of our residents. As LBS requires careful consideration, I would like to ask if HDB will be able to consider either dialogues or individual sessions with seniors who wish to consider this.

One other rehousing option is a 10% priority in new sales exercises if the delivery possession date of such flats is before that of the SERS replacement site. Some residents see this as a good opportunity to move nearer to their children or grandchildren, or nearer to schools of their school-going children's choice.

But I have two points here. Some residents have also expressed hopes of applying and receiving the 10% priority allocation for another upcoming Ang Mo Kio BTO launched in August 2022, consisting of 2-room Flexi, 4-room, 5-room and 3Gen flats, in particular highlighting that this would be nearer the MRT station. For inter-generational families or young families who wish to take this chance to buy a bigger home, the 5-room option here, which is not available in the SERS replacement site, is an attractive and important one. Some are eagerly awaiting to hear the delivery possession date.

Priority allocation would allow them some certainty, as the largest flat type in the previous Ang Mo Kio BTO in November 2019 was oversubscribed by more than 13 times. I would like to also ask, based on past SERS exercises, how many exercises have SERS affected residents been able to choose from, on average, which allowed them this 10% priority allocation? Knowing these estimates will allow residents to plan accordingly.

Out of the 606 resident households, there are approximately a quarter of residents who are required to pay a resale levy. I understand the principle of this is building a pot of monies that will be redistributed from sellers who have benefited from subsidised housing in the past, to buyers whose turn it is now to benefit from said subsidy. The resale levy payable is determined at the point you book your second subsidised flat and payment must be made, using your flat sale proceeds and/or cash. Housing loans are not to be extended.

In 2019, hon Member Ms Tin Pei Ling had asked, "Given that SERS is involuntary, whether the Government would consider waiving the resale levy for households affected by SERS". This is an ask by many who do not have this cash and I would like to ask if MND can consider waiving or deferring the payment of this levy.

I appreciated the HDB SERS team who have taken great pains to walk through the SERS timeline in detail with residents. I understand that the valuation of the homes will be released sometime in Q42022. Many have felt the uncertainty, with some already putting their flats on the open market for prices as high as $700,000.

The rehousing decision has to be made by Q12023. I ask for the Ministry's assurance that the residents will be given ample time to consider their options and many have shared that three months are not enough. They hope that valuation will be carefully considered and released as soon as possible so that they can make plans.

And finally, on valuation. Many have expressed disappointment on the estimations, highlighting the number of bus services currently running at the SERS blocks versus the new site, access to wet markets and in particular, proximity to the future Tavistock MRT station. Works for this station has started, and they will be putting up with the dust and the noise, but not be able to reap the benefits.

Could the Ministry clarify if these such conveniences are being considered in the independent valuer's valuation and also that the new site will be improved along the way to include amenities, given that this estate will be home to at least 1,000 households?

I also understand that the new SERS replacement area has been marked for further residential use. Could the Ministry please elaborate what the residents can expect in the future and what will become of the old site?

On pricing, the range of a 4-room flat in the replacement site is up to $563,000 and with BTO prices rising, I would be grateful if the Ministry could share what the breakdown of the components that make up this price?

Finally, one other concern I have is on the number of new replacement flats available. The projected total number of flats is 1,065 up to level 25, whereas the current SERS flats only have 606 units up to level 13. So, based on my estimation, this means that there is only 530 flats in the new site that level 13 and below. This implies that if all current residents select the new site, some residents will have to buy higher floor, meaning at a higher flat price, or may have to choose a different flat type, depending on the mix.

I will be grateful if HDB could please revisit the flat mix and ensure that there is a comparable flat? Mr Deputy Speaker, in Malay, please.

(In Malay): [Please refer to Vernacular Speech.] As we have already seen, the ability to own a house is one of the main concerns of every Singaporean.

For young couples who have just started working, they are worried that their savings and CPF funds will not be sufficient to buy a new flat in view of the rising cost of housing. For those who have retired like many Cheng San – Seletar residents who were selected to undergo SERS, they are worried that they cannot afford a replacement home.

Therefore, subsidies and grants of $30,000, and a $10,000 removal allowance for reasonable expenses are most welcome. I hope the Government can review the subsidies and assistance given because I understand that it was last revised in 2014.

(In English): Mr Deputy Speaker, Sir, I am committed to bringing my residents' appeal to Parliament. We are 606 affected households – hardworking Singaporeans who have worked for most of their lives to pay off their housing loans. And many have been looking forward to living out their older years, debt free. Each of these units tell different stories and many of them are close neighbours and even hope to ballot together to continue staying along the same corridors.

I am grateful that we have written a successful housing story over the past few decades and while there are no easy answers in redevelopment, whether SERS or VERS, as our leases decay, we must write a new chapter, assure and bring along our people, so they know that they will always have a fair and concrete stake in our country. [Applause.]

Mr Deputy Speaker: Minister Desmond Lee.

6.06 pm

The Minister for National Development (Mr Desmond Lee): Mr Deputy Speaker, I thank the Member for her passionate speech. The Selective En bloc Redevelopment Scheme, or SERS, allows us to provide new homes for residents in ageing estates, while redeveloping these sites to build more flats for Singaporeans in need of housing.

By intensifying the land early, the Government shares the gains with residents through a package that compensates them for their existing flats at market value. This is determined by a private valuer who will take reference from recent transactions of comparable resale flats, the remaining lease duration and flat attributes, including the condition and extent of renovation works.

So, to answer the Member's query, the valuation would factor in public information on existing, as well as new amenities and infrastructure coming onstream in the area.

If residents have concerns about the valuation of their flats, they can present their valuation alongside the valuation provided by HDB to the Appeals Board, provided for under the Land Acquisition Act, for the neutral tribunal's assessment. And we can guide them through the process, if necessary.

On top of the market compensation, eligible households will receive a SERS grant of up to $30,000 and a $10,000 removal allowance to cover the cost of moving. We will also provide residents a sum, for the stamp and legal fees that they incur.

In terms of rehousing options, they can choose to buy a new replacement flat at the designated replacement site, at a subsidised price with a fresh 99-year ownership duration. Like all other BTO flats, these replacement flats are priced with a significant subsidy below market value, to ensure affordability.

Alternatively, residents can apply for BTO or sale-of-balance flats at other locations and receive priority, with up to 10% of flats set aside for allocation. These SERS policies have been consistently applied across exercises, including the recent Ang Mo Kio SERS exercise and the Marsiling relocation exercise.

In April, we announced that Blocks 562 to 565 at Ang Mo Kio Ave 3 will be undergoing SERS. The site comprises 606 units, with a balance lease of about 57 years. Eligible flat owners will be offered new replacement flats at Ang Mo Kio Drive nearby. And by the time the flat owners collect the keys to their new replacement flats at nearby Ang Mo Kio Drive in around 2027, their current flats would have a balance lease of around 51 to 52 years.

Holding size, location and other attributes constant, an older flat will have a lower market value than a younger one with a longer ownership duration. For past SERS exercises, the flats were generally younger at the point of SERS announcement, with around 70 years of lease remaining. The market value of these flats was, therefore, generally sufficient for the flat owners to purchase a new replacement flat of a similar type or size, on a fresh 99-year ownership lease.

In comparison, the flats for the Ang Mo Kio Ave 3 SERS exercise are older. So, this is the key difference here. The basis of determining the compensation for the Ang Mo Kio SERS flats is the same as past exercises.

Based on the estimated compensation amounts and estimated selling prices of the replacement flats, the Ang Mo Kio SERS flat owners are generally able to purchase a replacement flat of a similar flat type with the compensation provided, that is, a 3-room flat owner will be able to purchase a 3-room new replacement flat that comes with a full 99-year lease. But that is generally smaller than their existing older flats. Those looking for a flat of similar size or with better attributes may have to top up the amount for a fresh 99-year lease.

I met some residents affected by the Ang Mo Kio SERS exercise over the weekend together with my HDB colleagues. We visited a few households and also spoke to residents who had gathered and wanted to meet us. Some residents, particularly seniors, had shared with us that they could not afford to top up to continue living in their replacement flat of similar size as their existing flat and in familiar surroundings. Some said that did not need a fresh 99-year lease for their new flat.

We recognise these concerns of the older residents and will provide additional options for them to meet their needs.

First, HDB will offer residents an option to purchase a similar flat type at the replacement site on a 50-year term. Second, flat owners who are seniors will have an additional option of taking up the Lease Buyback Scheme, or LBS, on their existing flat and then buying a new replacement flat of the same flat type on a short lease. Seniors can monetise their flat further and enjoy an LBS bonus of up to $30,000 when they top up their CPF Retirement Account to prepare for retirement.

Why are we introducing these additional options now? First, we recognise the challenges faced by older residents living in older flats. To some of them, a brand new 99-year lease may be less important than a similar sized flat in a familiar locality. Looking ahead, the flats involved in future SERS exercises are also likely to be older, with shorter remaining terms and these needs may arise too.

A 50-year lease flat would be more affordable and the lease term is about the same as the balance lease of their current flat. For the 540 or so residents aged 45 and above in this SERS exercise, they can consider this 50-year lease option which provides them with a home of life until the age of 95. They should not need to top up for a replacement flat of the same type. Nearly all will even be able to move replacement flat of the same size, with no top-up.

Second, these shorter lease options are an extension of the approaches we have adopted to better meet the needs of our seniors over the years, such as the 2-room Flexi scheme and the LBS. In fact, we had been studying variations of shorter-term ownership options for older home owners involved in SERS exercises and have decided to offer this option now to better address the needs of older residents from this SERS exercise onwards.

Third, the short lease options are consistent with the key principle that the length of the remaining term of a flat has an effect on its market value. As the Member had pointed out, the 50-year lease is not half the price of the 99-year lease, as the market value of a flat does not follow a straight line down. The value of assets, in general, is calculated based on the time value of money, or the concept that a dollar today is worth more than a dollar in the future. This applies to most financial assets, including leasehold properties in Singapore.

Adopting this principle, the value of the first 50 years of the lease is expected to be worth more than the value of its last 50 years. But a shorter lease flat would be more affordable than a longer lease flat, all things equal.

For younger residents, we know that some of them want to buy the new replacement flats on fresh 99-year leases. So, they give up their flats of almost half a century and replace with one with almost double the lease left. Or to buy resale flats, which can be their home-for-life. HDB will continue to help them in other ways, including with housing loans, if necessary.

HDB is prepared to engage and advise the SERS residents individually. For those who do not meet the home-for-life criterion and face extenuating circumstances, we will consider availing them of the 50-year lease option on a case-by-case basis, if they are open to this option.

These additional options will not be limited to the Ang Mo Kio exercise. They will also apply to the ongoing Marsiling acquisition exercise and to future SERS exercises too.

Sir, in carrying out the SERS programme, we seek to strike a good balance between meeting the needs of existing residents, by providing them with a new flat and giving them other options, while redeveloping the site to provide for future housing needs of Singaporeans. There has been no change to our approach on the compensation to residents.

But with the SERS flats being older, we have now introduced a wider range of rehousing options and choices for residents who can then decide which one best meets their needs. The replacement flats at Ang Mo Kio Drive are nearby and will have their own range of amenities when the development is complete.

However, we recognise that residents have different expectations and needs. For instance, some residents shared that they want to continue to live in their flats and not make way for SERS, regardless of the benefits. Others would like to exchange their flat with a flat of the same size but with double the length of lease, without paying for the longer lease, or to be provided with replacement flats in more prime locations. HDB will look at each of these residents' needs. But while they will try their best, they may not be able to meet everyone's expectations perfectly.

Having personally met and spoken to some of the residents and heard feedback provided to me by my colleagues from HDB, I better understand their concerns. With the range of options available, we should be able to address their key concerns. Our HDB journey managers will continue to make door-to-door house visits to explain the additional rehousing options to residents, address any queries that they may have, and gather more feedback and concerns from individual residents.

We understand that this is a big decision and HDB will also provide ample time for residents to decide.

Finally, let me also thank the Member for her hard work and personal effort to represent her residents' concerns, and working closely with us to address their worries. Thank you, Sir.

Mr Deputy Speaker: Order. The time allowed for the proceedings has expired. I adjourn the House pursuant to the Standing Order. Order. Order.

The Question having been proposed at 5.46 pm and the Debate having continued for half an hour, Mr Deputy Speaker adjourned the House without question put, pursuant to the Standing Order.

Adjourned accordingly at 6.18 pm.