Income Eligibility Criteria for Rental Housing

Dr Lam Pin Min asked the Minister for National Development if he would consider reviewing the income eligibility criteria for rental housing in view of the increased median income and higher costs of living in Singapore.

Mr Khaw Boon Wan: Sir, the current income ceiling for HDB rental units is set at $1,500. This adequately covers the lowest 20% income households. In practice, HDB exercises flexibility so that those earning above $1,500 can still get public rental flats, if they are unable to purchase a flat, have no family support or other housing options. Our focus, however, should be on helping as many as possible to become home owners. And this is a point that Dr Lily Neo mentioned just now too. This is made possible even for low-income Singaporeans because of the additional help the Government gives to them.

If I may illustrate, the average price of a two-room flat in a recent BTO launch in my Sembawang constituency was about $107,000. A family earning $1,500 a month will be eligible for a Government Housing Grant of $60,000. His monthly mortgage instalment will be about $190. This can be paid entirely through their CPF contributions without any cash outlay. Indeed, the median income of those who apply for two-room flats in recent BTO launches was $1,400. This is below the income ceiling for public rental housing.

Dr Lam Pin Min (Sengkang West): Sir, I thank the Minister for the answer. According to the Department of Statistics' 2010 report on key household income trends in 2010, the median income had increased from about $3,638 in 2000 to about $5,000 in 2010, that is, over the past 10 years. I would like to ask the Minister when was the income ceiling of $1,500 set for rental housing? Was it many, many years ago? Considering the fact that the median household income has increased, plus inflation, would it not be timely to review the income criterion at this point in time?

Mr Khaw Boon Wan: While the median income has moved, the bottom 20 percentile has not.

Mr Pritam Singh (Aljunied): Mr Speaker, Sir, I thank the Minister for those clarifications. At the beginning, if I heard him correctly, the Minister suggested that the rental amount – the limit of $1,500 – there was a range that the HDB would consider above on a case-by-case basis. Can I just enquire from the Minister what is the nature of that range above $1,500 where the HDB will exercise some flexibility, if there is a range?

Mr Khaw Boon Wan: As I said, it is very hard to prescribe a formula because the circumstances of families do differ. You may have huge or small families. The circumstances can vary a lot. Even if you have small families, you may have other circumstances, like medical or chronic illness which exert different expenses on the family. These are the sorts of details that we need when we look at individual cases. And the fact is that it is not uncommon to have households earning more than $1,500 and living in our rental flats.

Mr Gerald Giam Yean Song (Non-Constituency Member): Mr Speaker, Sir, just a point of clarification for the Minister. He has said that there is no formula for the discretion to allow those earning a bit more than $1,500 to still rent HDB flats. But would the Minister consider a formula whereby even those who are earning above that amount can get a rental flat but have to pay a higher tier rental? Because the reality seems to be that there are many people who are not able to afford the BTO flats because of different circumstances: they may not be first-time buyers, they may have sold their previous flat. And so the gap between the public rentals and the open-market rentals is really great right now. Would the Minister consider something where there is a tier in between such that someone can pay a certain amount of rent that is not, say, $800 a month, but maybe about $200 or $300?

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Mr Khaw Boon Wan: Sorry, I missed the last sentence. What is that $800 and $200 again?

Mr Gerald Giam Yean Song: I was just giving some figures as to whether or not there can be an interim tier between what people pay right now for public rental versus what they pay for the open-market rental, to make it more affordable for them.

Mr Khaw Boon Wan: The Member quoted some examples where families may be earning a higher income than $1,500, but might not be able to buy a BTO flat despite the affordability of BTO flats, because they have bought a couple of flats before. And precisely it was because of those circumstances that we made exceptions to allow them to rent. But I think the strategic intent must be that, wherever feasible, we should try to get them onto the road back to home-ownership rather than permanent rental. My objective will always be for permanent ownership rather than permanent tenancy because, tenancy, as Dr Lily Neo put it just now, is consumption rather than some sort of investment in property. Whether we can have higher rental for those earning above $1,500, that is, paying rental above what is currently prescribed, is something we can take a look at, as we make exceptions. I belong to that school of thought too. Currently, the rental is capped at, I think, less than $10 a day. But for some families who exceed the income ceiling of $1,500 and could not go on to home-ownership yet, there may be a higher rental tier to help them in between. This is something we are looking at.