RESPONSE TO LEASE BUYBACK SCHEME

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RESPONSE TO LEASE BUYBACK SCHEME: 7.

Assoc. Prof. Paulin Tay Straughan asked the Minister for National Development (a) what is the public response to the Lease Buyback Scheme since September 2009; (b) how many elderly homeowners downgraded from larger apartments to studio apartments in the last four years; and (c) whether these options are sufficient to help elderly homeowners unlock the value of their residential property to facilitate financial needs for retirement.

The Parliamentary Secretary to the Minister for National Development (Dr Mohamad Maliki Bin Osman) (for the Minister for National Development): Mr Speaker, Sir, the Lease Buyback Scheme (LBS) was introduced in March last year. As at 30th April 2010, HDB has received 552 applications for the scheme, 229 cases have been approved while another 166 cases are being processed. The remaining 157 cases are either not eligible or decided not to proceed with the LBS.

Besides the LBS, there is a range of other monetisation options which elderly flat owners can consider, depending on their individual needs and preferences. For example, they may consider moving to a smaller flat or a Studio Apartment (SA) purpose-built for the elderly. From 2006 to 2009, about 900 elderly owners have downsized from larger apartments to SAs.

If they wish to age in the familiarity of their home and environment, they can choose to sublet their spare bedrooms for rental income. Those who wish to move in to stay with their children for care and support can sublet their entire flats.

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The Member asked if the current range of monetisation options is sufficient to address elderly homeowners’ financial needs for retirement. Findings from HDB’s Sample Household Survey 2008 suggest that 84% of our elderly do not need to monetise their HDB flats to meet their retirement needs. Elderly respondents to the survey indicated their main financial sources were support from their children, as well as their own personal and CPF savings. More than 80% indicated that their current sources of income were sufficient to cover their daily expenses. HDB will continue to monitor the sufficiency of monetisation options and ensure that they are readily available to our elderly flat owners as and when the need arises.

Ms Irene Ng Phek Hoong (Tampines): Can I ask the Parliamentary Secretary if the Ministry is satisfied with the take-up rate, and also whether the Ministry has received feedback from the public whether the amount received from this Lease Buyback Scheme is sufficient for the elderly who want to use it as a way to monetise their flats.

Dr Mohamad Maliki Bin Osman: Sir, we presented the Lease Buyback Scheme as one of the options. We do not want to see it as the only option because there are many reasons why the elderly would prefer to take up the Lease Buyback option. We decided that because of the concept of ageing-in-place, they want to encourage the elderly to see that as a viable option. Whether they are satisfied or not, of course, we want more of the elderly to take it up because it is a good scheme, but we also respect their individual decision as to whether they want to take this up or use other alternative options. As far as the financial payout is concerned, we have explained to the elderly that the Lease Buyback option is should be seen as a supplemental income, not the only source of income. We want to encourage them to

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see that there are other sources of income that they could also source from, basically their children as well as CPF savings and other possible sources of income. So the Lease Buyback payout should not be seen as the only source of income. It is a possible supplemental income. It is one of the various options that is available for the elderly.

Assoc. Prof. Paulin Tay Straughan: Thank you, Sir. I have three supplementary questions. The first is with regard to the Studio Apartments. Your data suggests that the take-up rate is quite healthy. The question is, perhaps, rather simplistic. I mean, at this point, if I am 55 years old, I can buy a studio apartment, and the lease is 30 years. What if I live beyond 85? What are the provisions in place that HDB has? My question – with regard to the Studio Apartment again, is whether HDB has plans to set up more Studio Apartments options so that within the mature estate, where the elderly households are likely to be concentrated, we can promote ageing-in-place. My last supplementary question relates to the Lease Buyback Scheme. As far as I can understand, this is for low income households, so, if I have a 4-room flat, I am not eligible for this. Moving ahead, does HDB have plans to extend this option, with ageing-in-place as emphasis, to facilitate this similar option for those owners of larger flats?

Dr Mohamad Maliki Bin Osman: Let me take the questions from back to front. On the LBS, whether we can extend it to the 4-roomers. Whe we crafted the LBS, we looked at the different needs of the different groups of the elderly at this point in time. We see that the elderly with larger flats, 4-room, 5-room, they have other options of monetising their assets to buy smaller flats, meaning that they can downgrade from either 5-room to 3-room, from 4-room to 2-room, for example. Of course, there could be those who are interested in the Lease Buyback Scheme.

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At this point in time, we want to try to encourage those who are in the 3-roomers first because the take-up from the 3-roomers is still quite low. We are still studying the reasons behind it. If it is proven, and from feedback there are indications that the 4-roomers are also equally interested and, in line with this concept of ageing-in-place, we are prepared to consider it at a later date. Because it is new, we have just executed the programme a year ago, it will take time before people are comfortable and understand what the scheme is all about. We still have a large pool of elderly in 3-room flats who need to be given better understanding of this scheme before we consider expanding it to larger flat households.

The second question is: where do we plan to build more Studio Apartments? Certainly we will try to build studio apartments in different locations. If you look at our plans for 2010, we launched the BTO flats in January in Choa Chu Kang, which is a semi-mature estate. There are young people there and elderly people living together with the young. In that development, there are also Studio Apartments. The concept now is to try to integrate the Studio Apartments together with the other flat types so that the elderly can continue to integrate with the other younger generation and they can co-exist within that same development.

On the issue of what happens after the 30-year lease runs out – at this point in time, of course, it is estimated that people do live beyond 85 years. I think at that point in time, HDB will probably assess the situation and see how else we can assist some of these elderly who are currently in the Studio Apartments, whether there is an extension of the lease. We will probably evaluate it closer to the time. I give the assurance to the Member and the House that we will not leave the elderly without a home by the end of the 30-year lease.

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Mr Baey Yam Keng (Tanjong Pagar): Thank you, Mr Speaker, Sir. I would like to applaud the Ministry for coming up with this Scheme because I think it is very thoughtful and allows people to monetise their flats. I would like to ask the Parliamentary Secretary; with the low take-up rate for the LBS Scheme, what are the common reasons cited by those who are eligible and yet turn down the offer and what are the concerns of the elderly who do not take up the Scheme and what will the Ministry be doing to address these concerns? Secondly, awareness of the Scheme. I realised that among my senior residents, they do not fully understand the details of the Scheme and therefore they do not take up the Scheme. So I would like to urge the Ministry to look at other ways to raise the awareness so that the elderly are able to make an informed decision.

Dr Mohamad Maliki Bin Osman: Sir, we periodically survey the residents to find out why they are hesitant to take up the LBS. One of the things that has surfaced quite regularly is the idea of wanting to leave behind something for their children. When you sign up for the Scheme, the potential of not leaving behind the asset or the property to their children is very high. And many elderly people do see it as an important aspect of their legacy to leave behind their property. So that is one of the reasons that they cited. The other reason is, they look at the calculations as Ms Irene Ng asked earlier; is the payout worthwhile for them? I think we have emphasised to them that it is not a main source of income for them. It is a supplementary source of income, along with other possible sources of income. I think the Member is right, we should try to educate the public more because they are elderly and may require a lot of hand-holding in understanding possibly a complex system because the Scheme talks about annuities, tail-end period of your lease and buying over that tail-end,

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that sort of thing. These are some complex terms. The HDB officers have tried very hard. When we launched the programme, we engaged the grassroots leaders as well as the advisors on trying to target the groups that are eligible. We had sessions with them, tried to explain to them, but we are more than open to addressing local needs. I think if there are Members of the House who have got groups of elderly who they think would benefit from other schemes that require HDB officers to go down and explain further, we are more than glad to do so.