HEAD T - MINISTRY OF NATIONAL DEVELOPMENT

Head T – Ministry of National Development

4.15 pm

Affordability of HDB flats

Mr Cedric Foo Chee Keng (West Coast): Sir, I beg to move,

That the total sum to be allocated for Head T of the Estimates be reduced by $100.

Sir, my first cut is on the "Affordability of HDB flats." This issue is of great public interest. We must discuss it, we must debate it. But at the same time, we need also to put the issue in its right perspective.

Before I begin, let us revisit the history of the Housing Development Board (HDB). HDB was set up 50 years ago, back in 1960, during a period when Singapore faced a housing crisis. At that time, many Singaporeans were living in slums. Only 9% of Singaporeans lived in flats. Since then, the HDB has constructed and made available some 880,000 homes to Singaporeans. This was no happenstance. It was the result of a bold vision, meticulous planning and swift execution.

Our achievements in public housing can be attributed to the strong Government support and financial commitment. HDB has subsidised, financed and housed an entire nation. In the last 10 years, from financial year 1999 to 2008 alone, HDB

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ran a total home ownership deficit of $7.3 billion. That means the sales revenue where it collects from selling the flats, fall short of its cost for land and construction by $7.3 billion in the last 10 years. HDB also carries a housing loan of $47 billion as of the end of last financial year and these are the amount that were used to finance HDB flat owners.

When compared to public projects, say in Bronx, Manhattan or Hackney in East London or Mong Kok in Hong Kong, our public housing estates are envied by many. And it is not just about flats. It is our ability to provide every migrant family then, who had arrived here from many shores, a stake in the country – a reason for them to sink their roots here and call Singapore home. That is why while they were taken as scapegoats, we must continue to enable our new migrants, PRs, citizens, to own homes even if they had caused prices to creep up.

My plea to the critics of MND and HDB is a simple one. Let us see it in the right perspective. Put it in context and do not politicise the issues.

The mission of the HDB is to provide affordable housing, but I believe that allowing HDB flat prices also to appreciate gradually over time, must also be one of its objectives and desired outcomes. In fact, what sets public housing in Singapore apart from public housing in the rest of the world is the "wealth creation effect" of HDB housing over the years.

Consider the converse – a crash in HDB prices, that will be a disaster! If we over-correct the current situation of a creeping up of prices and over-built right now, we run this risk of creating an even bigger problem. This is exactly what is happening in the US sub-prime market which has sparked off a world recession. So, broadly speaking, a gradually appreciating HDB flat is a good thing and we really do not want "falling prices".

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To achieve this objective though, we must do a better job at forecasting demand so as to match the supply accordingly. After all, prices are determined through supply and demand interactions. I recognise that this is not easy. For example, some of the factors contributing to the recent spike in resale HDB flats. Prices are high liquidity in the marketplace, very low interest rates and the lack of attractive alternative investments. These factors are very difficult to forecast, even sentiments. However, other factors like the number of couples getting married each year, number of new citizens and PRs expected and number of upgraders to bigger units etc. These could have been forecasted with reasonable confidence. If we do this well, we can avoid HDB flat price volatility and therefore maintain a reasonable Debt Service Ratio (DSR) so that first-timers can continue to afford HDB flats.

I would like to ask the Minister about the past trend of new flat sale prices. Over the last 10 years, for each class of new HDB flats, are they sold at prices that have grown faster than the median household income? How has this debt service ratio changed over the last 10 years? How does it compare with DSRs in other developed cities? This will give us a sense of whether or not HDB flats continue to be affordable by Singaporeans.

More importantly, will the Minister assure prospective first-time buyers that new HDB flats that are coming on-stream will be priced at a level that will be within their reach and if need be, a higher subsidy (compared to resale market prices) will be provided so that the DSR will remain largely the same as in recent years?

There is another concern for buyers of new HDB flats; that, the time taken to obtain one is about three years. This is

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considered too long. Could, for example, the Minister consider that the BTO threshold be lowered to, say, 40%-50% instead of 70% before construction can begin? Also, could the construction time be shortened by way of piling in advance of need or pre-fab fabrication construction methods that are faster, more productive in order to bring new flats to the market more speedily? I think this would allay a concern of many. In order to reduce the supply lead time, another method which may be worth considering by the Ministry, is to construct a "base load" of units under Build-to-Sell (BTS) scheme rather than Build-to-Order, in other words, you build ahead of demand, but only a base load. This base load could be determined, for example, by looking at past demand and drawing a line where it is a "safe level" of supply across the property cycle that will be met with demand without inundating the market. If you do that, this will become a ready stock for prospective HDB buyers. Then, the BTO scheme which is really constructing to demand, can then be layered-on to meet fluctuations of demand at each stage of the property cycle. I would like the Minister to consider whether this is viable.

Some people consider the inability to afford the cash downpayments or cash-over valuations as an "affordability issue". I see this more of a financing issue and this leads me to my next cut.

Financing of HDB flats

Sir, MND and MAS have reduced the Loan to Value (LTV) from 90% to 80% recently for all buyers – private properties as well as bank loans. I would like MND to consider allowing newly married couples under the age of say 32 years old, who are buying their first owner-occupied homes, to be able to obtain a higher LTV, of say, 90%-95% if they pass credit evaluation test. This is a group of buyers who has a genuine need for a first home and they are clearly not

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speculators. Also, because they have many years of working career ahead of them, they could repay these loans better than older couples and their DSR will decline over time as most would enjoy some degree of salary increases.

The other issue is COVs, this is the other "bugbear" which has been bothering many prospective buyers. In a rising property market, valuations of properties lag behind the prevailing prices, which is climbing day by day. If valuations were conducted "real-time", that can be done. Then they should reflect that prevailing transacted prices and logically there should not be a Cash-Over-Valuation. The reason that Cash-Over-Valuation has happened was because of the lack of the timing of valuation versus the market place happenings.

The Chairman: You are running out of time, Mr Foo.

Mr Cedric Foo Chee Keng: So, I would like to know if HDB can improve the "price recovery mechanism" by disclosing transaction of past HDB resale flats prices more regularly. I understand HDB does so quarterly today.

Finally, I would like to make a plea for second concessionary loans for downgraders. This has been something that this House has discussed many times but have yet to be successful.

Demand and supply of affordable HDB flats

Mdm Cynthia Phua (Aljunied): Mr Chairman, Sir, supply and demand of affordable flats – these three words are critical words that I have chosen carefully and I will bring up my concerns that have made many MPs very frustrated at the MPS. Affordability is define by the dictionary as, "one is able to pay". However MND defined affordability as the amount of loan instalment for the flat as

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not exceeding the 30% of the household income of a family. The Minister replied to a PQ in January 2010, using an example of a family with income of $4,000, and the family can easily afford to buy a flat costing $333,000 – using his 30% definition of affordability.

However, Minister assumes income is static over the loan period of 20 to 30 years. For young couples, one can expect the CPF income to increase. But for an upgrader, who is middle aged, one would expect the income to come down. Many would struggle to pay the loans when they are over 50 or 60 years, when health and income decline. Cash-over-valuation is part of the affordability ratio, but this is not taken into account. The other concern of affordability is location pricing. Here, HDB has priced its flats according to location. However, we are talking about public housing, basic housing for the people. We know some of these flats at convenient locations, where parents stay are not affordable at all. HDB should also review its floor pricing. Many young couples complained that these are their first flats they are buying and they want to select the best flat. Floor pricing should deviate enough to attract young people to buy, instead of penalising these young people for not selecting these flats.

For supply of flats, HDB is only supplying flats in the future, using the BTO system. Flats are only available in three to four years, and not presently. That is clearly future supply and not current supply. Although in 1997, HDB has 31,000 excess flats. Now in 2010, there is zero or no ready flats available, except resale flats. HDB is really going to extreme measures for the supply of ready flats. I am pleading to HDB once again to build some ready flats for market demand. There are many buyers for ready flats in a year – those who want to get married and cannot wait for three to four years, those families that break up, growing families

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may need to shift due to the need for bigger space and to be closer to schools, aged parents, need extra bed space due to medical reasons. Even the Minister stressed the fiance and fiancee scheme. To get to know the other party, it takes at least three years, before you can say, "hey, we can consider getting together". The couple then applies for BTO, and wait another four years. It takes a total of eight years.

Mr Chairman: I would like to appeal to Mdm Phua to finish your speech. [ Laughter ]

Mdm Cynthia Phua: Thank you. Please consider having ready flats.

Supply and affordability of HDB flats

Mr Lim Biow Chuan (Marine Parade): Sir, although the Minister for National Development has said several times that HDB flats are affordable, the statistics from HDB are not comforting and this is cause for concern.

Latest Public Housing Data from the HDB shows that the HDB Resale Price Index rose by 8.2% for 2009. And the median Cash-Over-Valuation (COV) is $24,000 for the fourth quarter of 2009. For flats in the more mature estates, the COV is much higher.

Not everyone who wishes to buy a HDB flat is in a position to wait approximately three years for BTO flat. In today's fast-paced environment in Singapore, citizens want to have choices and also speed. Many residents have expressed that they need a completed flat because they are ready to start a family, or that they want to have the personal space to build their relationship with their spouse. Not everyone has the luxury where they can stay with their parents

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whilst waiting for BTO flat because their parents' flat may simply be too small.

Even for BTO flats, unless you are a first-time buyer entitled to the CPF Housing grant, these new flats are not that affordable. Hence, people like divorcees, who have sold off their matrimonial flat would struggle with the purchase price for a BTO flat. Likewise, for citizens who have lost their jobs and needed to downgrade. After selling off their first HDB flat and paying off their mortgage loan and other debts, they too may have difficulties paying for a three- or four-room BTO flat.

Sir, may I ask the Minister what else can HDB do to manage the rising prices of HDB flats and to keep such flats affordable?

For a start, may I suggest that HDB goes back to its objective which is to provide basic housing for the citizens of Singapore. May I ask the HDB to consider concentrating on building smaller flats like three- or four-room flats to cater to the group of lower-income citizens who simply need a basic home to live in. Provide a larger amount of housing subsidy to this group of citizens buying a smaller flat. If there is a need to build larger flats like five-room flats, HDB should consider increasing the minimum occupation period for these larger flats, from five years to maybe six or seven years. Buyers of such larger flats should buy them for their own long-term occupation. Price these new larger flats at a lower price because of the longer minimum occupation period. The reality is that the property market uses the selling price of new HDB flats as a base to set their prices.

4.30 pm

Next, Sir, may I ask the HDB not to allow flats bought in the open market to be sold unless the flat owner has occupied the flat for a minimum of two

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and a half or even three years. Revoke the policy which allows HDB flats to be sold within one year simply because they do not have any HDB loan for the flat or that they have not taken any housing grant from the Government. This is to deter speculation in HDB flats by the richer citizens.

Finally, leave the construction of Design & Build flats like City View in Boon Keng or flats in prime locations like Pinnacle@Duxton to private developers. The private developers can then cater to the aspirations of the "better off" group of Singapore citizens who can afford the luxury of buying such flats in prime locations.

The Chairman: Mr Chiam See Tong. We are on MND now. It is your turn to speak.

Mr Chiam See Tong (Potong Pasir): Sir, I would like to speak on my cut on Defence.

The Chairman: No. You cannot speak on Defence, Mr Chiam. We are under the National Development Head now and your name appears here. I am sorry. You cannot speak on Defence. Unless you speak on National Development, I would not allow you to speak.

Mr Chiam See Tong: Sir, I am not speaking.

Mdm Ho Geok Choo (West Coast): Sir, I will be taking two cuts so will it be three minutes?

The Chairman: You only have one cut. Unless it is consecutive, you cannot take two cuts together.

Mdm Ho Geok Choo: My first cut is three minutes.

Mr Chairman, Sir, the HDB will build 12,000 new flats under the BTO

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programme this year. Most of these flats are going to be in non-mature estates and will be many times over-subscribed but about half will be withdrawn. Why is this so? How could HDB further tighten the huge drop-out rate? How long does it take for HDB to sell off all the remaining flats not taken up by the original applicants under the BTO programme? Are they to be sold at a higher price or lower than the original price?

The Minister said the BTO programme will be intensified as per demand. Will the supply be able to meet the demand, given that Singapore's population is expected to increase by another one million to six million in another 10 years? Will the Minister be able to give us the total number of registered applicants, seeking to purchase flats from the HDB? The Minister has said the BTO system is the best way to address Singapore's housing needs. But in the face of pent-up demand for HDB flats on the ground, is it possible to re-implement the Build-to-Sell system? If there is no full U-turn, as indicated by Minister in his response to my Parliamentary Question in February, can there be a half U-turn? Will HDB immediately consider reducing the three-year waiting time under BTO to achieve better productivity for all, including young couples eagerly waiting to start a family?

Sir, the basic principle of affordable housing does not extend to fulfilling the aspirations of young families but the fact of the matter is that HDB can ill afford to ignore managing the growing expectations and aspirations of younger Singaporeans. This group will grow to form a significant cohort of HDB
dwellers in land scarce Singapore. Granted housing options are limited in mature estates with all their basic amenities, we should continue building more affordable Dawsons, Pinnacle or Sri Geylangs in pockets of land in mature estates. There is quite a bit of land available in a mature estate like Boon Lay. HDB could consider building

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more Boon Lay Meadows. But please keep the prices within the reach of ordinary Singaporeans.

Sir, high Cash-Over-Valuation (COV) is a dampener for many going the resale market route. The average COV in the first quarter of 2009 was $4,000. But in the fourth quarter 2009, it was $24,000, six times more than first quarter 2009. The COV is a cash hurdle for many young couples who are only eligible for 80% loan of the selling price. How does Minister intend to resolve the COV issue?

Sir, although PRs constitute a mere 5% of households, the fact of the matter is that this percentage can have a significant impact on the limited supply in the HDB resale market. Should HDB consider extending the debarment period for resale of flats by PR dwellers, so as to minimise speculative tendencies by PR HDB owners?

Sir, many private owners are buying resale flats. We cannot deny them their fundamental right to be a HDB flat owner. But there should be proper checks to ensure that they buy flats to stay and not to rent out so as not to deprive those who genuinely need to buy a resale HDB flat, in view of the limited supply.

The Chairman: Your time is up, Mdm Ho.

Dr Ahmad Mohd Magad (Pasir Ris-Punggol): Mr Chairman, Sir, the woes of families who are caught in financial quagmires due to housing issues has been widely publicised and discussed. While the HDB has helped home owners facing large arrears, such assistance often comes a little too late as these families have already landed in financial troubles. Some of these families face huge arrears because they bought flats that were beyond their means or experienced a

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change in their circumstances that led to their inability to manage their loans. Then, there are those who sold off their flats in order to settle some debts and end up not being able to afford buying another flat, renting from the market or are unable to make any alternative housing arrangements. For buyers taking up HDB concessionary loans, they have to obtain a Housing Loan Eligibility (HLE) to ensure that they can afford the flat they are buying. Buyers taking up bank loans are given a letter of offer by the banks.

I would like to ask if HDB could consider implementing further measures to ensure that home owners taking bank loans are not given offers that are beyond their means. Also, what measures are in place to assist families who have sold their flats and are unable to buy another flat? How can HDB further inculcate financial prudence in home buyers and sellers?

Dr Ahmad Mohd Magad (Pasir Ris-Punggol):

Mr Ang Mong Seng (Hong Kah): ( In Mandarin ):[For vernacular speech, please refer to Appendix A] Currently, HDB allows buyers who did not take loans from HDB to sell their flats on the open market within a year of purchase, without any conditions. This might have provided opportunities for people who want to make a quick profit. This may have also contributed to the fast rising housing prices.

To prevent speculation, I suggest the MND amend this policy and extend the number of years the buyer must stay in the flat before he can sell it.

Recently, I received a lot of feedback from Singapore citizens who are not pleased to see the rising trend of PRs buying flats from the open market. To my knowledge, 20% of the flats sold in the open market are bought by PRs. To

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differentiate the housing benefits between PRs and citizens, I have the following two suggestions:

First, HDB should restrict PRs such that they can only buy resale flats once from the open market. This will prevent them from profiting from reselling their flats; and second, only allow them to buy flats in non-mature estates.

Currently, 85% of Singaporeans live in HDB flats. As demand increases, the price will rise at the same time. Some low-income families already feel that HDB flats are beyond their means. To help this group, I suggest to sell them the flats with a shortened lease of 60 years. This will lower the price of the flat and provide another option for our people, so that every Singaporean will be able to have a flat that is within his means.

*Cols. 3255-3256.

Dr Lim Wee Kiak (Sembawang): Sir, at the recent HDB 50th Anniversary celebration, Prime Minister announced that HDB will be building its one millionth flat soon and reiterated HDB's commitment to provide Singaporeans with affordable housing. Our current Singapore resident population is 3.58 million (ie, Singaporean and Permanent residents). Assuming 80% (2.87 million) resides in HDB flats, each HDB dwelling unit is housing only an average of 2.87 persons. What is the target number of flats HDB will build for Singapore residents and what is the target person per dwelling unit? Will there be a glut in the near future if we continue to build more flats? Is there really a shortage of flats for Singapore residents?

HDB's pace of building will have to slow down and prospective flat buyers will have to buy available resale flats in the open market. However, the current Cash-over-Valuation (COV) is a significant barrier to many new home buyers despite of generous Government grants. Hence, most prefer to wait for HDB new flats and laments on the lack of new flats. I

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suggest MND review the COV system. As the name implies, to sellers, it is cash OVER valuation and not UNDER valuation, although there are brief periods where COV was negative. COV represents an inefficient market valuation system that lags behind the real-time home prices. In a perfect system, the COV should be zero or close to zero. How often does HDB update the valuation? And how many months does the valuation lag behind the market?

If there are enough flats for Singapore residents, then what are the causes of high HDB resale prices? I understand many HDB home owners do not stay in their flats but choose to rent out their flats due to high rental yields. Many of these flat owners now are currently staying in private properties. There was even a recent newspaper report that featured a landed property owner who bought a resale HDB flat and sold it at a decent profit even without physically staying in the flat at all.

HDB flats should be homes for Singapore residents. Except for the retired elderly, HDB flats should not be rented out to foreigners for rental income. For Singapore residents who have done well and upgraded to private properties, they should not be allowed to keep their HDB flats for rental yields. They should release their flats so prospective new home buyers will have sufficient supply. I urge HDB to do a thorough review on HDB ownership and rental and keep to the commitment to provide Singaporeans with affordable housing.

Home Ownership

Mr Hri Kumar Nair (Bishan-Toa Payoh): Sir, my parents bought their first and only HDB flat in 1976 for $30,000. It was the first house they ever owned. It helped them raise nine children in a stable home. My parents passed on some years ago but the house remains with my family. Most

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of us had got married and moved out but our old flat would always be home to us.

All over Singapore, there are countless similar stories. The houses HDB built improved the lives of the majority of Singaporeans. They provided us with a good home and financial security. Most importantly, it gave us a stake in this great nation of ours. It also allowed the Government to promote national policies such as racial integration and even marriage. But the HDB's success, with their current success, there is also some disquiet.

Some of the complaints we have read and heard about – high prices, unavailability of flats – are politically driven – but some, not all. The important question is whether the current situation continues to promote our national policies. If a couple puts off marriage because their flat will only be ready in three years and they cannot afford a resale flat, how does that help them and how does it help Singapore? How does it help integration if different ethnic groups are allowed to congregate by renting flats near each other? And would my parents have been able to buy a flat and raise a family today?

I am not asking HDB to re-write its policies. There is no need to. But I do urge the HDB to implement rules which encourage home ownership and not property ownership. It should significantly advantage first-time owners and have no room for those who wish to speculate or invest in it. I have four suggestions to make this happen.

First, let us start with the policy principle. Let any Singaporean who wants to buy a HDB flat do so. Lift or do away with the salary cap. Those who earn high salaries will probably buy private properties anyway. But that may be high

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earners who, for various good reasons, wish to start off with an HDB flat. They may want to be financially prudent and we should encourage them. They may have other commitments like raising aged parents and children and we should recognise that. If they wish to live in public housing, let them. But the right to buy public housing must come with restrictions. That is only fair. We should therefore disallow individuals who own private properties from purchasing HDB flats including resale flats. Why should an individual be allowed to live in an HDB property and get rental income from a private house and vice-versa? Those who have the means and wish to buy or invest in private properties should not take public housing.

Second, the HDB should maintain a small but ready stock of flats reserved for first-time owners so that those who wish to get married may get a flat more quickly.

Third, there should be more control over subletting of HDB flats. Currently, there is very little control and that goes against racial integration.

Fourthly, there should be an increase in the time bar before an HDB flat bought in the resale market can be sold. It currently stands at one year. The one-year bar encourages speculation. The point is not whether the unit is bought with a subsidy or concessionary loan. Public housing is public housing – whether it is new or resale. They should all be treated alike. Resale flats give the buyer more choices in terms of location and immediate availability and he pays a premium for that. There should be no other difference or advantage. I ask the HDB to make it five years, just like new flats.

Finally, just a couple of points on private properties. For private properties, market forces should be the prime driver.

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Although I appreciate the Government has to, from time to time, step in to implement temporary measures to address bubbles, but there are two things I would like the Government to consider doing on a permanent basis. First, we should discourage foreigners from speculating in our property market. I have no difficulties with genuine investors. It is the flippers that we should target. How do we benefit from their activities? I therefore ask the Government to impose a capital gains tax on foreigners who sell their properties within, say, three years of purchase. Second, we need to address the issue of option flipping. Buying and selling options are purely speculative activities. They add absolutely no value and only serve to drive up prices. I urge the Government then to make options non-transferrable or impose a tax and profits scheme on transfer.

4.45 pm

Mr Masagos Zulkifli B M M: Mr Deputy Speaker, Sir, the increased prices of resale flats that continued to climb in the fourth quarter of the year 2009 has led to some active discussions among citizens over the affordability of public housing.

Nevertheless, I am pleased to note that HDB is taking proactive steps in ensuring that there is no room for speculation in public housing by emphasising that HDB flats are meant as roofs above our heads.

However, will MND be able to share with us some rules and regulations that are being studied to curb speculative behaviour of public housing? Among others, I have proposed in my Budget speech to revert to the old scheme where CPF gets priority over banks for sales proceeds and to lock in sales gains at least for some sector of our population.

My reason for asking is that, while I acknowledge that the resale market

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should be allowed to operate on the basis of a free market – with prices set on a "willing buyer, willing seller" basis – we need to ensure that whatever actions we take will not affect adversely certain quarters of HDB dwellers, especially those of the lower income, whose assets are largely vested in their HDB homes.

At one end, citizens would be able to gain from the capital appreciation of their HDB flats especially when downgrading to smaller units when most of their children have their own home and use the net sales proceeds for retirement. On this note, it is imperative for us to know whether the concrete steps to curb speculative activity of HDB flats that MND is currently mulling, could result in less-than-desired outcomes and affect citizens' aspirations to unlock the value of their flats when they reach retirement age.

However, on the other hand, these assets can pass on to cash-rich PRs and private property owners – Singaporeans included – who are also allowed to purchase HDB flats and can turn them into investment vehicles, to primarily earn rental income rather than to live in them. This only creates an artificial upward rise of HDB resale flat prices and jeopardise other sections of citizens who are in genuine need to buy HDB flats. To address this, a system of effective checks and balances to weed out speculators is paramount.

On the issue of owner-occupation of HDB flats, some residents whom I met during the Meet-the-People sessions explained that they cannot afford to buy resale flats or rent flats in the open market owing to the eligibility criteria that they do not meet, and, of course, affordability issues.

I have to admit that this group of residents are usually in the low-income bracket, sometimes unemployed for a long time and usually is saddled with

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difficulties in financing their bills like utilities and monthly mortgage payments. Hence, one of the practical ways to address their problems is through the sale of their HDB flats.

However, when they do this, the task of getting a smaller flat for their families becomes onerous – no thanks to the increased prices of HDB resale flats. As the HDB flats in the resale market are out of their reach, renting of rooms or flats is equally challenging given the high monthly rents quoted by the lessees. They often wonder and ask if their challenges are attributed to the practice of some flat lessees subletting their flats out illegally.

On this note, can the Minister cite some cases of HDB flat owners who contravene the rules and regulations stipulated of subletting their flats out illegally and the actions HDB has taken to address this?

The Minister for National Development (Mr Mah Bow Tan): Mr Chairman, Sir, someone asked me recently whether I was feeling the heat and I do not think he was talking about the weather. Public housing has always been a hot topic, but it is especially hot this year as can be seen by the exceptionally high number of cuts for MND, particularly for housing this year. But I just want to say that I appreciate Members raising these concerns because these are the concerns that people have on the ground and I thank them for this opportunity to respond.

As Mr Cedric Foo reminded us just now, HDB celebrates its 50th Anniversary this year. It has been an outstanding half century for HDB. Recently, the international news service, AFP, described HDB as a powerful agency whose projects have taken Singaporeans out of the slums and ghettos that once blighted the island

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and into multi-storey apartment buildings surrounded by shops, markets, banks, transport links and other essentials. International news agencies are not usually prone to writing good things about Singapore. So I thought this was particularly relevant. The UN and the World Bank have also commended our success in achieving quality public housing but, as Mr Hri Kumar noted just now, with success comes new challenges. And what is the challenge for HDB? Having to house over 80% of the population. Not 10%, not 20%, not even 50% – as in Hong Kong, which is the next highest. 80% of the population means that HDB has to cater to a very broad spectrum of flat applicants, from the low income to the high income. And we are talking about the upper middle-income households. From the young couples, first timer couples, to the elderly, and to the upgraders. From singles to new immigrants and to others.

So our housing policies will have to cater to the demands of all these groups, not just one particular group. And that is why we cannot just build the standard flats of the 1960s or the 3-room flats or 4-room flats only, as suggested by the Member, Mr Lim Biow Chuan just now. We need a wide variety of housing to meet the diverse aspirations. From the BTO flats to the DBSS (Design, Build and Sell) flats to the Executive Condominiums, with different features, different sizes and different locations.

Through our home ownership policies, growing up in HDB flats is a common Singapore experience for many of us and Mr Hri Kumar's story of his family home that was bought in 1976 is one that I think many of us in one way or another are familiar with. Take my own story. When I was young, I lived in various places with my mother, who was a domestic servant. I lost my father when I was three years old, so we moved around a lot. We stayed in a kampong in Lorong

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Ah Soo, which today has become HDB flats in Mdm Cynthia Phua’s constituency. Every time I go to visit the flats there, I still remember where that kampong house was. Then we moved to a shophouse in High Street. My mum was working for a High Street merchant at that time. Today, that is where MTI and MOF are. Then we moved to a room in Bugis Street. Today, it is Bugis Junction. There were 10 of us living in that room. We had one bed which slept five. Then we raised the bed, put it on stilts, so that another five of us could sleep underneath. So 10 of us in that room. Then, I moved to Kim Keat Avenue with my aunt and her family – eight of us in a 3-room flat, sharing one toilet and bathroom. My mother stayed in a 1-room rental flat in Whampoa Road. Later, we upgraded to a 4-room flat in Toa Payoh. Recently, my aunt who passed away, left the flat to the cousin. The cousin sold the 4-room flat, and moved to a studio apartment.

Sir, that is a typical Singapore story for my generation. Start in a modest flat, work hard, accumulate savings, upgrade. Then if you need to, right size to a smaller flat.

But times have changed. Our rapid progress has brought a new generation of HDB flat buyers who start from a different baseline. It is no longer a rental flat or a kampong house. Most probably a 3-, 4- or 5-room flat, or even a landed property.

The challenges we are tackling in public housing today is not just about providing a basic simple roof over the head, but also about meeting these rising expectations. Some Singaporeans worry that their children would not be able to afford their own homes. These are the concerns that Members have reflected in this House. I understand these concerns. I hope in the next 30 minutes or so, to allay some of these concerns.

Let me start off by addressing the issue of adequacy of housing supply. Mr

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Cedric Foo and Mdm Cynthia Phua both commented on this. I want to start by giving a very categorical assurance to all Singaporeans, especially young couples buying their homes – their first homes – that the Government is committed to helping you. We will provide enough new flats to meet demand. At the height of the last boom, that is, between 2006 and 2008, HDB offered a total of 36,400 new flats, or an average of about 12,000 flats per year. The actual take-up was 10,400 flats per year on average. In other words, there were 1,000 to 2,000 new flats left unsold every year. And this is at a time when everybody is saying that there are not enough flats. These are the unsold flats that we are able to offer for sale in the Sale of Balance Flats exercise every year.

For 2009, we started conservatively with a smaller planned supply of 6,000 BTO flats. Why? Because when we started in January 2009, some people thought that the world was going to collapse. Economies were in disarray, governments all over the world were coming up with very huge rescue packages. Singapore was not spared. Under those circumstances, we decided, "Let us continue to build but build 6,000 flats." But in the second half of last year, 2009, sentiments improved sharply, against all expectations. What did we do? We responded swiftly by increasing BTO supply to 9,000 units and then together with the DBSS and the surplus flats that we had over the previous few years, we offered 13,500 new flats in 2009. Again, not all of them were taken up, and I will explain later.

For 2010, we will provide 12,000 new BTO flats or more if there is demand. This is a substantial number. Just to give you an idea of what this means. Clementi and Jurong East – each town has about 23,000 flats. So at the rate we are building, we are going to build another Clementi or

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another Jurong East in two years' time. HDB will launch at least one BTO project each month for the next few months. In addition, they will be launching new EC sites and also new DBSS sites for sale. So for 2010, I expect that the total flat supply will be in excess of 12,000.

Therefore, flat buyers really need not fear that there are not enough flats. These are flats that will be built in various locations, spread out throughout Singapore – be it Sembawang, Punggol, and if you look at Chart 2*, you will see them in Sengkang, Yishun, Woodlands, etc. And when we fully build up Punggol, we can consider opening up new areas such as Tengah and Simpang which are the areas marked in yellow on the map.

So why this perception that there are not enough flats? Perhaps it is because of the high application rates for recent BTO launches – three times, four times, five, even six times of the flat supply. But these high application rates do not reflect the true demand for flats and I will explain why. First of all, about one-quarter, 22% of the applications for the BTO projects in the last four months are repeat applications. In other words, they apply every month and that is quite all right because we have BTOs every month. Second, and more importantly, I believe that not all applicants are in urgent need of a flat. The true test of the demand is not when they apply for the flat, but when they actually book the flat.

*Cols. 3247-3248.

5.00 pm

The difference between actual booking and invitation to apply is called the drop-out rate. HDB monitors the drop-out rates for BTO flats. Last year, the overall drop-out rate was close to 50%. In other words, one in two applicants did not book a flat when they were invited to do so. Take the most recent BTO project that

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completed selection – Fernvale Palms. When Fernvale Palms was launched in October 2009, the application rate was four times the flat supply. But if you look at Chart 3*, by the end of the selection exercise just this week, 44% of first-timers who were invited to select a flat did not do so. They were given the chance, they went, they saw, they said, "No. Thank you. I don't want it." Even when all the flats were available on the first day, 34% of applicants gave up their chance to select a flat. They had all the flats to choose from and one-third of them said, "No, thanks."

The results were similar for the most recent selection exercise which has completed first-day selection for all flat types, which is at Boon Lay Meadows. One-third of the applicants dropped out on the first day. This is quite consistent in all the recent BTO launches.

When asked for their reasons, the applicants told us that their choice units were taken, or they were considering other housing options – whatever that means. I can only conclude that these applicants were not in urgent need of a flat and preferred to wait for their choice flat. Unfortunately, they do drive up the application rates, and they do create this heightened sense of anxiety. So when you see headlines about four or five times over-subscription, understandably people get concerned. I hope that greater clarity about the situation will help to allay some of these concerns.

I have also received appeals from MPs and the public who tell me that they cannot get a flat, despite many attempts. I am sure many Members of this House would have heard similar stories in their MPS. I ask HDB to review all these cases carefully to ensure that our commitment to our first-timer Singaporeans is met. In the last six months, we received 477 such appeals. Twenty-nine cases or 6% of these applicants genuinely did not have

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a chance to choose a flat in at least two BTO exercises in non-mature estates. We will figure out how to give them more tickets, so that their chances of getting a flat will be much higher.

The rest of the appellants were either only interested in flats in the mature estates, which were in short supply, or they had given up one or more chances to select a flat. Let me share a recent case with you. Mr C wrote to me complaining about his lack of success in getting a flat after several tries. HDB checked and found that he had indeed submitted four flat applications, one of which was for a BTO flat in a non-mature estate, the other three were not so. What was even more astonishing was that he had actually been offered flats on three occasions, but he rejected them all. When HDB pointed this out to him, he replied, and I quote: " ... you are right, however, those we are asked to select is not of our choice. So how would one want to proceed when choice units we would like to select is taken?"

I was puzzled, so I asked HDB to find out what does he mean by "choice units"? Chart 5* – his first chance was in February 2009, there were 121 flats in Punggol and Sengkang available for his selection. He turned all of them down because he was, and I quote: "targeting the unit in Buangkok which is just opposite to where I am putting up." So he wanted only a flat opposite to where he is currently staying with his parents. In April 2009, he was offered BTO flats in Punggol, which he also rejected, despite having 143 units to choose from, virtually the whole of that project to choose from. His reason was that "the units that are left are those facing the mosque." But HDB tells me that there were actually 118 units remaining that were not facing the mosque. On his third chance in July 2009, there were 14 units available for his selection, in Serangoon, Yishun, Ang Mo Kio, Tampines and Woodlands. Again,

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he rejected his chance to select, because these were not his "choice" flats. Within a span of six months, he rejected three chances to select a flat, when there were many flats available for his selection.

Sir, I can understand flat buyers wanting to get the best flat available, if they can. After all, buying a flat is a major investment. However, they also have to be realistic. The Government is committed to helping Singaporeans own their first homes. But it is not possible to promise every applicant who buys direct from HDB his "choice" flat, at the floor of his choice; at the place of his choice; at the time of his choice; and at the price that he wants. Our land is limited, especially in the mature estates. So is our housing budget, generous as it is. Buyers have to decide on the tradeoffs they want to make – whether they should keep on trying for their "choice" flat, and delay setting up their home, or to settle first for one that is within their budget and move to a better flat when they have built up their finances.

Last year, 10,228 Singaporean families bought new flats, of which 8,200 were first-timers. 3,500 of these first-timers bought their flats under the Fiance/Fiancee scheme. They should be able to move into their new homes soon after they get married.

Sir, let me address some of the other questions that Members have raised, for example, the issue of lead time – whether the lead time for the supply of new flats can be shortened. As I have explained in this House earlier, it is better for building plans to be based on real demand as shown by the booking of flats. Because if we build ahead of demand, we would end up with a large stock of unsold flats if that demand disappears, which it can. The only way to assure ourselves that this demand is real is when they actually book these flats. By the same token, if we were to pile in advance, we could also

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end up with idle sites with a lot of piles in the ground. I think that is going to be an even more unsightly and unwelcome experience for our residents.

But I would take up the Member's suggestion to see whether we can reduce the hurdle rate for new BTOs in order to build up some buffer flats. There is already a buffer stock in existence today. This is because we do not wait until it is 100% subscription rate before we start a BTO project. Generally, we start between 60% and 70%. So, if we reduce that further to 50%, that, in essence, builds up a buffer stock along the lines that the Member suggested. And it is because of this that we are able to offer every year, or thereabouts, a stock of flats that are either ready to move in or almost ready to move in. But that cannot be our mainstay, because if that was our mainstay, then we are going back to the time when we tried to anticipate the demand, and we built a large stock. Obviously, when these flats are put up for sale, because they are near completion or because they are in mature estates, the subscription rates for them are much higher than the four, five times that I talked about. So we have to have both the BTO as well as the balance flats for sale as part of our overall sales programme.

Three years to get a BTO flat – is that unreasonable? Well, we can shorten it further, as I said, by moving the subscription rate down from 70% to less, and we will examine that. But three years is probably the fastest time frame if you add in the lead time for all the other things to build an average development. Some of the developments can be built faster – the smaller ones, the simpler ones – and some of them will probably need more time. But, on average, I submit that three years is a reasonable time for somebody to wait for a flat because it is a significant decision in life, whether you

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are planning for marriage or whether you are buying a flat. It is a very major decision, and it is not something that you do not plan for. Yes, we can shorten it further. But it is not possible nor is it a good idea to have a situation where flats are available straightaway, the moment somebody wants it or flats that are available on the shelf waiting for somebody to walk in and book. Of course, for those who cannot wait, there is the resale market. But, as we all know, the resale market fetches a premium in the form of higher Cash-Over-Valuation.

Sir, let me now move on to this other hot topic of affordability, a topic which many Members have spoken about – Mdm Ho Geok Choo, Mr Lim Biow Chuan, Mr Ang Mong Seng, among others.

Sir, my assurance again to all Singaporeans is that we will provide sufficient flats that are priced within their reach.

In terms of affordability, there is already a very generous housing subsidy framework in place, and this housing subsidy framework is skewed towards the lower-income group. In other words, we give more to those who need the subsidy more. We have a basic CPF Housing Grant of $30,000 or $40,000. On top of that, we have the Additional Housing Grant (AHG) which was introduced in 2006. Members will recall that we enhanced the AHG for a second time last year, extending it to those earning up to $5,000, increasing the maximum grant to $40,000. As at 31st January this year, we have disbursed a total of $330 million in AHG alone, which is a very significant sum. Twenty thousand families have benefited from AHG. Last year, 9,400 families received $176 million in AHG. So this is a very significant additional help given especially to the lower-income to buy their first HDB flats.

How do we measure affordability? There are many suggestions and articles

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written about affordability. What does affordability mean? Many Members here have also expressed their own views about affordability. One generally accepted way is to compare the house price with the income. So if you compare, say, the median house price to the median annual household income, you end up with a housing price-to-income ratio. That is one way of measurement. I am not suggesting that this is the ideal way. But I am just mentioning it as one way. If you take that as one measure, how does Singapore fare? Our house price-to-income ratio is 5.8; in other words, for the price of the house, it takes about 5.8 years to buy one house. In Hong Kong, the corresponding figure is 19.8, it takes you 19.8 years to buy an average house; in London, 7.1. I stress again this is not the only way of measuring affordability. This is a very rough ballpark rule of measuring affordability across disparate cities. Another well-established and a more commonly used benchmark of housing affordability is how much of your household income is spent on your mortgage loan to service your housing mortgage. This is what is known as the Debt-Service Ratio (DSR), which Mr Cedric Foo talked about just now. Generally, financial planners recommend that households should have a DSR of less than 30% or 35%, as a benchmark of affordability.

*Cols. 3249-3250; 3251-3252

5.15 pm

In the case of new HDB flats in non-mature estates, the average mortgage payment for new flats in non-mature estates sold in 2009 was 22% of monthly household income. In other words, our average DSR for last year was 22%. How has it moved over the last decade? The levels in the last decade hovered between 20% and 21%. So, we have moved from about 20% to 22%, still well within the affordability benchmark of 30% to 35%. In Singapore's case, this 22% figure means that 80% of Singaporean

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new flat buyers are able to service their housing loans completely through their CPF Ordinary Account without any cash payment because the CPF Ordinary Account is 23% of their salaries. Eighty percent of Singaporeans do not use any cash or any of their take-home pay to service their HDB mortgage loans. I think this is a very significant fact and that is a very real measure of affordability.

Let me walk the House through an actual example of a couple. If you look at Chart 6*, this is Mr and Mrs S. They have a monthly income of $4,500. They bought a new 4-room flat in Punggol, priced at $297,900. I quoted this example because I met the couple when I went to HDB to visit the sales counter. They received $10,000 in AHG to offset the price of the flat, so they took a loan of $268,100. This is the 90% loan from HDB at concessionary rate. The monthly instalment came up to $1,073, 24% of their income. They used $1,035 from their CPF to service the instalment and paid $38 in cash. So he belongs to the 20% who had to use some cash to pay for their mortgage loan, but he paid $38. So this, basically, leaves him with the bulk of his take-home pay for other expenses.

I want to stress one other point, and that is, when I talk about housing affordability, it is also about how people make choices. I mentioned earlier that HDB builds a wide variety of flats – different sizes, different locations, different designs, different features, etc – from basic 2-room flat in Yishun to the Pinnacle. Why we do this? It is because we need to cater for this wide variety of buyers who come to us with different aspirations and different budgets.

Sir, I just want to assure Mr Lim Biow Chuan that we will continue to build basic flats. Indeed, the bulk of our flats is actually 2-room, 3-room and 4-room flats.

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But, surprisingly, the ones that are in the greatest demand, ie, the ones where the queue is the longest, are the larger flats – the 4-room and 5-room flats. The 2-room flats, in fact, are undersubscribed. So, any of your residents who want to buy a 2-room flat, can come and see me, and we will give them a flat straightaway. For 3-room flats, similarly, it is just barely even. But the 4-room and 5-room flats, especially, are in the greatest demand. When you come to developments, like the Pinnacle and Dawson there is a huge demand. Very high prices but huge demand. Why? Because it represents the greatest value for money. So, we have to build basic flats and we will continue to build basic flats, but we will also need to build some of the more premium flats, the better designed flats and the DBSS flats. They will not represent the bulk because it constitutes only 10% of the flat supply and they are indeed built by the private developers.

When I talk about affordability, I am also talking about buying a flat that is within your means. Buyers must exercise financial prudence. They must carefully consider what they can afford, taking into account their income and other commitments. Look at Mr and Mrs S, the couple I mentioned earlier, who bought a flat at Punggol with a monthly income of $4,500. If they did not buy the new 4-room flat in Punggol, they could have chosen from other BTOs or any of the resale flats: a 3-room flat, smaller but better location, in Bukit Merah at $300,000; a 4-room flat in Yishun, which is slightly cheaper; or a 5-room flat in Jurong West, a bigger flat at $370,000. So there are choices – new flats, resale flats, different locations, different sizes, but there are tradeoffs to be made and this is the decision that every flat buyer has to make.

Dr Ahmad Magad and Mdm Ho Geok Choo asked about families in difficulty. I

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think we all know that these are families who have over-stretched themselves. They have bought flats which are bigger than they could have afforded or they have run into financial difficulty in the course of servicing their loans. HDB helps them in many ways – reducing their loans, deferring their loan instalments; in some cases, even offering them another loan to right-size their housing.

Mr Cedric Foo and others have been asking whether we can provide loans for those who wanted to downgrade. Some MPs also gave me feedback that by providing that second concessionary loan to households only for upgrading, it may inadvertently drive them to upgrade even though it may be prudent for them not to do so. I have also personally come across cases where in trying to get a second loan so that they can cash out of their flat – because they cannot get a loan when they downgrade – they say they will upgrade, which is not a very wise decision – But given the circumstances, they thought that it was the right thing to do at that time.

But we are now seeing a situation of greater economic volatility where the flexibility to right-size becomes more important and we need to maintain that flexibility. Therefore, I have decided to remove this upgrading condition for the second concessionary loan. What this means is that in future, both upgraders as well as those who downsize will be eligible for the second HDB loan, with the focus on helping families to right-size their housing choices.

I know many Members have been pressing for this for a long time. I hope that their residents will also take that second loan carefully and cautiously. But just in case they do not, to further encourage financial prudence, HDB will reduce the second concessionary loan quantum – by the full CPF balance, and

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half of the cash proceeds from the sale of the first flat. The household will get to retain at least $25,000 in cash proceeds, and this will give them some cash in hand. Let me illustrate what this means. Look at Chart 8*. Sir, if a couple sell their flat and receive $60,000 in CPF refund and they had $80,000 in cash proceeds, they will need to use their full CPF refund of $60,000 and half of their cash proceeds, in other words, $40,000, to pay for their next flat. HDB would grant them a loan, which is $100,000 less than what they would have got. In this case, the household would retain $40,000 in cash proceeds for their use.

Sir, the changes to the second concessionary loan will help Singaporeans right-size to a home that they can sustain over the long term. It will help homebuyers manage their finances for their flat purchases upstream so as to avoid financial difficulties downstream.

Let me now talk about Members' concerns on maintaining the owner-occupation status of HDB flats. I want to emphasise that HDB flats are provided primarily for owner-occupation. They are not for speculative profit or rental return.

Dr Lim Wee Kiak and Mdm Ho Geok Choo were concerned about high prices and COV levels and they asked what can be done to curb speculation. Mr Masagos Zulkifli also asked about the outcome of our review to curb speculation and whether PRs (Permanent Residents) are driving up flat prices, and how we have dealt with illegal subletting.

Sir, I think we have to decide whether we want to control resale flat prices or we do not. If we control HDB resale flat prices, basically we are going back to a regime where we say we will sell it to you at a certain price, and you sell it back to us at a certain price. This is a regime which we had many years ago. There is no capital appreciation, no profit to be

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enjoyed. The flat is not an asset. Basically, what you are doing is that you are collecting rental upfront, which is akin to a rental scheme.

Under the Home Ownership Scheme, where we sell the flat to the resident, we allow the resident to sell the flat after a certain minimum occupation period and to keep that profit or retain that flat until retirement, and then cash out and use the proceeds for retirement. That is the Home Ownership Scheme. That is what makes Singapore's public housing scheme different from any other scheme in the world. And I believe, that, that is the best scheme for Singaporeans. That is the reason why I believe that we should not interfere in the resale market. The moment you interfere in the resale market, and you say that we will ban COV, we will limit COV or we will not allow COV, I think that is the day when we are controlling the market, and that means we will be moving backwards and that will be to the detriment of 800,000 HDB flat owners or more.

So, why high COVs? Very simple. Because people are willing and prepared to pay for that particular flat. If we were to say no COV for their flat, how is the seller going to decide who to sell to. Can we force the seller to say you must sell to this person or that person? Obviously not. So the person who comes up with the COV that the seller asks for or close to that gets to buy the flat. That is free market at play – negotiation between willing buyers and willing sellers. If the buyer cannot or does not want to pay the COV, he just walks away. So let us keep the system as it is. Ultimately, as I have said, COVs do not rise indefinitely. They have been zero, they have been negative. Not too long ago, just one year ago, COVs were at zero. Today, on average, they are about $22,000 to $24,000. Will they keep going up? I do not know. Will they come down? I believe so, one day.

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Mr Hri Kumar asked about subletting, and whether private property owners (PPOs) should be allowed to own flats. The majority of resale flat buyers are citizens who do not own private property. So I do not think we want to go chasing after private property owners. Only those who are eligible get CPF housing grants to buy resale flats.

We do not have any evidence that specific buyer groups, like PRs and PPOs, are driving up prices. The median COV paid by PRs has been the same as the overall median COV paid for resale flats for the last two quarters. In other words, PRs are not more cash-rich than other Singaporeans. There are reports of PRs paying high COV but these are the exception, not the rule.

*Cols. 3251-3252; 3253-3254

I think Ms Sylvia Lim made mention of this yesterday in one of her interventions. Thirty-seven thousand resale transactions in 2009 – 58 cases had COVs exceeding $70,000. Of these 58 cases, eight cases involved PRs, and the rest of the 50 were Singaporeans. In other words, there is no empirical evidence to suggest that PRs are more prone to paying higher COVs or pushing up resale flat prices.

5.30 pm

It is the same thing for Private Property Owners (PPOs). They do pay higher COVs in general but their numbers are exceedingly small and not large enough to drive up prices. There is a very populist or common suggestion that we should ban Private Property Owners from buying resale flats. The issue is not just Private Property Owners buying resale flats. What about HDB flat owners buying private properties? Do we also disallow HDB flat owners from upgrading to private property? Surely not. And if we allow HDB flat owners to buy private properties, why do we stop Private Property Owners

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from buying HDB flats? So long as the owner occupation condition is satisfied–in other words, they must stay in the HDB flat that they can buy. So I urge that we take a longer-term view and do not over-react and do things that we may have to unwind sometime down the road.

Although flats are mainly for owner-occupation, we do allow flat owners to sublet their flats if they meet the Minimum Occupation Period (MOP). Currently, the MOP policy allows flat owners to sublet their entire flat after three or five years, depending on whether their flat purchase was subsidised. Of the 682,000 flats that have fulfilled the MOP and are eligible for subletting, only 23,200 or 3% are actually subletted. So the extent of subletting the whole flat is not as prevalent as many would suggest. Most flat owners are really buying flats for occupation, and not for rental.

But just to make sure, I have asked HDB to step up enforcement against unauthorised subletting of flats. HDB has the power to compulsorily acquire flats or impose a heavy fine on those found subletting without authorisation. Members of the House, members of the public, if you know of any such cases, you can help HDB by reporting such cases to me.

Sir, several Members have asked us to review the one-year Minimum Occupation Period (MOP) for resale of flats bought without subsidies. While there has been an increasing trend of flat owners selling their flats shortly after the MOP, especially those who have bought non-subsidised flats where the MOP is either one or two-and-a-half years, the numbers are not large. Just looking at the numbers, there is a trend and, if the trend continues, buyers who genuinely need housing could be crowded out.

To reinforce the principle of owner-occupation and reduce the possibility of speculation, HDB will be raising the MOP

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for resale of non-subsidised flats from one and two-and-a-half years to three years. This will align the MOP for home owners to resell and fully sublet non-subsidised flats. The extension of MOP will apply to all flats and not just to the larger flats.

Sir, the Government has provided high quality public housing for the last 50 years. For the next 50 years, we face new challenges. But I assure Members that we will strive to enable the majority of Singaporeans to meet their housing aspirations, which is to own a home that is comfortable, of good quality and yet affordable.

Mr Chairman, Sir, may I take clarifications on these and other housing issues after item (u) instead of at the end of the whole debate while these housing issues are fresh in the minds of Members?

The Chairman: Yes.

Provide housing with a heart

Er Lee Bee Wah (Ang Mo Kio): Sir, the topic of my speech is, "Providing Housing with a Heart". Actually, I wanted to talk about helping the downgraders – give them a loan. Sir, I really welcome Minister's announcement that there is loan for the downgraders. Thank you very much. Really, I feel there is warmth, not heat, just like a Chinese saying, " ren jian you wen nuan ". Perhaps we can do more.

Flat compulsorily acquired, for example – because of a non-payment of instalments, the flats were being compulsorily acquired. What are the reasons they defaulted on their payments? It could be that the breadwinners are struck with sudden serious illnesses, met with serious accidents or lost their jobs. Are they the typical delinquent pay masters? Not necessarily. They cannot pay because their dreams were shattered unexpectedly. Hence, I urge the Ministry to look into the merits of each case so

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that those who want to repay when their health improves or when they have found jobs, give them another chance to do so.

For example, I came across one of my residents; she was very ill. She could not work and, hence, lost her job. And recently, she has recovered totally and has found a job, started to work, and she went down to HDB as she wanted to pay but she was rejected. That was what she told me. And HDB told her that the flat no longer belonged to her. So can HDB give her another chance? We should provide housing with a heart.

Next, it pains me whenever I hear from residents that HDB forces those who are terminally ill and unable to pay their instalments to vacate their flats. The worst thing to do for them in their hour of need is to tell them they would not even have a roof over their heads. Is the terminal illness not enough stress and burden for them? Do we need to crack the whip at them when they are crawling on the last leg of their life journey? Where is the heart in providing a home to the people?

Next, can Minister update us on the various measures that MND introduced last year to help the needy and elderly such as the Lease Buyback Scheme, tightening the rental eligibility criteria, etc? If MND says that they have helped the truly needy, then why are there still people sleeping on the beaches or the void decks? Can the Ministry review the Lease Buyback Scheme to allow more elderly to benefit from the scheme? I have an elderly resident who owns a 4-room flat, which is fully paid up. She cannot work and has a handicapped son. And she has been appealing for lease buyback but got rejected. HDB asked her to sell away her flat and get a smaller flat if she needs money. However, for older residents, it is very stressful for them to shift. I can understand. Can HDB be more flexible and

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extend the Lease Buyback Scheme to residents like her?

Last but not least, I would like to urge the Ministry to consider introducing tiered subsidy for applicants who are earning more than $8,000 a month, instead of cutting them off totally and telling them that they cannot buy new HDB flats directly from HDB. We need to be realistic, especially given today's market, where two graduates starting a family are likely to hit this ceiling quite easily. Moreover, very likely, these young couples will have many other financial obligations such as repayment of university study loans, taking care of the aged parents and possibly children's education expenses, etc. Should this policy not be updated? I hope the Minister will help the people to dream their dreams and provide housing with a heart.

Rental flats for the needy

Mdm Ho Geok Choo: Sir, our Government has done what no other Governments in the world has done – provide affordable public housing for all at subsidised term loans. But many will still fall through the cracks. For some,
it is not their own doing – they may have lost their jobs and had to sell their flats to repay their loans; for others it could be bad lifestyle choices.

At my Meet-the-People Sessions, I have met several heart-wrenching cases. An example is an 80-year old widow, who bought and sold two flats through HDB and she is now seeking a rental flat. Her children had pocketed the proceeds from the sale of the two flats and now would not support her. Sir, she is asking for a flat. How can we help someone like her to get a roof over her head faster but not join the queue and wait for her turn to come?

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Sir, rental flats serve a purpose. Rental flats provide a temporary haven to those knocked out of the rat race. The low subsidised rental rates should give them time to catch their breath and re-enter the rat race. Could HDB increase the number of HDB rental flats beyond the 8,000 new rental flats that it would build over the next three years? As of now, will there be enough flats to meet the demand till then? What is the number of applicants for rentals flats and what is the profile of these applicants?

To prevent the abuse of the rental flat scheme, a proper audit is necessary. How many rental flats have been sub-rented? What is the number of rental flats taken back and what is HDB's vigilance procedure?

Supply of Rental Flats

The Senior Parliamentary Secretary to the Minister for Community Development, Youth and Sports (Mr Teo Ser Luck): Mr Deputy Speaker, Sir, another story. This couple, with children aged four and two, came to see me. They needed some help. The husband carrying the 2-year old, and the wife was trying to keep the 4-year old quiet. Why did they come to see me? They were going to vacate their current room with a friend, because they have been staying with the friend for about a month, and they were extremely anxious and helpless because they were waiting for their rental flats to be allocated to them but the wait is going to be about a year or more. Being from MCYS, I am actually quite reluctant to even recommend a temporary shelter because you have to split up the family.

There are also other stories of similar nature and these are low-income families that could not afford a flat and have to wait for a while to get their rental flats. And if they had sold their flats, the proceeds would probably have been used to repay other debts and they also cannot

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afford a flat at the market rental rate. Time is of the essence for them to be able to get a flat and, in this case, a rental flat. So while they are waiting and they cannot afford anywhere or to live anywhere else, they end up living outdoors. But when I saw the strong reaction of the residents whose flat will be affected by the newly built rental flat, I was actually very concerned because I am worried whether or not HDB will go ahead to built those rental flats.

Sir, there is no doubt that there is an issue here. Can I ask the Ministry whether there is enough supply of rental flats and can we actually meet the demand and shorten the waiting time?

Rental flats

Mr Lim Biow Chuan: Sir, HDB has a policy that applicants for rental flats would be considered as ineligible to rent flats if they have children or siblings who are able to provide accommodation for the applicants in their own homes. This policy is unfair to applicants who may have genuine reasons for not wanting to stay with their children or their siblings. Some applicants would prefer to be independent and some, unfortunately, are not on good terms with their children or their siblings.

Recently, a resident came to see me to appeal for a rental flat. When I asked her whether she has children who could accommodate her in their home, she answered that one of her daughters had asked her to stay with them. However, she had declined to stay with her daughter because she did not want to be a burden to that daughter. She also said that she may cause misunderstanding with her son-in-law by staying with her daughter and she felt that her continued presence in her children's homes could cause stress to the family and may inadvertently lead to misunderstanding between her children and their spouses, and this would cause a happy family to break up due to her.

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I wish to appeal to HDB to re-consider its policy. HDB should not engage in social engineering by forcing applicants to stay with their children when they may not be welcomed or their presence in the flat may cause strain in the family relationship. If the applicant is eligible to rent a flat and wishes to stay in a rental flat, allow them to join the queue and peg their rental based on the applicant's income. If the concern is that of abuse of rental flat, HDB should tighten up its rules and inspect these rental flats more regularly, and this would ensure that rental flats are occupied by the applicant at all times.

5.45 pm

Housing for divorced families

Ms Sylvia Lim: Sir, divorced mothers of lower income face challenges in housing. To be eligible for rental flats, one's household income has to be below $1,500. This puts mothers who earn slightly more at a distinct disadvantage. I came across a divorced mother who earns $1,600 working for a statutory board.

She has care and control of two children attending primary school. Having sold her matrimonial home after her divorce, she is currently staying with her children in one room with a relative temporarily. However, she would have to move out very soon as the relative is getting married.

This lady wishes to purchase a HDB resale flat but requires a HDB loan. She has additional income from giving tuition and receives maintenance from her ex-husband. As she also has some cash and CPF, there is reasonable basis that she will be able to repay a HDB loan for a 4-room flat, especially since she can easily rent out one room thereafter as well. HDB rejected her application for a loan saying that the maintenance payment and potential income from renting out the

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room had to be disregarded. As for the extra income from tuition, they needed a longer track record of at least a year for assessment.

What chances do mothers like her have? Renting a flat in the open market costs $1,500 or higher. Renting a room is simply too small for her and her two children plus their school books and belongings. Such a cramped arrangement may also lead the children to stay out more, aggravating the inter-generational effects of the divorce. Can the HDB have wider criteria in assessing loans for divorcees with children? It seems a shame to dampen the drive of divorced mothers, like the one I mentioned.

Interim housing

Assoc. Prof. Dr Muhammad Faishal Ibrahim (Marine Parade): Sir, I have mentioned in this House before that a home is often described as a haven. It is where one should feel secure, safe, comfortable, peaceful and able to live with our loved ones. It is where one grows, develops and achieves the best that one can be.

Last year, the Minister announced that the HDB had introduced another housing option, known as Interim Rental Housing (IRH) to cater to home owners in difficult times. To me, this was an important signal in highlighting the compassion of our Government towards Singaporeans.

I have met a few of my constituents who were in difficulties and I understand they were offered the IRH as a temporary measure while waiting for a permanent option. I observe that many were reluctant to take up this option and some would rather remain homeless. I would like to ask the Minister the following questions – how have Singaporeans

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responded to the IRH, and what is the take-up rate?

With the change in the environment and location from the previous permanent home of the occupants, it will certainly affect the way one lives and carries out the daily activities. What has the HDB done to take care of the well-being of the occupants of these IRH, particularly, the educational needs of the children? Secondly, since its implementation, what is the average duration of stay of the occupants? And, finally, what percentage of these occupants have managed to find permanent homes?

Sir, I would like to urge the HDB to engage these former home owners to take up the IRH rather than to remain homeless. While the property owners would have experienced the hardship of having to lose their homes and move to an IRH, I would like to suggest that the HDB provides the necessary counselling and workshop or seminar to these owners focusing on the right mindset of home ownership. This would help them to recuperate on the right note and rebuild a stable home for their families.

Housing option for distressed family

Mr Low Thia Khiang (Hougang): Sir, it was reported by the Straits Times that the number of homeless people has doubled. When I read the report, I was thinking whether this is more of a social problem or a housing problem.

My own experience from meet-the-people sessions is that it may be less a social problem and more of a housing problem. This is because while many of these cases of residents who lost their homes do involve dysfunctional families, quite a number of them are still financially viable and could afford to stay together as a family if they could afford the rental of a house. Many ended up without a home because of strict HDB rules on rental

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housing and obtaining HDB subsidised housing loan.

I understand HDB's housing rules are to ensure economic benefits given to citizens are equal and not abused, and thus resisted providing HDB rental flat and housing loan at below market rates. I am concerned that such a position could create more homeless Singaporeans which could unwittingly breed a segment of our society who become bitter and alienated from their country, which seems to care so little about them when they fall into bad times.

The HDB's proposition for those who are unable to purchase a HDB flat or to qualify for a HDB rental flat is to seek help for accommodation from family members. The HDB should know well that with the size of HDB flats, most families do not have a spare room to accommodate another distressed close family member's family. The end result would be strained relationships between family members, which could adversely impact the family structure as a basic unit of our society. Is the creation of more strained family relationships desirable? I therefore urge the Government to seriously look into the problem and explore other housing options for such families.

Sir, how can we aspire to be a first world country with a world class public housing programme if we have homeless citizens camped out in public parks?

Lease Buyback Scheme

Mr Teo Ser Luck: Sir, we have a greying population and we are also facing a low fertility rate. Many elderly people worry about what would happen to them, especially those without children and those with low income.

The problem really exists today. An elderly couple without children came asking for financial help and they needed

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it on a long-term basis. I thought maybe the Lease Buyback Scheme could actually help them. The problem is that they are living in a 4-room flat. I have many 4- and 5-room flats in my area, and I also know that there are many elderly couples with low income staying in these units. They bought their flats when they had stable jobs, and now they have aged. After a few financial crisis, I think they may not be able to afford to support their own daily living in the long term.

As of 15th September 2009, the Ministry reported that 409 applications, of which 93% were approved. The question is: are we reaching out wide and far enough?

Sir, I understand that in many other constituencies, including some of my colleagues, they have actually asked that we be more inclusive and include flats that are of larger size – larger than 3-room – 4- and 5-room flats. I think this is necessary.

I would like the Ministry to consider extending the scheme to more elderly people who could benefit from this lease buyback scheme and to change the policy to include larger flats. And may I go even further to say that we consider extending the scheme to people who may be younger than age 62. At the end of the day, the objective is to support them in their life's journey.

HDB community

Mr Cedric Foo Chee Keng: Sir, for the past 20 years, the Ethnic Integration Policy (EIP scheme) has had the good effect of ensuring a healthy mix of races within HDB estates. This has been effective in preventing the formation of ethnic enclaves within the community.

Approximately half a million permanent residents now own 5% of HDB flats islandwide .and their purchases in the HDB resale market are subject to the

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EIP programme which applies to both Singaporeans and PRs. The HDB announced in January 2009 that it was considering, over and above the EIP, a separate ethnic quota for PRs. I would like to seek the Minister's update on this particular subject.

Also, it seems that the category of "Indian/Others" is growing since immigrants from Sri Lanka, Bangladesh and Pakistan are all classified as "Indian/Others". In addition, people like Filipino as well as Myanmese are also classified as "Indians/Others". Would the Minister update and consider increasing the "Indian/Others" quota – up from the 10%-13% currently?

Social integration and permanent resident distribution

Dr Lim Wee Kiak: Sir, with the large influx of permanent residents (PRs) and foreigners into Singapore over the last five years, there are grumblings from the ground regarding the congregations of PRs/foreigners in HDB estates. I have also noticed more PRs and foreigners staying in HDB flats during my weekly block visits. Some residents have very good feedback about their new non-Singaporean neighbours while some have negative comments.

Among the adverse comments are: they are unfriendly and seldom interact with us, they make too much noise, they talk too loudly, they litter and make the place dirty; they put too many things at the corridors, resulting in obstruction, as well as they throw rubbish out of the windows. And the list goes on.

There is also a natural tendency for PRs and foreigners to stay and interact with their own kind – hence, a danger of ghettos forming. Although it is not a problem now as PRs only own 5% of HDB

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flats, we should act fast to introduce a quota not unlike our Ethnic Integration Policy. Will MND impose a restriction on PRs purchasing flats in areas where concentration is already high? We should act now to prevent the formation of ghettos – otherwise, once formed, they will be tough to break up. If we do not do anything now, apart from our little India, Chinatown and Malay heritage village, we may see little Myanmar, Philippines and Vietnam emerging very soon.

Regarding their behaviour and social integration, somebody suggested that perhaps a set of MCQs on knowledge about Singapore be proposed as a screening test for new citizens. Maybe a similar test on "Harmonious HDB living" should be set for all PRs/foreigners and also Singaporeans who intend to buy or rent a flat. They should be made to take and pass this test first before they can buy or rent a HDB flat.

More efforts to promote social integration are definitely needed. Can the Minister give an update on the progress of the new social integration unit formed recently by HDB? Is there an overlap of roles of this unit with the Integration and Naturalisation Committee that was formed by the People's Association?

Prevention of racial enclaves

Mr Christopher de Souza: Sir, the Ethnic Integration Policy (EIP) was introduced to achieve a balanced mix of residents from different racial groups in HDB estates and prevent the formation of ethnic enclaves. Residents have more opportunities to meet and form bonds with neighbours of different races. This fosters inter-racial understanding and strengthens social cohesion in Singapore.

New citizens and PRs are subjected to the EIP when they purchase HDB flats. However, there is still a risk of enclaves forming. For example, they could

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congregate at a specific location outside of their homes. It is natural that people feel comfortable with their own kind, from similar backgrounds and culture. However, this could lead to a situation where integration within the Singaporean community is delayed or hampered.

Would the Minister provide an update if he sees such racial enclaves forming, whether the EIP is effective in preventing them and what other initiatives beyond the EIP can be introduced to make our new citizens, PRs and foreigners in Singapore very much part of Singapore?

Ethnic Integration Policy

Mdm Ho Geok Choo: Sir, Minister Mentor has mentioned that HDB's Ethnic Integration Policy is a "very valuable instrument of communal harmony." The EIP which has been in place since 1989 has prevented the formation of racial enclaves.

But how effective has our EIP been over the past 20 years? Have our efficiency and over zealousness in implementing this policy impacted upon our social and community bonding efforts? Now, 20 years later, we are facing the same set of problems with the second wave of immigrants – this time in the resale housing market. We have about 530,000 permanent residents and they own about 43,000 HDB flats island-wide. But as these PRs can only own resale flats, it poses an even bigger problem. They buy when the respective ethnic quota in the precinct is relaxed, and when they buy they do so near their own countrymen. How do we avoid that?

Sir, this has several implications upon the HDB resale market. Firstly, most of these foreigners are flushed with money and are willing to plonk their savings into a flat of their choice. Secondly, I have been receiving feedback that their social

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and cultural norms are left wanting by fellow residents.

HDB's announcement that it would introduce a separate ethnic quota for residents is a welcome move as it helps allay fears of enclaves forming. But in our haste to implement a second tier ethnic policy, we should consider the outcome of such a move. If our implementation policy is not carried out judiciously, Singapore might be seen as a nation unwelcoming of foreigners. I think we need to tweak the system such that nobody gets offended.

Mr Mah Bow Tan: Sir, earlier, I talked about what HDB does for families looking to set up their first home. Let me now, at this stage of the debate, focus on some of the specific groups, namely, the lower-income, the elderly, and PR issues which Members have raised.

Helping people buy their flats is one part of the story. But we all know that after buying, some people run into trouble. I have spoken about the upstream measures that help to manage this problem. Er Lee Bee Wah asked about downgraders and compulsory acquisition and, generally, called for HDB to have a kinder heart. The HDB that I know – and I hope it is the same HDB that Members are familiar and worked with – spares no effort in helping households to find a long-term solution to their arrears problem. Right-sizing their flat is one key solution. I have announced changes to HDB's loan policies to help families do so, and I believe that this will go some way to helping the low-income families, particularly those with financial difficulties, to right-size their homes.

Compulsory acquisition only comes into the picture when all other options are exhausted, and households repeatedly ignore HDB's efforts. Sir, I can assure the House that HDB's heart is in the right place. But sometimes I wonder whether they are a little too compassionate, so

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much so that people do take advantage of HDB's kindness.

6.00 pm

I have come across many cases, because all appeal cases come to the Ministry, where residents fall into arrears for years, not months, but years and some as long as three to four years. And they still refuse to accept offers to solve their problem on a longer-term basis, to rent out a room, to sublet their flat, to add family members to pay for the loan, for spouse to work or for children to work or, ultimately, to downgrade. And when they downgrade, HDB does offer them help with loans.

It is not a matter of showing compassion. I think the compassion is already there. There needs to be some reciprocity on the part of the lessee to be willing to make adjustments in their life and lifestyle, and to be able to contribute towards finding a solution. It is not enough just to say, "No, I refuse to move, I don't want to move, I don't want to downgrade, I don't want to do this, I don't want to do that. HDB should just allow me to stay on. Why? Because I am in financial difficulty." Obviously, that is not a tenable solution and that is the reason why HDB had to deal with non-performing loan portfolio of close to 9% at one stage.

Today, with all these upstream measures – HLE, credit assessment, etc – as well as downstream measures helping them to right-size, HDB has managed to bring the arrears situation down, as I have mentioned in this House, to something like 7%, which is still very high. Included in this group are many who are caught in very long-term arrears situation. But even as HDB tries to resolve these NPL (non-performing loan) arrears cases, it still exercises a lot of compassion, a lot of

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forbearance, and I am surprised to hear the case that Er Lee Bee Wah mentioned just now about a terminally-ill person being asked to quit. There is another part of the story somewhere. I do not know what it is but I am almost certain that there is another part of the story which has not been told, and I would dearly love to hear what the other part of the story is. If the Member could please pass me the details, I will look into that case personally because I do know for a fact that HDB does grant a lot of leeway and forbearance to such hardship cases, particularly when the financial difficulty is through no fault of their own – ie, illness, loss of job, etc. Please be rest assured that the HDB will continue to be the housing authority with a heart. But compassion has to be reciprocated and the other party also needs to do something. I hope Members will help to solve their residents' problems, not just by asking for forbearance but also persuading them to try to come up with a long-term solution.

But despite this help that HDB gives, I know for a fact that there will still be families who cannot afford to own their homes and HDB will help those who are in genuine need, with no housing options, by the provision of a subsidised rental flat.

Mdm Ho Geok Choo asked if rental flats are going to the truly needy and Mr Teo Ser Luck also asked about supply, and the rental queue. If Members remember last year's COS debate, I announced that HDB will adopt a two-pronged strategy. One, increase supply; and two, manage demand. I also explained that if I just increase supply and not manage demand, the queue is just going to get longer and longer, including some of those cases that various Members have brought up here. HDB revised the eligibility criteria last year for the Public Rental Scheme and now, in addition to an income limit, HDB also looks at an applicant's assets and

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whether he has family support, because income alone is not a sufficient criterion to assess whether that applicant really deserves a rental flat.

Mr Lim Biow Chuan suggested that strained family relationships should be considered for rental flat applications. I think he knows the Government's philosophy, which is not just reflected in housing policies but reflected in many other policies as well, is that the family must be the first line of support. It is almost self-evident that if you have a family, if you have children, the family or the children, and not the Government, should provide for the parents, whether it is housing or whether it is financial help if they are able to. So when we look at availability of alternative housing for rental flat applicants, we look at the kind of flats that they own, we look at whether they have rooms available, whether the family or whether the children are capable of looking after the parents. And in many cases, we find children living in 5-room flats, with spare rooms, 4-room flats with spare rooms, even landed property and private property. And in those cases, we say, "Sorry, you cannot join the rental flat queue." I think that is eminently reasonable.

Rental flats are heavily subsidised. And that is one of the reasons why the queue is so long. Because we charge $30 or $40 for a flat, and the flat is very comfortable. If you look at the new flats that are being built, they are very, very comfortable, not like the old days. Thirty dollars, a flat of your own, who does not want? Everybody wants to join the queue. If you are an elderly retiree with no income, under the old criteria, you could have joined the queue. No questions asked and then when your turn came, you got the flat. If we had continued with that, no amount of new rental flats that we build will be sufficient. Our position is that if you have family support, if you can stay with your families, please do not

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compete with the truly needy for these flats because they are really for those who have no other housing option. In that particular case where the old lady had a daughter who was willing to take her in, we would say "go and stay with your daughter." The fact that you want to be independent is not a good reason for you to come and ask HDB for a rental flat. For those families who do not or cannot get along, we will refer them to the Family Service Centre to see whether they can provide counselling to make sure that the family can at least try to accommodate one another. In some cases, we do exercise compassion, for example, where there is a history of family violence.

On the supply side, HDB is building 7,000 more rental flats over the next three years and this will increase its stock to 50,000. By next year, we should have 20% more rental flats. As a result of this two-pronged approach – increase supply, manage the demand – the waiting time for a rental flat for those who need them has been reduced by 50%, or halved, from 21 months a year ago to 12 months today.

But this effort to build more rental flats is not as plain sailing as we would have hoped. Recently, you all know that HDB came under fire from some residents who were unhappy that new rental blocks are springing up in their neighbourhood. I think their concerns are quite real. But in land-scarce Singapore, I would appeal for their understanding that we need to build these rental flats to meet demand and we need give-and-take in a city like Singapore where land is so scarce, where it is necessary to make space for other groups in our society. I am glad to see that this is a view that is shared both inside and outside the House, as reflected by views expressed by Members as well as by writers, reactions in the media and other forums.

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Let me now touch on another group of HDB residents and that is the elderly. One of the benefits I have always said about owning a HDB flat is that you have a valuable asset that you can use for your retirement. You have two valuable assets in your old age – your CPF and your HDB flat – and both of them combined together can provide an elderly Singaporean with a comfortable retirement.

We introduced the Lease Buyback Scheme (LBS) in March 2009 and this allowed elderly lessees the twin advantage of continuing to live in their flat – because we do know that the elderly do not wish to move if they can – at the same time they receive a lifelong stream of income.

Er Lee Bee Wah and Mr Teo Ser Luck asked if LBS is working well and can be expanded. I am glad to announce that we will revise the criteria to allow more elderly lessees to benefit. Lessees who had previously owned 4-room or larger HDB flats can now apply for the LBS. We have excluded these lessees in the past but now we are prepared to include them.

We will also allow lessees with an outstanding loan exceeding $5,000 to apply for the LBS, so long as the amount available for the purchase of an Immediate Annuity is at least $60,000. So the relaxation of these two criteria will allow another 3,800 elderly lessees to be eligible for LBS. HDB will announce details later.

Let me now touch on permanent residents. Mdm Ho Geok Choo, Dr Lim Wee Kiak and Mr Ang Mong Seng all raised questions about PRs buying HDB flats. The first point I want to make is that in the purchase of HDB flats, Singaporeans always come first. PRs can buy HDB flats, resale flats, not new flats. Why? Because they also need a roof over

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their heads. If we do not allow them to buy resale flats, and if the private property market is out of their reach, they have to rent. When they buy resale flats, they get no subsidies, no grants, no concessionary loans from HDB. They have to go to the banks to get a loan. They have to pay whatever the banks ask of them. Only Singaporeans can get new flats, only Singaporeans can get grants for buying resale flats.

But PRs are long-term residents in Singapore. They live, they work, and they study in Singapore. Their experience here is a major factor in whether they take up citizenship and we want them to take up citizenship. My Ministry will adjust our public housing policies to nudge them in this direction.

Currently, a PR married to a citizen can enjoy exactly the same housing benefits as Singaporean couples for homeownership flats. To provide an incentive for PRs to take up citizenship, we will withhold $10,000 of the subsidies for citizen/PR households, that means one member is a citizen and one member is a PR, when they buy a HDB flat. This will reinforce the principle that Singaporeans are our priority.

What this means is that if such a couple buys a resale flat and is eligible for a CPF Housing Grant, we will hold back $10,000. So if their grant previously was $30,000, it will now be $20,000. If it was $40,000 previously, it will now be $30,000 if they are staying near their parents. And if they buy a new flat from HDB, they will pay $10,000 more on top of HDB's subsidised selling price.

6.15 pm

Once the PR converts to citizenship or when they have a Singapore-citizen child, we will return the withheld subsidy. The full $10,000 will be refunded into their

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CPF accounts if they convert, or if they have a citizen child.

These measures will give greater assurance to citizens that they are our priority, and at the same time encourage our permanent residents to view citizenship more favourably. HDB will release further details soon.

Mr Cedric Foo, Dr Lim Wee Kiak and Mr Christoper de Souza also raised concerns about foreigner enclaves in HDB estates. Let me say that, currently, this is not a major problem. Last year, PRs made up 14% of our resident population. But PR families owned only 5% of HDB flats. PRs buy flats all over Singapore. However, there are some towns in the western and northern regions where the proportion of PRs owning flats is slightly higher than the national proportion of 5%.

As I said, PR enclaves are not a problem today, but we try to look ahead. If we see a trend, we should put precautionary measures in place early. Otherwise, it may be too late when the problem is already there and you have to unravel the problem later. It is also important that PRs integrate well in our local communities as they are long-term residents in Singapore.

To prevent enclaves from forming, HDB will introduce a new quota for PR families buying resale flats. PRs will be subject to quotas of 5% and 8% at the neighbourhood and block levels respectively. In other words, a PR family cannot buy a flat if the neighbourhood or block already has 5% or 8% of flats owned by other PR families. This quota will only apply to non-Malaysian PRs. Why? Because of our close historical and cultural links.

The quota will be applied on top of the Ethnic Integration Policy (EIP). This means that a PR family will have to fulfil both the EIP quota and the new SPR quota. Details will be provided by HDB shortly.

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Finally, I want to talk about the issue of racial harmony in HDB estates. I think, as Mr Cedric Foo rightly pointed out, the importance of racial harmony cannot be overstated. Mr Foo and Mdm Ho asked if the EIP has been effective in preventing ethnic enclaves. I think the answer is to be found in any of our HDB estates today. We do not see ethnic congregations anywhere. But that is not to say that it will not happen if we do not implement this EIP policy vigorously. We do implement it vigourously. As a result of doing so, some transactions cannot take place because the EIP quota has been reached. We need to work hard to maintain this racial harmony. Although the EIP limits are reviewed periodically, they have not been changed since 1989.

In line with demographic shifts since then, we will raise the Indian and Others limit from 10% and 13% at the neighbourhood and block levels respectively, to 12% and 15% – by two percentage points for the block as well as the neighbourhood. The overall proportion of Indian and Others households in public housing has grown over the years to about 10% in 2009, which is pushing at the current neighbourhood limit. That is the reason why we have to tweak the numbers and revise them. This revision will allow the EIP limits to better reflect current demographic situation. Based on HDB's projections, the limits should remain relevant until 2020.

We will not change the Malay and Chinese limits because the current limits still provide a reasonable margin of flexibility relative to the Chinese and Malay share of public housing. In other words, these will remain at 22% at the neighbourhood level and 25% at the block level for Malays, and 84% and 87% respectively for Chinese.

Sir, my Parliamentary Secretary will now address queries on other groups such as divorcees and families in distress.

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Dr Mohamad Maliki Bin Osman: Mr Chairman, Minister Mah has spoken at length about how HDB caters to the needs of different groups to ensure an inclusive home for Singaporeans. Let me now focus on the specific groups with immediate housing needs as raised by some Members.

Mdm Ho Geok Choo and Dr Ahmad Magad asked about help for families who are now unable to afford another flat as they have spent away all the money from the sale of their previous subsidised flat. Ms Sylvia Lim highlighted the housing needs of divorced parents with children, who may be earning only slightly above the $1,500 income ceiling and thus cannot qualify for HDB’s Public Rental Scheme. While Mr Low Thia Khiang called for the Government to support the housing of homeless families.

Sir, for all of these groups, their housing woes are often a manifestation of deeper underlying problems, for example, inadequate income or family disputes. Our approach in helping such families is to work with MCYS and Voluntary Welfare Organisations (VWOs) to understand the root of their problems and to then help them to look for a sustainable housing solution for the long term. Wherever possible, HDB will strive to help families work towards home ownership.

In the interim, HDB will help the families to identify temporary housing options to meet their immediate needs. Wherever possible, families should be the first line of support. If they have no family support and are unable to rent from the open market, interim housing options such as Interim Rental Housing (IRH) and Transitional Shelters run by VWOs would then be considered. Within the context of this approach, let me now address the specific comments from Members.

Helping with underlying problems – Ms Lim asked for "broader financial

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assessment for housing loan eligibility" so as to help divorced parents achieve home ownership. However, granting a larger loan is not an appropriate option if families are unable to afford to service the loan. This is not in their interest as it may lead to spiralling debts.

Fundamentally, these families need to improve their earning capacity and financial situation first. HDB can help to refer families to the Community Development Councils (CDCs), which can then provide financial assistance, help in job matching and skills upgrading. HDB will help these families to buy a flat when they are financially ready, by providing them a second or even third mortgage loan on a case-by-case basis.

For other families, such as the "homeless" mentioned by Mr Low, their housing problems are often also a manifestation of deeper issues, such as unemployment or strained family relationships. HDB has looked into the housing history of those who overstayed at our beaches and parks. Many have enjoyed housing subsidies in the past and sold their flats with sufficient proceeds to buy a new flat or rent one from the open market. More than half of them have other housing options. Some of the "homeless" have even been allocated rental flats by HDB or are already listed as current owners, tenants or occupiers of sold flats, but chose not to stay in them. Others have families whom they can stay with.

We need to look at their problems holistically and address the root cause of their housing woes, including referring them to Family Service Centres for counselling on family relationship problems.

Interim housing support – while these families work towards their long term housing solution, HDB will also assess how best to address their immediate

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housing needs. Often, it is in their interest to stay with parents or siblings temporarily if possible, while they build up their finances. Alternatively, they may consider renting a flat or room in the open market.

Where families are unable to afford renting a room in the open market, Interim Rental Housing (IRH) could then be offered. Dr Faishal had asked about this. IRH is a temporary shelter let out by managing agents to help families who cannot afford market rent. To keep the rents low, two families will generally share a 3-room flat.

Dr Faishal said that some of his constituents in financial difficulties were offered IRH, but were rather reluctant to take up this offer. He mentioned the changes to the routine of these families if they were to take up the IRH. I would like to emphasise that IRH is not meant to be a permanent housing solution. Compared to living in your home, the IRH arrangement is certainly less ideal. It is no different, however, from having to rent a room in the open market, but with the advantage of lower rents in the IRH. Families have to be willing to make some temporary adjustments as they work towards their permanent homes. They may be referred to CDCs and FSCs for help and counselling where necessary. Where possible, the managing agent will take into account the characteristics of families in pairing them. Families may also be referred to transitional shelters run by VWOs, where social workers will work with the families on their underlying social and employment problems.

Sir, we recognise that there are families with housing difficulties due to various reasons. Our approach is holistic and pragmatic. We aim to help the families address their underlying problems and to stand on their feet again. We will help these families work towards home

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ownership, where possible. However, this will also call for hardwork and adjustments on the part of families. For genuinely needy cases who do not have family support and cannot afford their own homes even in the longer term, HDB will help them with a public rental flat.

Lift Upgrading Programme (LUP)

Dr Ahmad Mohd Magad: Mr Chairman, Sir, the Lift Upgrading Programme has been in operation since 2001 and benefited many residents of HDB estates, including those in my constituency. Many more of my residents have been asking, "when is it their turn for the LUP?" With an increasingly ageing population, this programme will become even more critical in meeting the needs of mobility and access of our elderly citizens. In view of the Government's commitment to complete the LUP and upgrade all eligible HDB blocks by 2014, could the Minister provide an update of the progress of the LUP? How many ineligible blocks will there be after this completion of the full programme? And what alternative will the HDB explore to assist the residents of these blocks? Substantial part of the LUP costs is co-shared with the Town Council. Could the Minister provide an assessment of the financial impact on Town Council, with regard to the implementation of the LUP? In view of the high cost involved, would the HDB extend more assistance to Town Council, to help co-fund this programme?

Mr Masagos Zulkifli B M M: The HDB, in the planning and design of public housing and in its endeavour to meet the changing needs and aspirations of Singaporeans, has done no less for the elderly.

Without a doubt, everyone acknowledges the impending increase in the number of the elderly in our population and it is for this fundamental reason that planning works and allocation of

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resources must be considered to benefit them.

In the past before 1990, HDB flats built did not come together with 100% lift access. However, with changes in demographics and shifting desires of HDB dwellers, the Lift Upgrading Programme came about with the aim to improve the flats' access and provide personal convenience. What is noteworthy regarding this programme is of course the availability of heavy subsidies. Sir, my residents welcome LUP programmes and we thank HDB for these.

Last year some time in the early period of the global financial crisis, HDB announced that efforts on lift upgrading would be stepped up. If I recalled correctly by as much as 12%, and the move was designed to stimulate the sluggish economy by creating business for smaller contractors then.

Certainly, the increased momentum to accelerate the LUP last year could be considered a two-pronged approach – benefiting the citizens and at the same time, capitalising on the low construction cost to level up the LUP.

A year has since passed and it would be good for us to know what progress has been made. On this note,

can MND give us an update on the number of precincts that have benefited from the LUP, amount of Government spending to-date and expected completion period of this entire LUP?

6.30 pm

In addition, I also understand that in an attempt to ramp up the LUP and achieve the target of providing direct lift access for all eligible HDB blocks, Town Councils (TCs) are allowed to implement their own LUP by tapping on their sinking

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funds, subject, of course, to certain conditions and limits.

In view of the importance to cater to the needs of an increasing ageing population and making it more affordable for the Town Councils to implement the LUP, would HDB be willing to consider more assistance to TCs?

Wet market and hawker centre development

Mr Low Thia Khiang: Sir, the Economic Strategies Committee (ESC) calls for "bold steps to enhance land activity, so as to gain the greatest economic benefits from land", but in land scarce Singapore, we cannot use land solely for economic benefits.

We should guard against looking at all available resources from the economic benefit perspective. We must not forget the ultimate aim of any economic benefit derived from our policies will only be meaningful if the outcome is a better society with happier citizens.

Land is needed to provide for necessary social activities that carry low or no economic value. It provides community space for social interaction. One such example is wet markets and hawker centres.

Hawker centres have become a feature of Singapore and provided fairly inexpensive food for the people due to the relatively low rental. If we apply the principle of maximising economic benefit from the land occupied by hawker centres and wet markets, these iconic features of Singapore would become supermarkets and food courts in no time.

The current trend of the Government to release land for tender by private developers to build and operate markets and hawker centres is worrying. When private developers bid for the land for wet

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markets and hawker centres, they are out to maximise profits. In a competitive bidding exercise, especially during times of economic growth, private developers compete against one another to secure the tender. The highest bidder who is successful would need to recover their investments and recoup their returns through higher rentals charged to individual stall lessees. In the end, these high rentals tend to translate into higher prices which consumer would have to pay for their cooked food and market produce.

The Government should continue the practice of building markets and cooked food centres at new locations for NEA to operate to ensure Singapore remains a liveable and at the same time affordable city.

Future of HDB neighbourhood shops

Assoc. Prof. Dr Muhammad Faishal Ibrahim: Sir, since the 1970s, the developments of our first few satellite towns witnessed the emergence of planned retail facilities in new towns which aimed to provide residents with self-sufficient daily and essential needs. Many Singaporeans saw the developments of traditional HDB Neighbourhood Centres in housing estates, such as Toa Payoh, Queenstown, Ang Mo Kio, Bedok and Clementi.

These centres were the shopping haven and meeting points of our residents in the 1970s, 1980s and possibly in 1990s. Today, with better connections via an efficient transport system, the attraction of newer, bigger and up-to-date retail centres which are easily accessible by public and private transport are likely to dominate the shoppers' choice of retail destinations. Shoppers may give their shops at the neighbourhood centre a miss for other retail centres which are able to provide a large variety of goods and services, as well as a more entertaining shopping experience.

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In addition, quite a number of the housing estates which these neighbourhood centres are located have seen a change in the demographic structure of the residents, which implies the change in the purchasing power and shopping patterns of the residents.

Knowing that I will be making this cut, I made a conscious effort to gather feedback relating to this issue. Essentially, youths feel disconnected to these centres and hope that it can be remade to enhance its relevance in connecting the generations who live there, as well as provide a space for them to be engaged at their neighbourhood. Other Singaporeans feel that the retail space provided at few of these neighbourhood centres far exceeds the demand of the residents today, thus, resulting in vacant retail shops, which sometimes results in below optimal and inappropriate uses. There are also arguments which direct the problem to the shopowners who are not able to keep up with the changes in the expectation of the shoppers. Residents are surprised to observe that a few of these shopowners are operating the same way they used to operate a few decades ago.

I am aware that that there have been some improvement and restructuring works at some of these traditional neighbourhood centres. However, there are still others which are grappling to survive in this changing retail climate. Therefore, I would like to call for an urgent need for a re-look at the relevance of these centres in our society today.

I feel that these centres do not reflect the highest and best use of the sites, thus, not resulting in an optimal use of space in our land scarce city-state. Finally, we need to refine the current ownership and management structures to ensure its continuous relevance in today's fast changing world.

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Linkway

Er Lee Bee Wah: Sir, many of you may be surprised that I am speaking on this topic – "linkway." I know that linkway is a common structure linking one HDB block to another. However, not every resident enjoys the comfort of a linkway. Today, I want to highlight the plight of the residents in my constituency living in blocks 858 to 864 in Nee Soon South who are confronted with hindrances as soon as they step out of their homes.

Yes, these seven blocks are linked to one another. However, they are separated by a temple and a petrol kiosk. And hence, while they enjoy the convenience of living near amenities like the Khatib MRT station, coffeeshops and NTUC Fairprice, there are no shelter linkways from their flats to these amenities. This makes walking difficult for them, especially when it rains. I brought up this issue in Parliament at last year's COS and the Minister told me then that there were such things as umbrellas. Yes, there are such things as umbrellas but it does not mean that when we need them, we have them. Not only the old but also the young who come back from schools and from the MRT stations get caught in the rain. May I ask the Minister to reconsider allocating some funds to construct linkways from the above mentioned blocks to the nearest HDB block – I am not asking to link to the MRT station – so that they can walk home even in the rain. Let us link them with the heart.

The Senior Minister of State for National Development (Ms Grace Fu Hai Yien): Mr Chairman, Sir, Singapore's good public housing is not only about delivering an adequate supply of affordable flats but also about making sure that existing flats and housing estates are regularly upgraded and rejuvenated to sustain their value, and to ensure their accessibility and relevance to our changing population.

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Dr Ahmad Magad and Mr Masagos Zulkifli spoke about the importance of the Lift Upgrading Programme (LUP) for our ageing population and asked about its burden on town councils (TCs). I am glad to update the House that we have selected more than 90% of the eligible blocks for lift upgrading so far, with works in 50% completed or ongoing. The programme is on track and HDB will select the remaining 400 plus blocks over the next two years or so for completion by 2014, as earlier announced.

As the lift upgrading solutions for different blocks are firmed up, we have gained a better understanding of the financial burden of the LUP on town councils. Many of the middle-aged blocks require more complex and costly lift solutions as these were designed in the 1980s to allow greater privacy amongst residents. Lift upgrading in middle-aged blocks tend to be more costly per benefiting unit. Newer blocks built after 1990 would not require LUP as they would have been built with direct lift access from the start. The older blocks prior to 1980 may have benefited from lift upgrading under earlier programmes such as Main Upgrading Programme (MUP). So you can say that the burden on the middle-aged blocks is probably largest if you compare the three types of flats.

Even though Government bears the bulk of the cost of the programme at $5.5 billion, the LUP co-payment by TCs totalling about $360 million is not a small sum. It can pose a significant burden for some TCs, especially those with a high concentration of flats built in the 1980s.

When the LUP was introduced, TCs had asked to help make lift upgrading more affordable for residents by sharing in the co-payment. The principle of co-payment by TCs is well-intended for the benefit of residents and should be upheld. However, we must ensure that the LUP

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co-payment does not overstrain the TCs' ability to meet other cyclical works, which are also for the benefit of residents. We are therefore considering a one-off LUP Assistance for the TCs. The amount of LUP subsidy given to each TC will take into account the complexity and scale of works to be undertaken by the TC for the entire LUP. In addition, we will consider the extent each TC would have saved on lift upgrading, arising from earlier upgrading programmes such as MUP. We estimate that the LUP Assistance will cost Government about $130 million. We will notify all TCs later this year.

On neighbourhood renewal, Dr Muhammad Faishal Ibrahim and Mr Low Thia Khiang asked about the development of neighbourhood facilities such as shops, wet markets and cooked food centres. Today, we have a variety of upgrading programmes to support the renewal of estates. These include the Neigbourhood Renewal Programme (NRP) and the Community Improvement Projects Committee (CIPC) scheme. The Prime Minister also unveiled HDB's first batch of town-wide rejuvenation plans under the Remaking Our Heartland (ROH) programme in 2007. We are considering the next batch of towns for the ROH programme and will announce the list later this year.

Dr Muhammad Faishal Ibrahim had asked about the future of neighbourhood shops and centres, particularly in older estates. I assure the House that neighbourhood centres and shops will remain important community nodes for HDB residents. As our population ages, neighourhood shops will remain relevant due to their proximity to residents. However, as Dr Faishal rightly pointed out, shopping habits have also changed over time. The number and business mix of our neighbourhood shops have to change to remain relevant.

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Currently, we have the Revitalisation of Shops (ROS) Scheme to help shops upgrade and enhance their competitiveness to better serve residents. Under the scheme, shops receive co-funding for the upgrading of common areas and promotional activities. HDB retailers must do their part and constantly adapt their businesses to meet changing needs.

The issues are similar for wet markets and cooked food centres. With the changing lifestyle of Singaporeans and changes in demographics, demand for traditional wet markets and hawker centres may change over time. Singaporeans are increasingly turning to modern amenities like supermarkets for their groceries. The Government will have to review the needs from time to time, help businesses to exit where the demand is dwindling, inject new opportunities where there is new demand, or change the mix of tenants to inject vibrancy.

Generally, the Government sets aside land in the new towns for commercial development by the private sector. This gives private operators the flexibility to decide on the type of eating and marketing facilities to meet the changing needs of residents.

Er Lee Bee Wah asked for more covered linkways to improve the quality of HDB living for residents. She mentioned the specific case in Nee Soon South. This is already covered under programmes such as CIPC and NRP. HDB also constructs covered linkways as part of the design of new public housing developments. Linkways beyond HDB boundaries can be provided by agencies such as LTA and TCs. For the specific proposed linkway at Nee Soon South, it can be nominated for evaluation under existing channels. I understand that a significant portion of the linkway would have to be elevated as it traverses two vehicular driveways to the blocks and two

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access roads to the petrol kiosk. Its cost-effectiveness would therefore have to be carefully studied.

The Chairman: It is time for clarifications now. The clock will show the remaining time. I will allocate about 20 minutes for clarification. Mr Cedric Foo.

6.45 pm

Mr Cedric Foo Chee Keng: Sir, I thank the Minister for addressing many of the points that I have raised and even agreeing to one or two of them. But nevertheless, there were two points which I had raised which the Minister had not replied to. One of these is the Loan to Value (LTV) ratio. I have recommended that we allow young couples who are getting married, one or both of them, say, less than 32 years old, buying their first owner-occupied homes, to be able to have a LTV that is higher than the average base now allowed by MAS, which is, I am suggesting 95% and not the 80%.

My second point relates to the COVs. The Minister talked about COVs, that it is inevitable – they rise sometimes, they may fall. The point I was making was: how do we keep the COVs as low as possible? Not by interfering with market forces but by providing the market with more prompt data. As I understand it, HDB today provides transaction prices for resale flats quarterly. So, my point is, if we can do this, say, monthly, would the market be able then to reflect better valuations, thereby having a smaller gap between the transacted price and the valuation price which may result in lower COVs. Could the Minister help us address this point?

Mr Mah Bow Tan: Thank you, Mr Chairman, Sir. I am sorry and I apologise that I have not answered all the Members' questions, so it is good that we have a lot

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of time for clarifications. I will take each of those points that I have missed, in turn.

First of all, Mr Cedric Foo's point about LTV. He mentioned that I have only been able to say "yes" to a few of his suggestions. The good news is that I can tell him that there is "yes" for this suggestion of his. In fact, it is already being done. What do I mean? For young couples who are buying their flats for the first time, there is already a bias towards such young first-timers buying their first flats. We set aside the bulk, 95% of the flats, for them so that they do not have to compete with the second-timers. We also give them additional tickets, additional chances in the draw – two tickets if they are first-timers, another two more if they are near their parents, etc. But, as far as the LTV is concerned, I think he may have had the wrong impression that the reduction of LTV from 90% to 80% applies to these young couples – they do not. The reduction of LTV from 90% to 80% only applies to bank loans, not HDB loans. HDB will continue to give such couples 90%. In addition to that, for young couples – this may not be well known – there is a scheme known as the Staggered Downpayment Scheme, and this applies only to young couples buying for the first time. Under this scheme, instead of paying the 10%, they only need to pay 5% of the deposit upfront in cash or CPF when they book their flats. In other words, they get a 90% loan, they pay 5% in cash or CPF and the remaining 5% will be paid when they collect their keys. They can save up for the remaining 5%. It is like a deferred payment for the 5%. So, the Member's wish has been granted.

The second point was about valuation – whether we can actually give information faster, monthly instead of quarterly. I think HDB can do that but, frankly, I do not think that will address the crux of the problem. The crux of the

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problem really is in this kind of market, people are either worried about prices going up and are prepared to pay more or did not buy in the past and therefore now have to buy. In other words, pent-up demand, and also having to pay more. So, that is a real fundamental issue – the supply and demand issue. We can speed up or make the valuation publications more frequent, that is not a problem. But my worry is that that may not address the problem. In fact, when the supply and demand situation becomes more stabilised and as the anxiety about prices going up or about not enough flats, etc, abates, I think that is when the COVs will start to come down.

The Chairman: There are six or seven Members who want to make clarifications. Mr Cedric Foo, a short one, please.

Mr Cedric Foo Chee Keng: Thank you, Sir. It is good to know from the Minister that there is a staggered downpayment scheme, but this applies to young couples – if I understand it, either of them below the age of 30 years old – purchasing a new HDB flat and, in that case, their LTV will be at 90% and they can pay 5% upfront at, I guess, booking, and the last 5% on collection of keys. But for couples who are buying a private property, that would not apply to them because they will be taking a bank loan, so they will have 80%. So, I would like the Minister to also address that group of people as well as those who are buying resale flats, in which case the staggered downpayment does not really address it.

Can I take the other one as well, very quickly?

My point on COV is not to control the overall market price. If you like, there is a valuation and there is a COV, so this is the total price that a particular buyer needs to pay. The problem is that if the COV grows, the buyer can only finance the basic valuation without the COV, so

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there is a financing burden to him. My suggestion of having more frequent data releases is to reduce the COVs, so that he is more able to finance it but not necessarily to try and control the overall market price.

Mr Mah Bow Tan: Let me take the second one first because it is counter-intuitive in a way. If we were to say that you can get financing for the COV as well, ie, in addition to the valuation, what will happen? Prices will go up even further. Why? Because what the seller is asking for, really, is what you can afford to pay over and above what the valuation is. So, whatever the valuation is, the buyer is just going to ask for more cash. And the moment we allow for higher cash or we allow for loans to pay for the COV, that is just going to chase prices up even further. So, rather than helping the buyer, by giving him more loans, you are actually not doing him a favour. The Member asked why do we not have valuations which are closer to the actual price. The answer is that there is always a lag because the valuation is always based on transactions. Even if those transactions were done yesterday, there is still a lag and you need those transactions to be able to find out what the valuation is. That is what valuation means. So, once you do that valuation based on transactions yesterday, whatever that number is, the seller says, "I would like Cash-Over-Valuation, who can afford to pay me this?" And that is what will happen. So, we can do all these things, but my point is that this is not going to help. I will ask HDB to study it, but please do not get your hopes up and that this will solve the problem.

On LTV for young couples who are buying private property, I am afraid the rules for private property will have to apply to everybody, whether young couples or others. My responsibility is to help young couples who are buying HDB flats for the first time to own their own

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homes and this is what we will do. For resale flats, the same applies – if you get a HDB loan for the resale, of course, you enjoy the 90%; if you get a bank loan you enjoy 80%. So, we do not make any distinction when it comes to getting a bank loan. I think this is a prudent thing to do because, by definition, those who go to the bank for loans are usually those who are not able to enjoy HDB loans, either because of income ceiling or because they have enjoyed many HDB loans, or they are PRs.

Mr Chairman: We have 10 minutes left. We need each clarification to be kept to a minute. Dr Lim Wee Kiak.

Dr Lim Wee Kiak: Sir, thank you very much. I think the Minister has not answered the question about the long-term target and what is the total number of HDB flats that this country really needs, in the first place, for the population. I have made a calculation saying that there is currently about 2.9 persons per dwelling unit. Now, are we going to build until there are two persons per dwelling unit or one person per dwelling unit? Is that enough? My fear is that there could be a glut coming up.

The other question I want to ask is this. What is the proportion of first-time home buyers buying a resale flat versus going for a new BTO flat now? Can we have a mechanism now to shift people more to think about buying a resale flat? Will that save us more resources? Because if there are enough flats, then we should actually encourage them buy resale flats rather than build more and more BTO flats. If COV is a problem, then fix the COV problem, like what my hon. Members have been talking about, which represents a lack in the system.

Mr Mah Bow Tan: I wish we could fix the COV problem like the Members are

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asking for. I think fixing the COV problem is not really fixing the problem. The real issue is whether there are sufficient flats for first-timers who want to buy, whether it is new or resale, ie, the overall demand. On the overall demand for housing, we calculate based on long-term projections: household formations – what is the projected new household formation. We also take into account new arrivals, ie, new immigrants, how many new Singaporeans there are. We also take into account the PRs. We model this on a medium- to long-term basis. As a result, we get a certain base number of flats that we need to build. It ranges from 10,000 to 12,000. But ultimately it is still a projection because there are other factors that come into play for demand: the state of the economy, the liquidity in the market, the jobs situation. I give you an example. Before 2006, between 2000 and 2005, HDB flat prices were languishing. If you took 1999 as the reference point – all the way from 1999 to 2006 – flat prices were below the 1999 level. So, that was the index. Salaries were also languishing but salaries were higher than that. If you take the salaries compared to 1999, they were higher than the 1999 levels. So, affordability was very good. But the demand for flats was low. Why? We had flats waiting for people to buy. I have had people who come to me and say, "I could not buy a flat in 2003, 2004", yet there were many flats available.

So, the actual demand for flats is not just a result of an arithmetical computation where you put these numbers in and out comes the demand. The real demand – the people who really book the flats – varies from year to year. So, that is the difficulty. Yes, we do have a computation. We roughly estimate that the demand for flats is met between half to two-third by resale flats and the rest by new flats. Half to two-third depending on the market. The market is high, the ratio comes down; if the market is low, the

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ratio goes up. Yes, we will always factor in a certain amount of that demand to be met by resale flats, precisely for the reason that the Member mentioned, that we do not build a new flat for every couple or family that wants a flat because, otherwise, there will be a glut. I want to assure the Member that this is part of our planning philosophy.

Mdm Cynthia Phua: Thank you, Mr Chairman. I would like to, first of all, thank the Minister for the second loan for the downgraders; secondly, on the use of the cash proceeds to calculate the next loan. In fact, I could not finish my question, but it was one of my requests as well. Fifty percent seems to be very high, but I would like the Minister to review it, maybe after three months, to see whether it is too high.

The other question is on the net proceeds – is it really net proceeds or the cash proceeds per se ? Because you will have to pay for the legal fees as well as the administrative costs. I hope the Minister could take into account the net-net-net proceeds that are due to the purchaser.

7.00 pm

The third point is that we used to have the fiance/fiancee housing scheme for young couples. We used to have interim flats for them. Not forgetting that we want more "tiger" babies, could the Minister consider continuing with the fiance/fiancee scheme so that young couples could have interim flats?

Mr Mah Bow Tan: Sir, we even accede to requests before they are made. That is how efficient the Ministry is!

Yes, we will review the 50% and see whether it is too high. The idea really is to leave some cash behind for the person who is selling the flat for whatever use. Using 100% totally would have been the

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ideal thing to do, but I think it would be too draconian. The question is whether 50% is too high or too low. We will see after we have implemented the scheme. Is it net? Yes, it is. It is net of cost, net of stamp fees, net of legal fees, etc.

Young couples – fiance/fiancee scheme – yes, we did have interim rental housing. The problem with that, of course, is that we have to set the rental pretty high. It cannot be at $30, just like the subsidised rental scheme. So, instead of that scheme, we have decided that we will let them buy in the market and allow them to sell when their new flat is ready. In other words, they do not have to satisfy the minimum occupation period. It is equivalent to buying a flat for three years or so, and then sell it. If they make a profit after three years, good luck to them.

Mr Low Thia Khiang: Sir, I want to clarify. For hawker centres and wet markets, will the Government consider direct development, instead of tendering out the land for private developers to develop?

Secondly, I would like to ask whether the Government is concerned with the competitive bidding system of tendering out the land. It will, in time to come, jack up the price of food at the hawker centres and wet markets as well.

Ms Grace Fu Hai Yien: Sir, I think this argument has been quite attractive to some quarters of society – the fact that it is a commercial tender, therefore, it must drive up the price of rental because of the tender process. As a result, it will definitely lead to higher prices.

I would just like to remind Members that we are talking about different factors at play. First of all, it is the cost of operating a hawker centre. While it is a tender process, we have also stipulated that the building specifications have to be

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minimal that is required for the kind of facilities. So, in the case of Sengkang, we have actually stipulated that it is not going to be air-conditioned and so forth. That is one part of it.

Also, we have seen that in some cases, even in the traditional hawker centres, some tenants, who are able to sublet at a higher rental, have done so, and I think we should not fault the tenants. Because, if they have medical problems or they are getting on in age, and if they can find someone else to take over their stalls, or if they can rent it out and get a higher rental, that is something that we should allow them to do. So, it does not mean that going by the traditional mode of having stalls at a low rental, we can assure that the cost will be always low.

Second, it is about the price of the food. Here again, we cannot assume that the consumers have no choice but to accept high prices. The food has to be good and has to be competitive with what is being offered in the vicinity. We have looked at the prices at Sengkang. I have been there personally. I have looked at the prices and they are comparable to any hawker centre in the neighbourhood – $3 for a plate of chicken rice and 90 cents for a cup of coffee. I do not think we can consider that exorbitant. But, most importantly, by having a single tenant to manage, we can assure that there is a good standard of cleanliness, because there is one person that we can hold responsible. We can also be assured that there is a good standard of service, because they are able to have 24 hours' operation. That master tenant is able to manage the tenants such that enough stalls are open for 24 hours, and providing much better service to the residents in the neighbourhood. If we go there in the early hours, we will find it to be quite crowded.

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So there are advantages in having a master tenant who is able to adjust the tenant mix, so that it remains relevant. As for the hawker centre in Hougang, before we demolished it, we were looking at tenancy with 34% vacancy. That is not a very vibrant mode of community gathering. Thirty-four percent of the stalls were vacant. Why? Because NEA, as the regulator, is very hard pressed. It does not have the role to micro manage the tenants' businesses. Whereas the commercial operator will be able to do that and has the incentive to do that.

The Chairman: Since this is a very hot topic, we will carry on till 7.15 pm. Er Lee Bee Wah.

Er Lee Bee Wah: Sir, I would like to show the Senior Minister of State this two-kilometre long linkway along Woodlands Avenue 2 and Woodlands Avenue 9, whereas in my area I am asking for a 160-metre long linkway. I would like to know how I can make use of CIPC funding, because I have explored with the Town Council and I was told that using CIPC will not provide sufficient funding for this linkway. I have also asked HDB to look into extending the NRP to include this area.

Ms Grace Fu Hai Yien: This is a very specific case. Without knowing the full details of the case, I would not go too much into the details. Let me say that, in general, for CIPC and NRP, there are certain cost guidelines that the Government imposes, and that is to avoid a situation where certain installation of facilities costs too much to build. For example, if the Member is talking about a linkway that crosses two roads leading to a petrol kiosk and a religious organisation like a Sikh temple, I would imagine that the covered linkway would be fairly high in order to allow trucks to gain access to the petrol kiosk. I also would imagine that it would not be very effective because if it is a high covered linkway and if it rains, it

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is not going to shelter residents very much. It probably needs to be quite broad in order to allow cars to go through without any obstruction, and therefore piling and a heavy structure will have to be built.

What I am saying here is that there is a certain limit or cost norms in order to apply for CIPC. This is to ensure that installations and facilities are basically provided on a cost effective manner across the entire nation, including Nee Soon South.

Mr Liang Eng Hwa: Sir, earlier, the Minister mentioned about the many BTO exercises which resulted in a high subscription rate but also high drop-out rate. I would like to ask whether the HDB wants to review this system perhaps to see whether it is the best system to manage the flat orders, especially when we have a high subscription rate. We may send the wrong signal to the market that there is a demand in the market, and then the resale market starts to move up as well.

Secondly, the Minister also mentioned that many of the applicants who dropped out said that it was not a flat of their choice. Perhaps the HDB may want to look at what is the flat of choice of many of the applicants. And then maybe through some creative or innovative design and presentation, we might be able to match their preference and then offer better choice of flats to the applicants.

Mr Mah Bow Tan: Sir, on whether the BTO exercise is the best system, basically, I think what the Member is asking is instead of balloting, whether we should have another system. Essentially, it is back to this perennial issue about allocation of a scarce resource. You either ballot or you queue up, which is what we have done in the past. We used the queue system. Or we allocate by price, which is basically what the resale market does.

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The resale market is really allocating a scarce resource by price. Whoever pays the highest gets it. So these are the three ways.

Going by price, obviously, is out of the question, because we are talking about subsidised public housing. Going by queue, we have done it before. We have done that. Applicants join the queue. The first one in the queue will get it. The last one in the queue will have to wait. Say, if there are 5,000 people in the queue and 500 or 1,000 flats available, then they have got to wait.

The balloting system is not ideal but I think it is a fair one. It allows us to allocate this scarce resource in a way which is equitable. Some people have suggested that we should go on the basis of need – in other words, who need it more should get it. The problem with that is – who determines need? The first one comes to us and says, "I've just got married. I want to have a house. I need it more." Another guy says, "I've been married for five years and I don't have a house to stay. I need it more." And when we add up all these people with legitimate needs, we find the queue is back again, and then we are back to square one – how do we allocate a scarce resource?

So, if the Member or anybody else has any ideas for a better system to allocate this scarce resource, I would be very happy to consider. But, in the meantime, we have tweaked the system. We have favoured the first-timers more than the second-timers. We have added one extra parameter, which is closeness to family by giving them additional tickets. We can tweak it a little bit more but, finally, it is still the number versus the queue. And the length of the queue really is not determined by the need, as I said, but by the attractiveness of the project, which brings me to the second point that the Member raised.

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He said let us look at more flats of choice and reduce the drop-out rate. Earlier, I went through an example in some detail. This applicant did not want a flat which is not next to his house. I cannot be building all new flats just next to each other's house. He did not want a flat which is next to a mosque, or next to anything that is inconvenient. It is not possible. In every space in Singapore, we will have to build a place of worship, rental flats, schools, whatever.

So, what is a flat of their choice? Some have argued that we should not be building flats on the second floor, because nobody wants a second floor flat. So should we only build flats like some private condominiums do today, starting off from the fifth or six floors? The rest will be empty?

Some others have suggested why not have community centres on the lower floors and flats on the higher floors. Basically, that means in land scarce Singapore, we have to allocate more land for public housing. Ultimately, my point is that there will be some flats which are not "ideal" and buyers will have to make their decision and trade off. We cannot promise everybody a flat of their choice. If we go on that basis, then I think the queue will be even longer. But, again, I welcome any good ideas from Members of this House on how we can actually build more flats of their choice. There is a limited resource, which is land. There is limited budget. We will build within these limits

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to fulfil our commitment, which is to make sure that young Singaporeans have a flat. But to have a flat of their choice – that part is not so easy to achieve. When people say that they have not been able to get a flat, I think what they mean is that they have not been able to get a flat that they would like to have. I think there is a difference between the two.

The Chairman: We have used up all the clarification time. I urge Members to keep their speeches short on Monday to generate more time. Order, it is now 7.15 pm.

Thereupon Mr Deputy Speaker left the Chair of the Committee and took the Chair of the House.