REVISED COST-SHARING FOR STEADY STATE PHASE OF HDB UPGRADING PROGRAMME

[Mr Speaker in the Chair]

Mr Lim Hng Kiang: Mr Speaker, Sir, on behalf of the Minister for National Development, I would like to announce the cost-sharing arrangements for the steady state phase of the Upgrading Programme.

The Pilot Phase of the Upgrading Programme has been completed while the Demonstration Phase has entered the construction stage. In the light of experience and feedback gained from these two phases, Government has revised the cost-sharing arrangements for the steady state phase of the Upgrading Programme. There are two objectives in this revision: (1) to focus on improvements that provide flat owners with the best value for money; (2) to make upgrading more affordable to the lower income groups.

Let me address the first objective. The Pilot and Demonstration Phases have enabled the Government to identify a number of improvements that provide the best value for money. For example, residents are very keen on upgrading the toilets and providing lift landings on every floor. The revised cost-sharing arrangements will focus on such improvements in order to keep them affordable to residents.

On the other hand, the Pilot and Demonstration Phases have also revealed that some improvements provide less value for money. One particular example is the space-adding item. Construction of this item is both costly and problematic. Existing services lying in the aprons of the blocks have to be diverted to make way for the space-adding item. Costly piling is needed. Special hacking techniques have to be used to knock down the existing wall to join the space-adding item to the flat. Dry construction and prefabrication methods have also to be used. All these procedures are required to overcome problems of site constraints as well as to minimise noise and dust. Fittings and finishes put in by the residents are affected in the course of construction. Precautions are needed to prevent damage to flat owners' belongings and to minimise inconvenience to residents. All these factors jack up the cost of the space-adding item.

Tender prices for the six Demonstration precincts show that the cost of the space-adding item is $4,100 per square metre compared to $1,000 per square metre for constructing new flats, in other words, four times more expensive. The space-adding item is simply not cost-effective. The Government has therefore decided to make the space-adding item optional and share the cost of this item more evenly between flat owners and the Government.

Let me now turn to the second objective. Precincts to be upgraded under the steady state phase cover a wide range of income profiles. Members of Parliament from the first batch of steady state phase have indicated that some flat owners may not need or be able to afford the full range of improvements offered under the Demonstration Phase. The revised cost-sharing arrangements for the steady state phase will therefore cater to the different upgrading needs of the various precincts.

The Government has therefore repackaged the improvements to be offered to flat owners in the steady state phase into three upgrading packages termed the Basic, Standard and Standard-plus Packages. The Basic Package comprises essential improvements that provide the best value for money. The space-adding item is not included. The Standard Package comprises most of the improvements offered under the Demonstration Phase, minus the space-adding item and certain less essential improvements. The Standard-plus Package comprises all the items under the Standard Package, plus a space-adding item. Members may wish to refer to Annex A (Cols. 937 - 942) for examples of the various improvements and specific work items that could be provided under the three upgrading packages. The actual upgrading package for a specific precinct will depend on the preference of flat owners in that precinct. Annex A - POSSIBLE IMPROVEMENTS IDENTIFIED BY HDB FOR THE VARIOUS PACKAGES UNDER STEADY STATE PHASE (Cols. 937 - 942)

In 1989, the Government announced that under the steady state phase of the Upgrading Programme, owners of 3-room and 4-room flats would have to pay 25% of the total upgrading cost, while those of 5-room and Executive flats were required to bear 35%. Town Councils were required to bear 5% of the total upgrading cost with the Government bearing the remaining 70% for 3- and 4-room flats and 60% for 5-room and Executive flats.

However, several Town Councils have indicated that to meet their share of the upgrading cost, they may have to forgo other general improvements that they had planned to implement. To enable Town Councils to concentrate on improving the environment in their town, Government will now absorb the Town Councils' share of the upgrading cost under the steady state phase of the Upgrading Programme. Members may refer to Annex B (Cols. 943 - 944) for the revised steady state phase cost-sharing ratios. Annex B - REVISED STEADY STATE PHASE COST-SHARING RATIOS (Cols. 943 - 944)

To make the Upgrading Programme affordable to the lower income groups, flat owner's share of the upgrading cost for the Basic and Standard Packages has been reduced from 25% for the 3-room and 4-room flats to only 10% and 15% of the direct upgrading cost respectively. One-room and 2-room flat owners will also pay only 10% of the direct upgrading cost. Five-room and Executive flat owners' share of upgrading cost for the Basic and Standard Packages has also been reduced from 35% to 20% and 25% of direct upgrading cost respectively.

These reduced cost-sharing ratios will also apply to the standard portion of the Standard-plus Package. However, as the space-adding item is not cost-effective, flat owners' cost-share for this item has been set higher at 40% for 1-, 2-, 3-room flat owners, 60% for 4-room, 70% for 5-room, and 80% for Executive flat owners. A higher cost-share for the space-adding item has been set to ensure that only flat owners who truly need the additional space and are prepared to pay for the cost of installing it will opt for this item.

Overall, the Government will bear between 90% and 75% of the direct upgrading cost under the Basic and Standard Packages. In addition, the Government will also be bearing 100% of the ancillary costs for the three upgrading packages.

Let me now turn to the estimated costs. HDB has estimated that the Basic Package will cost about $30,100 per flat; the Standard Package, $42,400; and the Standard-plus Package, $67,200. Upgrading costs of all the three Packages are likely to be lower for the 1-room and 2-room flats because of the smaller flat sizes.

Based on these estimated costs and the revised cost-sharing ratios, a 3-room flat owner's share of total upgrading cost works out effectively to only 7% or about $2,200 for the Basic Package. For the Standard Package, a 3-room flat owner's share amounts to only 8% of the total upgrading cost or $3,500. Members may refer to Annex C (Cols. 945 - 948) for the estimated amounts that flat owners and the Government will have to pay under the three upgrading packages. Annex C - ESTIMATED AMOUNTS TO BE PAID BY FLAT-OWNERS AND GOVERNMENT UNDER STEADY STATE PHASE (Cols. 945 - 948)

Mr Speaker, Sir, the revised cost-sharing arrangements for the steady state phase will focus the Upgrading Programme on improvements that provide good value for money. It will also encourage flat owners to opt for improvements that they truly need and prefer. As the Upgrading Programme will span a 15-20 year period, Government will review the cost-sharing arrangements periodically to keep flat owners' share of upgrading cost affordable.

I notice many Members have filed amendments to discuss the Upgrading Programme under the Ministry of National Development (MND) in the Committee of Supply. To keep time for debate on the other Ministries, we may wish to debate this issue further in the Committee of Supply.

Mr Chiam See Tong (Potong Pasir): I have one clarification for the Minister. At the last by-election at Marine Parade GRC, it was clearly stated that those who vote for the PAP will get priority in upgrading. Is this still true?

Mr Lim Hng Kiang: The Government has always stated that those who support this programme, the level of support will be considered when HDB assesses the precincts to be selected for the steady state phase.

Mr Chiam See Tong: Am I to understand that there is, in fact, no fixed programme in regard to the HDB Upgrading Programme? There is no fixed programme in the sense that it schedules certain estates to be upgraded at a certain point of time. It will depend upon the elections.

Mr Lim Hng Kiang: The criteria for selecting precincts to be put on the steady state phase have been announced many times. The main criteria are, first, it must form a precinct; second, the older estates should be upgraded first; and third, we will have a geographical distribution of the estates so that the benefits will spread to all Singaporeans. All things being equal, we will also look at the level of support of the residents for the programme in determining whether the precinct qualifies for the Upgrading Programme.

Mr Low Thia Khiang (Hougang): Point of clarification, Sir. I understand that the Upgrading Programme, divided into precincts, will make improvements to the blocks and space-adding. Could Town Councils concerned apply to MND to commence certain upgrading works first? For instance, improvements to the precinct before the upgrading work is due to be carried out in the blocks.

Mr Lim Hng Kiang: Mr Speaker, Sir, we want to avoid duplication of work and wastage of public funds. The Upgrading Programme is a very massive job. It is better to be done and organised centrally. If Town Councils start putting improvements on an ad hoc basis, later on when the upgrading comes to their precinct, this may have to be undone. So it will result in duplication of work and wastage of public funds. I would prefer Members to follow the schedule of HDB so that we make better use of public funds.

Mr Low Thia Khiang: Certain Town Councils have upgraded their precincts, eg, improvement works like covered walkways, etc. When the HDB Upgrading Programme comes on stream, what are they going to do with these improvements?

Mr Lim Hng Kiang: Sir, by and large, HDB encourages the Town Councils to have a master plan of what they want to do and to incorporate the improvements as part of this master plan. If they put in the linkways, they must appreciate that these linkways must fit in with the overall master plan of upgrading their precinct. If Town Councils should put in all these improvements in an ad hoc manner, then later on, when we look at the Upgrading Programme when it comes to their precinct, many of these may not fit in so well. We have always urged Town Councils that when they put in the improvements, be it linkways or void decks, they should do it in the context of the overall plan for their Town Council.

Mr Low Thia Khiang: Sir, is the Minister's advice that the Town Councils should not do further improvement works in the precinct concerned but wait for the HDB's programme and their turn to be upgraded?

Mr Lim Hng Kiang: That is not what I said. I said that the Town Councils should have an idea of what the precinct to be upgraded, what it would look like, and do whatever it can in consonance with that overall plan. If you do not have an overall plan and you do it in an ad hoc manner then you have reason to regret later on.

Mr Speaker: I will allow one more question because we have to begin the Committee of Supply.

Mr Chia Shi Teck (Nominated Member): Sir, could the Minister enlighten us on whether the 15-20 year period is constrained by manpower and finance. And could the design of the precincts take place first so that Town Councils would know the programme and the design could be decided upon earlier.

Mr Lim Hng Kiang: There are constraints to implementing the programme faster because of the capacity of HDB, the construction industry as well as financial resources. This is a very expensive programme and we cannot do it in a very short period of time. But HDB will help the Town Councils to identify the precincts within the Town Councils, mark out the precincts early so that Town Councils will have an idea of the precincts and can initiate work on the master planning of the precincts.