CONTROL OF RENT (ABOLITION) BILL

Order for Second Reading read. 5.00 pm

The Minister for National Development (Mr Mah Bow Tan): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, this Bill seeks to abolish rent control in Singapore. Rent control operates in two ways. First, it restricts a landlord's right to raise the rent. Second, it restricts the landlord's right to take back possession of the rent-controlled property.

The history of rent control goes back to 1947, just after the Second World War. At that time, much of the basic infrastructure like roads and utilities were severely damaged. Housing was in short supply. The population had risen sharply, especially with a massive influx of refugees. Against this backdrop, rent control was introduced to prevent landlords from exploiting the situation and raising rents drastically.

Why rent control is no longer needed

The situation today is totally different. The Government has successfully implemented its public housing programme to provide affordable housing for Singaporeans. Almost nine in 10 Singaporeans now own their homes. Subsidised rental flats are available for those who still cannot afford home ownership. No family need go without a roof over its head. After 54 years, rental control has outlived its purpose to protect families from unscrupulous landlords.

On the other hand, rent control is a disincentive for landlords to redevelop or restore their properties. The Controlled Premises (Special Provisions) Act was introduced in 1970 to allow landlords to recover their rent-controlled properties for redevelopment. However, as landlords are required to pay compensation to the tenants, some landlords have not moved to recover their rent-controlled properties. As a result, some rent-controlled properties, including those designated for conservation, remain in a poor state of maintenance. The complete lifting of rent control will give landlords additional incentive to recover their properties and to spruce them up.

Paving the way to rent decontrol

In April 1997, the Government announced its intention to abolish rent control in four years' time, that is, on 1st April this year. This long period of notice was to give sufficient time for tenants to find alternative premises or to reach agreement with their landlords to stay on after lifting of rent control.

The early announcement in 1997 aimed to strike a balance between the interests of the tenants and their landlords. Tenants were assured that they could continue to pay low rent and stay in the rent-controlled properties for another four years while landlords were given indication that their properties would cease to be rent controlled by 1st April 2001.

The 1997 decision to abolish rent control was not a sudden decision. In 1988, the Government used the Controlled Premises (Special Provisions) Act, which was introduced to facilitate the redevelopment of the Golden Shoe area in the 1970s, to accelerate the phasing out of rent control. The Controlled Premises (Special Provisions) Act was made applicable to all rent-controlled properties over four phases, between October 1988 and December 1991. This allowed landlords to recover possession of their rent-controlled properties for purposes of development subject to payment of compensation to their tenants. As a result of these measures, the number of rent-controlled properties dropped from about 7,600 in 1989 to about 1,600 in 1997.

Tenants have been informed of the impending abolition of rent control. The Urban Redevelopment Authority has been sending reminders about the abolition of rent control to the tenants every year since April 1997. From April 2000, that is, last year, URA has been sending these reminders every three months.

Since the Government's announcement in 1997, the number of rent-controlled premises has shrunk further from approximately 1,600 to about 700 as at January this year.

Residential tenants

There are approximately 750 residential tenants (and their families) still living in rent-controlled premises. These tenants can apply for public housing under the various public housing schemes. There are also two special housing schemes for people affected by rent decontrol. Under the Old Single Person Tenants' Scheme, the landlord can apply to HDB to resettle two or more single elderly tenants in a HDB rental flat. The landlord will have to pay four years' rental to HDB on behalf of his tenants. The second scheme is the Rent Decontrol Housing Assistance Scheme which grants priority allocation of HDB rental or purchase flats to families or joint singles of more than 35 years old who are affected by rent decontrol. These two schemes help to ensure that affected residential tenants will not suffer undue hardship.

Non-residential tenants

About 420 non-residential tenants will be affected by rent decontrol. Of these, some 68% (284) operate businesses such as coffee shops and eating places, medical halls and retail and wholesale shops selling a range of goods such as jewellery, stationery, textiles, garments, shoes and electrical goods. Another 10% (41) deal with trades and crafts such as laundry, hairdressing, photo studios, pawnshops and furniture making. The remaining 22% (95) comprise a mix of uses such as bars, lodging houses, stores as well as bicycle, motor and battery workshops. These shops and commercial tenants will have to negotiate with their landlords to remain after 1st April or look for alternative premises.

The original intention of rent control was to ensure a roof over people's heads during the post-war days of housing shortage. It was not meant to provide cheap premises for commercial or other non-residential uses.

I shall now go through the main provisions of the Bill and give details on the related transitional matters.

Control of Rent Act

Firstly, the Control of Rent Act will be repealed. This effectively abolishes rent control in Singapore.

Upon the repeal of the Control of Rent Act, there will no longer be any statutory restrictions on the landowner's right to adjust rent or to recover possession of their properties through the proper legal process. The repeal of the Control of Rent Act will also dissolve the Rent Conciliation Board, established under that Act to deal with applications by landlords to adjust the rent of rent-controlled properties. This is provided for in clause 2(1) of the Bill.

I will now deal with the major transitional issues related to the repeal of the Control of Rent Act, which are set out in the First Schedule of the Bill.

Firstly, the repeal of the Control of Rent Act allows landlords to adjust the rent or to recover possession of their properties through the normal legal process. Therefore, with effect from 1st April 2001, any pending application with the Rental Conciliation Board will be discontinued. Similarly, any proceeding before the courts in relation to the Control of Rent Act will be discontinued. These are provided in paragraphs 3 to 5 of the First Schedule.

Secondly, the status of a statutory tenant after the abolition of rent control is clarified in paragraph 6 of the First Schedule. A former statutory tenant will, on 1st April 2001, continue to hold the premises on the same terms and conditions as before the repeal of the Control of Rent Act. However, either the landlord or the tenant can terminate this tenancy by giving the same notice as required by law to terminate a monthly tenancy.

Controlled Premises (Special Provisions) Act

Clauses 3 and 4 of the Bill deal with the Controlled Premises (Special Provisions) Act. This Act provides a form of rent decontrol whereby a landowner is allowed to recover his rent-controlled property for purposes of redevelopment.

A landowner who wants to recover his property for redevelopment may apply to the Tenants' Compensation Board (TCB) to recover his rent-controlled property. The TCB has the power to award compensation to the tenant. This compensation is determined based on the provisions of the Act and is paid by the landowner. With the abolition of rent control, a landlord no longer needs a TCB order to recover his property.

The Act will, however, not be repealed immediately so as to allow the TCB to settle its outstanding matters. The TCB will therefore continue to deal with pending applications for which the Order for recovery of rent-controlled property has been made prior to 1st April 2001 and to administer the payment of compensation money to tenants.

The Controlled Premises (Special Provisions) Act will, however, be amended as of 1st April 2001. This is provided in clause 3 of the Bill. From that day, the TCB will not accept any new application for recovery of possession of rent-controlled property, and any pending application for which an Order for recovery of possession has not been made will be discontinued.

These amendments are set out in paragraph 1(c) of the Second Schedule of the Bill. A landowner who wishes to recover possession of his property will thus have to use the normal legal process from 1st April 2001 onwards.

The Controlled Premises (Special Provisions) Act currently imposes restrictions on landowners on the use of properties recovered under the Act. Firstly, a landlord is not allowed to use the property for any other purpose except for redevelopment; he is not allowed to sell or lease the property until redevelopment has commenced. Secondly, a landlord must commence redevelopment of the property within six months after repossessing it and must complete the redevelopment within 10 years. The Act will be amended to lift these restrictions. The amendments are provided in paragraph 1(a) and paragraph 3 of the Second Schedule of the Bill.

The lifting of these restrictions will put such rent-controlled properties on the same footing as any other rent-controlled property that is de-controlled by the repeal of the Control of Rent Act. This is in line with the idea of the total abolition of rent control and ensures that all formerly rent-controlled properties are given similar treatment.

Clause 4 of the Bill provides for the repeal of the Controlled Premises (Special Provisions) Act. The repeal of the Act and the consequent dissolution of the TCB will take effect after the TCB has settled all outstanding matters. Therefore, clause 4 of the Bill will come into effect at a later date to be determined by the Minister for National Development.

When the TCB is finally dissolved, there may still be compensation moneys deposited by landowners with the TCB which have not been claimed by the tenants. The Bill provides that any unclaimed compensation moneys will be transferred to the Urban Redevelopment Authority. Thus, a claimant may continue to claim compensation money after the TCB is dissolved. The URA will administer the compensation moneys for a period of 12 months. This is provided in paragraphs 1 and 2 of the Third Schedule.

After the 12-month period, any unclaimed compensation moneys will be transferred to the Consolidated Fund. Any claims for compensation moneys may be made to a public officer or a statutory authority to be designated by the Minister. If the claim is established, the compensation will be paid to the claimant from the Consolidated Fund. This is provided in paragraphs 3 and 4 of the Third Schedule.

Premiums on Leases Act

Finally, the Bill also seeks to repeal the Premiums on Leases Act. In recent years, the only effect of this Act has been to deter landlords of rent-controlled properties from seeking higher rents than those prescribed by the Control of Rent Act. With the appeal of the Control of Rent Act, the Premiums on Leases Act will no longer be required.

Conclusion

In summary, this Bill will abolish rent control in Singapore and make provisions to wind down the affairs of the Rent Conciliation Board and the Tenants' Compensation Board.

Sir, I beg to move.

Question proposed.

Dr Teo Ho Pin (Sembawang): Mr Speaker, Sir, I rise in support of the Bill.

The abolition of the Control of Rent Act is a step towards an open market economy. The Act, which was enacted in the early 1950s, has outlived its usefulness. It was meant to prevent unscrupulous landlords of premises built before 7th September 1947 from increasing rent indiscriminately. While it had served its purpose, the Act is no longer applicable in today's market environment. Tenants now are more educated, and they know how to protect their rights against unscrupulous landlords. The success of the HDB public housing has also eliminated the need to protect tenants from being levied market rental for these premises.

In fact, some tenants in these rent controlled premises have abused the Act. I learn that some tenants profit immensely through the subletting of the whole or part of these premises at market rent while paying low rental under the Act. In cases where the premises are of commercial or industrial uses, the profits made are substantial. These practices are unfair to landlords who have lost much opportunity to recoup their investment returns.

The above situation has also hindered our urban renewal progress. With such low rentals, landlords have no incentive to maintain or upgrade their premises, thus leading to disrepair. These derelict premises mar our city landscape and result in under-utilisation of our limited land. In order to inject life into our city areas, the Government must remove legislation which hinder urban renewal. The abolition of the Act will provide much impetus for landlords to rejuvenate their premises thus adding more buzz to our city.

Sir, I understand the plight of tenants affected by the abolition of the Act. But we have no choice as market forces determine our efforts to prepare Singapore for a knowledge-based economy. We must continue to improve our living and business environment to make Singapore a world-class city. At the same time, we will spare no effort to make sure that all Singaporeans are taken care of during this transition.

I would like to commend the efforts put in by the Ministry in helping tenants affected by the abolition of the Act. The Ministry has announced in April 1997 (three years ago) that the Control of Rent Act will be repealed as from 1st April 2001. This has given tenants adequate time to make the necessary preparations and adjustments. In addition, URA and HDB have implemented two housing schemes, especially for low income and single aged tenants, who may face difficulty finding alternate accommodation. They are the Housing Assistance Scheme for families affected by rent de-control and the scheme for relocating tenants and occupiers who are single aged persons.

Sir, these measures clearly show that the Government has taken a very compassionate approach to help the affected tenants although it is a private matter. Likewise, I hope that the landlords will also help low income tenants to make this transition in their lives more smoothly.

Sir, I support the Bill.

Mr Simon Tay: Sir, a number of media reports have focused on the effects of the intention to remove rent control on some tenants, especially those with vanishing trades. Conservation of buildings and of traditional trades is a concern. A recent survey has shown that while we have been relatively successful at saving the buildings, there are gaps in trying to make sure that traditional trades continue. Like many Singaporeans, we were disturbed. But when we think about it more carefully, there are reasons to see that the Control of Rent Act has been a bit of an anomaly for which perhaps the time has passed. Because even if we are concerned about the conservation of buildings and traditional trades, we must be fair. We must recognise that there are also rights of the owners and that we must actually create incentives for the owners to value the properties, to perhaps restore the properties and we can only do so if they know that they will get some fair return.

Sir, in fact, though I am for conservation, I am not for the freezing of time, like a magic wand, where the sleeping beauty is supposed to keep sleeping for 100 years. Rather, this kind of approach of freezing things, making people sleep, will tend to lead to distortion of markets, and I do share Dr Teo Ho Pin's point on the problem about subletting and profiteering by some tenants. In a sense, Sir, I was assured to hear that there will be special schemes for some of the tenants who are affected, the elderly tenants who have little choice. More than that, more generally, I would say that the phasing-in over a long transition period of four years shows that while Government sees that something needs to be done, they have sent a signal to those tenants to please do something to accommodate the changing times.

For businesses, I believe we cannot save them by special privilege, by freezing them in time. We can at best prevent sudden changes, unexpected upheavals. But in the end, we should foster them to change over time to meet changing times. This, of course, is not easy for businesses. That is why there is such a thing called the free market. Some of these traditional businesses will go out of business. But when you look around us, sometimes there are stories which heartened us, for example, the Killiney Road Kopi Tiam. The fact that they have continued, the fact that they have got branches, shows them competing in a sense with the coffee clubs of today. And those were the things those of us who are conservationists, but yet who want to see a bubbling vibrant modern Singapore, have to think about.

There is one point, Sir, that continues to have some difficulty for me. It only occurred to me when the Minister was reading the Bill. This is part of the Schedule that provides for the discontinuance of proceedings before the courts and tribunals. These courts and tribunals are already seized of the matter. They are hearing the issues. We seem to be actually pre-empting their decision. In comparison to that, if I am correct, the Minister has said that the Tenants Compensation Board will have a right to continue to look over the issues already before them. Could I understand from the Minister why is the difference and whether we should be discontinuing these proceedings?

Sir, I support the Bill because conservation is not about freezing areas or people in time but encouraging them to move forward at a pace acceptable to all.

Mr Chiam See Tong (Potong Pasir): Sir, I welcome this Control of Rent (Abolition) Bill. It is timely now that Singapore has, more or less, solved the problem of housing in Singapore. But the Control of Rent Act, at the time when it was enacted, was a good law. It was a socialist piece of legislation. It protected the poor tenants from the landlords because, at that particular point of time, there was an acute shortage of housing, and if there were no such law to protect them, the rents would have shot sky-high and they would all have been forced out and to live in the streets.

Sir, I have got only two issues. One is whether or not that will cause hardship to certain people in Singapore. I know that the Minister had already said that the Ministry is having some kind of a scheme to help people who have to move out from their rent controlled premises. They will have to move out once this abolition of the Act comes into effect on 1st April. I have no doubt that the landlords of rent controlled premises will increase their rents. They will not only increase their rents, but increase them higher than what they should be, because they feel that they are justified to do so to recoup their losses for so many years when the rentals were lost in a certain way in that they could not increase their rentals as early as 1953.

Many Members, I am sure, are familiar with the rentals that the landlords are getting for their rent controlled premises. Some tenants are only paying something like $40 or $50 for a two-storey terrace house because for so many years, the landlords have been collecting such low rentals. Most of these houses are quite run down, until of course they receive a notice from the HDB to spruce up their buildings. Even when they have to spend money repainting and repairing their premises, they will lose much money because they have to take money out of their own pocket to pay first, which the meagre rents they have received all those years cannot make up.

Sir, I am thinking of the plight of single persons who are not within the scope of help which the Ministry is going to give. In fact, last night, in my meet-the-people session I saw for the first time such hardship cases. A man, on behalf of his friend who is a 80-year old widow, came to see me. The landlord must have known of the abolition of the Control of Rent Act and has already got a lawyer to send this old lady a notice to quit within a week from 1st April if she cannot pay the new rental, which will be increased from $280, which she is presently paying, to $1,800. So you can see landlords of controlled premises are quick to take advantage of the abolition of the old law. The increase is slightly over seven times. The premises where the old lady lives is in my constituency which is an old building.

Sir, there must have been other similar cases throughout the island. The Minister mentioned about 1,000-odd of these premises. I know HDB is doing everything they can to help these tenants. But I hope, somehow or rather, HDB rules can be amended to help accommodate single people.

The other point I want to bring up has been mentioned by Mr Simon Tay. This concerns the preservation of old buildings. Sir, once the Bill comes into effect, I am sure landlords will immediately get rid of their tenants and sell the buildings to the developers who will probably pull them down. Or the owners themselves will pull the buildings down and redevelop the land. If these old buildings are demolished, Singapore will be a different place.

Sir, during the Budget session, we have been debating on what it is to be a Singaporean. If all these buildings were knocked down, many of us older Singaporeans would have lost something. The old buildings are very familiar to the older generation and that is how they feel that they have a home in Singapore. If the familiar buildings are gone and, in their places, strange looking buildings are put up, Singapore would be a strange place to them. It is no different from any other city in the world. So Singapore becomes another place. It is no longer the home in which they are so familiar with. I would earnestly urge the Government to take steps to prevent the wholesale demolition of the old pre-war buildings. Greed is a great motivating factor, and we know what developers and house owners of old buildings will do when the next rise in property prices comes along, unless of course they are curbed.

Mr Mah Bow Tan: Mr Speaker, Sir, I thank all the Members who have risen to speak. I believe all of them have supported the Bill.

As Dr Teo rightly pointed out, rent control has outlived its usefulness. It was enacted at a time when it was absolutely necessary. As Mr Chiam pointed out, I think it was a very noble piece of legislation, and it has actually enabled a lot of the people who came to Singapore at that time, just after the war, to be able to have a decent roof over their heads. But, over 50 years have passed, and I think we all agree now that there is really no necessity for such an Act.

So the question really is whether we allow sufficient time, for those tenants who have been affected by rent decontrol, to adjust. I believe the Government has given more than sufficient time for the tenants to adjust. In trying to be fair to the tenants, we also have to take into account the interests of the landlord, but I believe that we have given sufficient time for both parties to come to an amicable settlement. In fact, it is not just four years ago that notice was given. The intention of the Government to abolish rent control was signalled as far back as 1988, when the Control of Premises Act was used to start the first phase of rent decontrol. Since then, in 1997, four years ago, actual notice was given, annual notices were sent to the occupiers in all the four official languages. Last year, every three months, the same notice was sent out. So I believe adequate attention has been paid, and adequate notice has been given, to everybody concerned.

More than that, of course, there have been several additional steps being taken to make sure that tenants who are affected adversely by rent decontrol would not suffer unduly. These are the several schemes that I have mentioned just now to help the tenants. One was the Old Single Persons Scheme, and the other is the Rent Decontrol Housing Assistance Scheme. So steps have been taken to make sure that the effects of rent decontrol are mitigated.

It is an anomaly, as Mr Simon Tay has said, and he has also rightly pointed out that we should not just look at the interests of the tenants, but we should also look at the rights of the owners. In this respect, we have tried to balance both as much as we can. And the rights of the owners are necessary - not only the right to recognise their property rights, but also to incentivise them, to give them an incentive to refurbish and to renovate their premises.

In this regard, perhaps I should reassure Mr Chiam that it does not mean that all premises that are rent decontrolled will necessarily be demolished, redeveloped or knocked down. Some of those premises are gazetted for conservation and, if they are so gazetted, they will not be allowed to be torn down. The questions of conservation and rent decontrol are two separate matters. So where they are worthy of conservation, separate steps would be taken to incentivise, as well as to prevent, in some cases, developers from tearing them down. That much he can be assured of.

As for traditional businesses or so-called vanishing trades, again it is a question of how we can make sure that these vanishing trades do not vanish. If there is a need for such trades, they will not vanish. In fact, he has mentioned several of them, eg, the Killiney Road Kopi Tiam. And there are some other traditional trades which are doing very well in Chinatown, eg, medicine shops, herb dealers, the very well-known kaya toast shop which has now moved to Far East Square and, I am sure, there are many other examples. So the moral of the story is, if it serves a purpose, if there is demand, if there is somebody willing to carry on the trade and it is worthwhile for them to carry on the trade, that trade will not vanish. It is as simple as that. It is not easy to subsidise them to make sure that they carry on. And, as Mr Simon Tay rightly points out, we cannot freeze everything in time. I know some countries and some cities do that. They have got certain areas set aside where they carry on some of the trades of old, eg, shoeing horses, making nails and so on. But those are for the tourists. They are not real trades. They are actually there for the sake of, maybe, preserving a little bit of the past for the enjoyment of tourists. So I think we are talking about different things. But, certainly, for those trades which can survive, I think they will survive even after rent decontrol, because there is a demand for such trades.

Mr Simon Tay also made a specific point about the discontinuance of proceedings. I think he is referring to the Control of Premises (Special Provisions) Act which we are amending. Under this amendment, what we are doing is to say that TCB will not accept any new applications for recovery of possession. All those applications that are pending and which Order for Recovery of Possession has not yet been issued, those will be discontinued. But anything that has already been settled, that is of course with the Tenants Compensation Board. If the monies have not been claimed, those monies will be set aside and, therefore, they will not be touched. I believe that is what he is referring to. Is that correct, Mr Simon Tay?

Mr Simon Tay: Mr Speaker, Sir, may I just clarify briefly? That is correct, Sir. But, on the other hand, if you look at the First Schedule, the savings and transitional provisions on the repeal of the Control of Rent Act, clauses 3 and 4 provide for the discontinuance of proceedings for the Rent Conciliation Board, and for the discontinuation of certain proceedings for the High Court. Sir, perhaps I can raise this issue separately with the Minister.

Mr Mah Bow Tan: A final issue I would like to address is Mr Chiam's point whether there will be hardship to certain people caused by the Act. I think, yes, some people will be adversely affected by this. He cited the example of a constituent of his, a widow who is 80 years. If that person is not eligible for assistance under the two schemes that I have mentioned earlier, there are the normal HDB schemes where she can get assistance and, if not, if he would like to put up a case, we will consider that.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Mah Bow Tan].

Bill considered in Committee; reported without amendment; read a Third time and passed.