RENTING OF HDB FLATS

Dr Teo Ho Pin asked the Minister for National Development (a) how many Housing and Development Board (HDB) retailers had their rentals increased by more than 10% in the recent rental revision; (b) what are the justifications for such increases; (c) how does HDB compute market rentals; and (d) what measures are being taken by HDB to help retailers overcome the uncertain economic conditions.

Dr S. Vasoo asked the Minister for National Development why there is a necessity to increase rental of shophouses and industrial premises managed by the Housing and Development Board in this time of economic slowdown.

Mr Mah Bow Tan: Before I address the issues raised by Members, allow me to give the background of HDB's rental policy for its commercial and industrial premises. Prior to 1987, HDB let out these premises on monthly tenancies with rents fixed at the point of letting. Many of the older tenants were resettlement cases who enjoyed concessionary rents. On the other hand, there were some tenants who obtained their premises via tender and were paying market rents, which were much higher. As there was only one rental adjustment between 1960 and 1987, there was great disparity in the rents for similar HDB premises.

To be fair to all tenants doing business in HDB premises, and to make HDB rents more responsive to market conditions, HDB decided to gradually move all rentals to market. In 1988, HDB converted all monthly tenancies to fixed-term tenancies and adjusted its rents at every tenancy renewal. For tenants who paid above the prevailing market rate, HDB would reduce their rents during tenancy renewal. Those who paid below the market would have their rents adjusted upwards.

For tenants who were on subsidized rents, HDB has staggered the rental increase towards prevailing market rate over 4 renewals, at 3-yearly intervals, ie, over 12 years, to moderate the impact on the tenants.

As at June 2001, HDB had 8,400 commercial and 10,200 industrial tenants. Of these, 7,900 commercial and 6,000 industrial tenants were paying below market rate. On the other hand, 300 commercial and 4,200 industrial tenants were paying above market rents, because the market rate has fallen over time. At the point of tenancy renewal, HDB will adjust the rents of both groups of tenants towards market rate. For example, among the 227 shop tenants who renewed their tenancies in the last three months, 70% had their rents maintained or reduced. 30% had their rental increased, of which half had their rents adjusted upwards between 10% and 35%.

Sir, the Government recognizes that some HDB tenants are facing difficulties in view of the poor economic conditions. Thus, HDB has given rental rebates to its commercial and industrial tenants since December 1997 to help them lower their business cost. The current rebates consist of three categories: (a) an across-the board rebate; (b) a further rebate to reduce rental for tenants paying above market rate; and (c) a rebate arising from property tax reduction, which is passed on by HDB. Taken together, HDB tenants will receive a rental rebate of 12% - 13% for Year 2001.

As I mentioned in Parliament on 19th April 2001, HDB is examining whether and how it can provide further assistance to HDB commercial and industrial tenants. HDB is expected to complete its review before the end of this month.

Dr Teo Ho Pin also asked "how does HDB compute market rentals?" I would like to inform him that HDB engages a team of qualified professional valuers to determine the market rent for its commercial and industrial premises. In assessing the market rent, the valuers would take into account recent lettings of comparable premises in the vicinity, and make adjustments for the location, size and age of the premises. HDB also allows tenants who do not agree with the assessed market rent to appeal for a rental review or to seek a separate assessment from the Chief Valuer.

Dr Ker Sin Tze asked the Minister for National Development whether the Housing and Development Board is prepared to waive or shorten the waiting period of 30 months for flat owners, who have sold their flats due to financial hardships, to rent a flat in mature estates or in areas such as Sembawang and Woodlands Estates where many flats are unoccupied.

Mr Mah Bow Tan: Under the existing policy, an ex-lessee who has sold his Home Ownership flat in the open market is not eligible to rent a flat from HDB for a period of 30 months from the date of sale. This is to ensure that home owners consider the implications of selling their flats carefully before making the decision.

However, HDB understands that there will be households who may be in serious financial difficulties and have no choice but to sell their flats. For such cases, HDB may, on compassionate grounds, consider waiving the 30-month debarment period on a case-by-case basis.