Lesser flats are identified for SERS over the years – what’s the solution for aging HDB flats?

Three blocks of flats in Macpherson were identified for SERS (Selective En bloc Redevelopment Scheme) recently. This has once again stirred the debate on aging Housing & Development Board (HDB) flats. Blocks 81 to 83 MacPherson Lane comprising 313 sold flats which are about 50 years old, are the first set of HDB flats identified for SERS since the Minister for National Development, Lawrence Wong, announced in March last year that HDB flat owners should not assume that all old HDB flats will become eligible for SERS.

Wong said that “only 4% of HDB flats have been identified for SERS since it was launched in 1995”, and that “it is only offered to HDB blocks located in sites with high redevelopment potential”.

Wong’s comments on SERS spooked a considerable segment of the HDB flat owners as about 70,000 flats (of the 1-million HDB flats) are more than 40 years old, and almost 10 percent of flats will face lease expiry in 50 years. The Minister’s announcement essentially means that such flats will have zero value once it reaches 99 years and owners will have to vacate their homes. Most owners will see the land their flat was on being returned to the State at the end of the 99-year-leasehold.

The public’s alarm caused the Minister to clarify that HDB flats are still a “good store of asset value”, so long as one plans ahead and makes prudent housing decisions. The assurance by the Minister however, failed to ease the concerns of some who asked ‘how in one fell sweep, HDB flats had gone from being “asset enhancement” to “good store of asset value”’.

The set of blocks identified for SERS in Macpherson are only the second set of blocks identified for SERS since the last General Election.

Before the Macpherson, 8 blocks of flats in West Coast Road were identified for SERS in August 2016. It is unclear how many more flats will be identified for SERS before the next General Election is called, but the set of flats identified for SERS has been declining between each election cycle.

After the May 2006 General Election and before the May 2011 General Election, 9 set off blocks were identified for SERS:

S/N	Date	Town	Completed SERS Site*		Designated Replacement Site
			Street Name	Block No.	Street Name	Block No.
1	22 Jun 2006	Ang Mo Kio	Ang Mo Kio Avenue 2/3/4	246 to 252	Ang Mo Kio Avenue 1	307A, 307B, 307C, 308A, 308B, 310A, 310B and 310C
2	8 Dec 2006	Queenstown (Buona Vista)	Ghim Moh Road	9 to 12, 9A and 12A	Ghim Moh Link	22, 23 and 26 to 28
3	23 Feb 2007	Bukit Merah	Henderson Road	94 and 96	Kim Tian Road	126A, 126C, 127A, 127C and 127D
4		Bukit Merah (Silat)	Silat Walk / Kampong Bahru Hill / Silat Road	17 to 19 and 22 to 31
5	28 Jun 2007	Clementi	Clementi Avenue 1	401 to 404, 407 to 409	Clementi Avenue 1	416 to 418, 420, 421, 423 to 425
6	12 Jul 2007	Jurong East (Teban Gardens)	Teban Gardens Road	2 to 11	Teban Gardens Road	20 to 23
7	8 Aug 2008	Queenstown	Commonwealth Drive	74, 75, 76, 77, 78, 79, 80	Commonwealth Drive	Blocks 50 to 54 (Commonwealth 10)
8	8 Nov 2009	Bukit Merah	Bukit Merah View	110, 111, 113, 114	Boon Tiong Road	Blocks 9A, 9B, 10A and 10B (Tiong Bahru View)
9	13 Feb 2011	Clementi	Clementi Avenue 5	321 to 323	Clementi Avenue 3	Blocks 440A to 440C (Clementi Cascadia)

After the May 2011 General Election and before the September 2015 General Election, 6 set off blocks were identified for SERS:

S/N	Date	Town	Completed SERS Site*		Designated Replacement Site
			Street Name	Block No.	Street Name	Block No.
1	9 Nov 2011	Bedok (East Coast)	East Coast Road	1 to 3	Chai Chee Road	Blocks 807B and 807C (Ping Yi Greens)
2	15 Nov 2011	Central	Rochor Road	1, 2, 3, 4	Upper Boon Keng Rd	8A, 8B, 8C (Kallang Trivista)
3	3 Dec 2011	Bukit Merah	Redhill Close	1 to 3, 5 to 22	Henderson Road	Blocks 95A to 95C, 96A and 96B (City Vue @Henderson)
4	29 Dec 2011	Jurong West (Boon Lay Gardens)	Boon Lay Drive	167 to 172	Jurong West Central	697A to 6097C, 698A to 698C (Jurong West Blossom)
5	25 Jun 2012	Woodlands	Woodlands Centre Road	1A and 2A	Woodlands Drive 70	Blocks 717A and 717B (Admiralty Vista)
6	27 Jun 2014	Queenstown	Tanglin Halt Road / Commonwealth Drive	24 to 32, 33 to 38, 40 to 45, 55, 56, 58 to 60 and 62 to 66	Margaret Drive (Site A) Margaret Drive (Site B) Dawson Road (Ste C) Dawson Road (Site D) Strathmore Avenue (Site E)

At the height of the public concerns about lack of reasonable recourse for aging HDB flats, the Singapore Democratic Party (SDP) released a statement reminding the public about its Non-Open Market (NOM) flat scheme proposal. The SDP first made this proposal in 2012.

Prominent socio-economic commentator Chris Kuan said SDP’s proposed solution to the problem of aging flats had merits on its own but also had serious drawbacks.

“I thought the NOM solution has merit on its own. But it fails to consider wider implications beyond the narrow issue of public housing. The problem with NOM is that it is an enormously expensive bail-out of existing HDB owners by compensating them for the land price input in their purchase prices. Back of the envelope $130-$150b which can only and should be paid out of the reserves.

“This then will cause a drop by $2.5-3b in Net Investment Returns Contributions which means either taxes have to be raised to plug the gap or expenditures have to be cut which always nearly means the lower income gets it on the chin. Less subsidies for healthcare, Comcare, WIS, Silver Support, etc. That is not all, the intended reduction in HDB prices will cause the private market to collapse.”

International Property Advisor Ku Swee Yong suggests that the public unease about the restrictions on cashing out their aging HDB flats stem from the terminology the public uses in relation to HDB flats. Speaking to radio channel 938 Now, Ku said:

“One big error we have been holding in our head for the last 50 – 60 years are these words called “buy HDB” or “buy BTO”. Using the right terminology, we should all be saying “lease HDB” or “lease BTO”. When I go to HDB to apply for BTO, I am applying to lease it for 99 years. When I apply to sell it, I am not actually applying to sell it, I am applying to transfer the lease to the next person who wants to lease it from the HDB. In that case we might be able to tamper the expectations on the profit portion much better.”

Ku may be right after all, and this rethinking of terminology may help buyers of newer HDB flats. But what about the 10 percent of flat owners who will face lease expiry in 50 years and bought into the Government’s promise of ‘asset enhancement’ wholesale?

Some had suggested that taxpayers should not bail out HDB flat owners  upon expiry of their lease, when owners of HDB flats have already enjoyed generous subsidies. Kuan suggests that such bailout (if it becomes politically necessary), may not involve taxpayers’ monies.

“Such a bail-out is essentially a re-acquisition of land which was sold under a lease agreement that put the leaseholder in an unfair position. Monies paid by the government can be drawn from the reserves because as one Tharman Shanmugaratnam had opined in the past, monies spend to acquire or redevelop land is a shift within the reserves, not spending the reserves. And where did the reserves come from? Selling land to HDB buyers is a major source. A bail out is just returning money. Even if its taxpayers’ money, it is bailing us out with our own money anyway.”

Minister Wong is right in that there are ‘serious trade-offs and ramifications’ when considering the conundrum of aging HDB flats. Perhaps one solution would be for the the Government to consider extending the lease to x-number of years for the 70,000 HDB flat owners who have used up more than 40 years of their 99-year-lease (as a one-off exercise), before subjecting them to the same restrictions which would affect better monetisation of older HDB flats.

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