Singapore's housing policies have been uniquely successful. We are the only major city in the world where nearly every young couple getting married can afford to buy their first home immediately. In other major cities, young couples can only hope to rent a flat, and the monthly rent can cost up to 40 per cent of their household income. And in some cities, you do not rent a flat, you rent a space. In Singapore, you buy a flat, you pay for most of your flat out of your CPF (Central Provident Fund), and the flat is yours.
Public housing in Singapore is really "national housing". We made it happen through sound policies, unwavering political resolve and the strong support of Singaporeans.
Our founding fathers started the Home Ownership Scheme in 1964. They wanted every citizen to benefit from the country's growth and prosperity, and to have a valuable stake that would be theirs that they would defend, if necessary, with their lives. As a result, generations of Singaporeans have been uplifted by home ownership.
THE ANG MO KIO EXAMPLE
Take, for example, a first-generation resident in Ang Mo Kio.
His four-room flat would now be about 40 years old, and can fetch more than $400,000 in the resale market. In a good location, probably more. When he bought the flat 40 years ago, how much do you think he paid for it? $25,000. Even accounting for inflation, this is a huge appreciation. This is how we have enabled many Singaporeans to have a substantial asset to your name, even lower-income households.
In fact, if you take our home owners who are 90 per cent of the population, and you look at the poorest one-fifth of home owners, each has on average $200,000 of wealth in his or her HDB flat. That means you take the value of the flat, you subtract his mortgage unpaid and he still has $200,000 to his name. This does not happen anywhere else.
Young couples buying a flat today probably would not see such a huge appreciation as the Ang Mo Kio resident who bought the flat 40 years ago, because our economy is maturing and it cannot grow as fast any more. But you still get a good head start because the Government helps you out with a subsidised flat or housing grants, and often both. And as long as our economy grows, the value of the flat will go up for many years, just not as dramatically.
WHY 99-YEAR LEASES?
The oldest flats in Ang Mo Kio are about 40 years old. Sometimes residents ask what will happen to their flats as time passes and their leases run down. Will their flats still hold value? What options do they have? Why are their leases for 99 years? Can they be longer?
Actually, 99 years is a very long time. Let's say you buy a new flat from HDB in your early 30s. At the end of 99 years, you will be 130-plus years old - and probably would not need this flat any more. If you have children, they will also be very old, almost as old as the flat itself, in their 80s or 90s. And if you have grandchildren, your grandchildren will already be grandparents. So, 99 years is a very long time.
In particular, when you retire, after living in your flat for 30 or 40 years, it will still have a good 60-plus years of lease left. That is long enough for it to retain substantial value, and be a good retirement nest egg. You can continue living in the flat, rent out a room for income if needed, and one day, pass on the flat down to your children. Or you can right-size, sell it and move to a smaller unit. Or you can go for Lease Buyback and return the remaining lease to HDB, then use the money you get back for retirement.
But we can make things better.
We can do several things to help residents monetise their older flats. We can expand the Lease Buyback Scheme. We can do things to improve the liquidity of the resale market. That means to make it easier for people to buy and sell old flats, and MND (Ministry of National Development ) is working on this.
What if you had bought a resale flat instead? Well, our oldest flats are at most 52 years old, so you have at least another 47 years left of your lease, which is still a long time. Very few of today's HDB owners will outlive their leases. HDB estimates that it will happen to less than 2 per cent of households, including those who have bought resale flats. So it is not likely to happen to you.
Even if you have to return your old flat at the end of its lease, do not worry because the Government will help you get another flat to live in. It may be a BTO (Build-To-Order) flat from HDB with a fresh 99-year lease, if you are eligible for another one. It may be a resale flat on a shorter and cheaper lease. Or it may be a two-room flexi flat for retirement. But whichever option you choose, you will have to pay for the lease. This is only fair, because you bought the original flat knowing when the lease would run out, and knowing that the flat would then have to be returned to HDB.
WHY HDB LEASES ARE 99 YEARS
There is one fundamental reason why HDB leases are for 99 years and that is, we need to be fair to future generations. Let me explain.
HDB sells the flat to you for 99 years. You own it, and you can pass it on for one or two generations. After that, the flat returns to the State, the Government redevelops the land, and builds new flats for future generations. This is the only way to recycle the land and ensure that all our descendants can buy new BTO flats of their own.
If, instead, the Government had sold you the flat on freehold, that means in perpetuity - sooner or later, we would run out of land to build new flats for future generations. The owners would pass their flats down to some of their descendants, many generations into the future. Those lucky enough to have a flat, they become flat owners. Those not lucky enough to inherit a property would get nothing. So our society would split into property owners and those who cannot afford a property. I think that would be most unequal, and socially divisive. So, that is why 99-year leases are not just for HDB flats. In fact, for private housing also, the Government only sells land on 99-year leases.
There is also a practical reason why we cannot extend the leases easily. If you look at older buildings today, some look rather worn down, even before they are 50 years old. Some condominiums are like that, private property. After a century, I am sure the mechanical and electrical systems will be obsolete. The concrete will have deteriorated in our tropical climate. And even if we could fix all that, the recurrent maintenance costs would be very high. So it is better to let the leases expire, take the blocks back, demolish them and rebuild afresh. We can rebuild newer, better, more liveable blocks, and townships, more suited to what our grandchildren and great-grandchildren will want.
Today, if I offer you (the choice) to live in a 100-year-old flat, I do not think there will be many takers because you want the mod cons. You want the lifts. You want the power supply. You want the modern sanitation. It is better we take back. We rebuild. Singapore progresses while keeping an essence of its history and soul. That is why when the leases expire, the flats will have to return to the State.
HIP AND HIP II
There are still many decades before the first HDB leases expire. As the flats grow older, the Government will help you to keep them in good condition. We do this through HDB's upgrading programmes. We started with the Main Upgrading Programme (MUP) in the 1990s.
Later, we replaced the MUP with the Home Improvement Programme. The HIP has been very popular. It is an essential upgrade. We fix up maintenance problems, like spalling concrete, ceiling leaks and damaged pipes. We upgrade the electrical supply too. The Government pays up to 95 per cent, so residents pay as little as a few hundred dollars for the upgrading. Not surprising that after upgrading, the flat value usually goes up. We launched the HIP 10 years ago. The final batch of HIP flats will be announced by next year. Altogether 450,000 flats (have been) upgraded under MUP plus HIP.
Now, HIP covers flats built up to 1986. We launched the programme a decade ago. We will expand the HIP and HIP will now include blocks built up to 1997. That means another 230,000 flats will benefit.
Beyond HIP, what more can we do as our flats grow older?
The expanded HIP will include flats built up to 1997. In other words, the flats will get HIP about 30 years after they were built. After upgrading, these flats should be good for another 30 to 40 years. By that time, the flats will be 60 to 70 years old, and I expect they will be showing their age again.
We are determined not to let our public housing degenerate into ragged, squalid slums, which has happened in many other cities. So we should do a second round of upgrading, at about the 60-to 70-year mark. Let us call this HIP II.
HIP II will keep the flats safe and liveable, and also help them retain their value as their leases run down. It should see the flats through to the end of their leases.
In short, every HDB flat can expect to be upgraded twice during their lease. Once when they are about 30 years old, through the MUP or HIP, and a second time through HIP II, when they are about 60 to 70 years old.
The first flats will reach 60 to 70 years old about 10 years from now. So that is when we plan to launch the HIP II programme.
HIP II is a huge financial commitment for the Government. If you own a private property, you are fully responsible for its upkeep and upgrading. But because HDB is public housing, the Government will upgrade each HDB flat not once, but twice during its lifespan. Furthermore, the Government will help you pay most of the upgrading cost. The first HIP will cost the Government more than $4 billion. HIP II will probably cost even more, because the flats will be twice as old by then. But it is well justified, and we will do it so long as MOF (Ministry of Finance) has the money.
I know what some of you are thinking. HIP and HIP II are fine if I want to stay on in my flat. But what if I want to move out?
The Selective En bloc Redevelopment Scheme (Sers) is one option, if your flat happens to be Sers-ed and selected. But Sers is a very limited scheme. It is meant for selected HDB blocks or precincts which have high development value which we can unlock.
It makes economic sense in such cases for the Government to take back the flats early and redevelop the site. Because there is a lot of value unlocked, we share this value with residents through generous compensation. And with generous compensation, we can make the acquisition compulsory. In other words, HDB decides on Sers, and residents do not get to vote.
However, HDB estimates that only around 5 per cent of flats are suitable for Sers. There will be a few more Sers projects to come, but many projects with high redevelopment potential have already been done. Because HDB chose the promising ones and did them first.
So what about the flats that do not get Sers-ed? HDB has been studying this intensively. More households will be able to benefit from redevelopment before their leases expire. Why? Because the Government has good reason to take back more flats, and redevelop them as they grow older, before 99 years are up.
When HDB towns grow older, and the leases in the estates are nearing expiry, we have to redevelop the towns. We want to do this in an orderly way. In the early years, because of the housing shortage, HDB often built in a tremendous rush. Several older estates were built within short periods, especially in the 1970s and 1980s. Marine Parade between 1974 to 1976 - within three years. Ang Mo Kio and Bedok, after that, 1975 to 1981 - within six to seven years.
Therefore, if we do not plan ahead, 99 years later, all the leases in such towns will expire around the same time, and all the flats will be returned to the State within a few years. We will have to find new homes for a lot of people at once. HDB will have to tear down and rebuild the old flats in a hurry, just like when we first built Marine Parade, Ang Mo Kio and Bedok. I do not think that is a good idea. The towns will become construction sites all over again, with cranes all over the place.
I think we should redevelop our old towns over 20 to 30 years, rather than within four to five years, progressively. That means starting when the oldest flats reach about 70 years old onwards. So some flats, you redevelop when you get to 70 years old, some 75, and you stretch it out over 20, 30 years and progressively do things in a measured and considered way.
Then, just like with Sers, the estate and the community can be renewed progressively. There will be more new and younger residents moving in and the estate will become more vibrant. Those moving out will have somewhere to go to, and those staying will have rejuvenation to look forward to. This is why it makes sense for the Government to take back flats progressively over several decades, starting from about 70 years onwards, and stage out the redevelopment.
We will need a new scheme for this. Of course, we will compensate the residents whose flats are taken back early. We will also help them get another flat to live in, just like we would if their leases had run out. But the terms will be less generous than Sers, because there will be less financial upside. There is social merit in it. There is community merit in it, but there is not so much financial upside. Therefore, the scheme will be voluntary.
I will call it Vers - Voluntary Early Redevelopment Scheme. So if you don't get Sers-ed, you can hope to be Vers-ed. Residents in the precinct will have to vote for Vers, just like for HIP. If the residents vote yes, we will proceed. The Government will buy back the whole precinct, all the flats, and redevelop, and residents can use their proceeds to help pay for another flat. If the residents vote no, then they can continue to live in their flats until their leases run out.
This is a long-term plan. We will not start doing Vers for another 20 years. We need time to work out how to select the precincts, how to pace the redevelopments out, the specific terms of the Government's offer and so on. We also need to study how to afford Vers for the long term. But I think such a scheme is necessary, so we will start planning for Vers now.
HDB will be very busy. They may have to change their name to HRB - the Housing Redevelopment Board. Indeed, we will never be done building Singapore.