SINGAPORE - The Workers' Party has unveiled a working paper on Singapore's housing policy, which outlined recommendations such as a universal lease buyback scheme and the current Selective En bloc Redevelopment Scheme (Sers) to be expanded.

Through these proposals, Singapore's main opposition party hopes to spark a discussion on how to better preserve the value of Housing Board flats that could lose value once their leases are up - an issue which has gained attention in recent years.

Titled Counting Down to Zero: Are There Alternatives to Vers?, the 60-page paper by the party's policy team, drafted after consulting real estate experts, industry professionals, and members of the public, was published on the party's website on Friday (Nov 29).

Vers refers to the Voluntary Early Redevelopment Scheme, in which owners of flats aged 70 years and older can vote for the Government to buy back their homes before their leases run out. It was announced by Prime Minister Lee Hsien Loong last year.

Among the key issues the paper hopes to address is the "inevitable tendency for resale prices to decline" as the flat approaches the end of the 99-year lease, which it described as a "systemic issue".

It said other shortcomings in the Government's housing policy are how HDB flat owners cannot initiate collective sales, how the prices of new flats have risen against median incomes, and how having to service a large mortgage loan could mean a lack of retirement funds for some Singaporeans.

The paper advocated four principles to guide a reform of housing policy, such as how HDB flats should be "primarily an affordable home, as compared to private property", and how the "resale value of HDB flats should act as a form of wealth protection for retirement and legacies".

The other principles are: having more housing options beyond owning HDB flats, and having any wealth appreciation to be in line with economic growth and be inter-generationally fair.

About 80 per cent of Singapore households live in HDB flats.

The paper reviewed current housing policies, introduced the principles guiding the party's view towards housing policy reform, and offered a number of ideas to address the problems caused by the current approaches to housing.

"These ideas are offered as a contribution to the conversation that Singaporeans must have about the future of housing in light of the fact of HDB lease decay," it said.

UNIVERSAL LEASE BUYBACK SCHEME

On the issue of how it was inevitable that the value of HDB flats will depreciate to zero upon the expiry of their lease, the paper evaluated how two schemes announced last year would cushion this impact.

They are the Home Improvement Programme (HIP) II and Vers, which were unveiled in last year's National Day Rally speech by PM Lee.

HIP II is a second round of upgrading for selected flats when they are around 60 to 70 years old that will start in about 10 years. Vers lets residents in selected older estates vote on whether they want to go en bloc as their flats near the end of their 99-year lease.

"It is not clear to what extent these two schemes will mitigate the long-term tendency of HDB resale prices to fall as units age," said the paper.

It pointed to uncertainties with Vers, such as how it was "far from clear" that the majority of flats will be eligible once they turn 70, and how compensation will be funded if many eligible blocks opt for it at the same time.

The paper proposed a Universal Sale and Lease Back scheme, which would be extended to all HDB property types and all HDB lessees after the Minimum Occupancy Period and with at least 80 per cent of loan repaid, provided the lessee does not own any private property at home or overseas.

Under the proposal, those eligible can opt for the Universal Sale and Lease Back scheme at any time after their unit has 30 years of lease tenure left.

It is meant to complement the existing Lease Buyback Scheme, introduced in 2009 as a tool for senior residents to monetise their flats while continuing to live in it, by selling part of their remaining lease to HDB.

It said the purposes of the two schemes are different.

The current Lease Buyback Scheme aims to create a monetisation option for elderly Singaporeans who wish to unlock cash from their HDB flat lease, whereas its proposal aims to be a tool to mitigate against "a severe price decline spiral" as the lease works its way towards 99 years.

The paper proposed that compensation under this scheme be determined by a published formula that uses an income method of evaluation.

"In brief, the value of the flat is determined by the discounted income expected from rental receivables over the remaining lease period, but at a further discount tied to prevailing interest rates."

It suggested that the Government could use flats bought under this scheme to provide HDB flats for rental, for resale under Sale of Balance Flats exercises, or for sale of shorter lease lengths, creating a market for shorter leases.

"The benefit of a Universal Sale and Lease Back scheme is that it ensures liquidity to HDB flat owners needing to sell their property, with the HDB serving as the buyer of last resort.

"More importantly, the existence of a universal buy-back scheme serves as a back-stop to mitigate the inevitable price drop for HDB resale flats," said the paper.

MORE WIDESPREAD SERS

To speed up urban renewal, the paper proposes an alternative scheme to Sers, called Sers Plus.

In this scheme, the Government need not secure a proxy site before the launch of Sers. Affected residents would be given priority and guaranteed placement of units under existing BTO and Sale of Balance flat exercises, it said.

This was meant to address one of the reasons cited for the "slow pace" of Sers, which was the need to identify a suitable replacement site near the affected units.

Affected residents could also be given the option to buy shorter lease flats or rent government flats, and a "relocation bonus" to facilitate their move on top of payouts under the Sers framework, it said.

CREATING A VIABLE PUBLIC RENTAL MARKET

The paper said that limitations of the current rental model include short tenancy agreements of, for instance, two years under the Public Rental Scheme, and the stigma attached to those living in rental units.

Current schemes include the Parenthood Provisional Housing Scheme, which helps to house families temporarily as they await the completion of their new flats, and the Public Rental Scheme, which provides heavily subsidised flats to cater to Singapore citizen households with no other housing options.

The WP suggested reworking the "current patchwork of schemes" into a Public Rental Market, which consists of flats rented out by HDB on commercial terms, with a possible discount after taking into consideration recent HDB flat commercial rentals in the vicinity.

The paper noted that commercial rentals for a four-room HDB flat, as at July 2019, range from $1,700 to $2,700 per month, while public rentals for needy Singaporeans range from $26 to $275 per month.

"In between these two levels of rental lies considerable room for a type of pricing option that would serve as another option for would-be renters who are unable to rent HDB flats at either end of this spectrum."

It added that the Public Rental Market is meant to increase the options for rental for those who need it. "It is not a proposal that would foist rental on all residents or undermine the viability of the resale market for those who prefer to own leases."

Reiterating a point made in the party's General Elections 2015 Manifesto, it said the party believes pegging prices of Build-To-Order (BTO) flats to median incomes will help to control the extent to which BTO price growth can significantly outstrip median wage growth.

Coupled with this, the paper also called for transparency in the pricing of land sales to HDB. It noted that past parliamentary replies suggest that land pricing is undertaken by the Chief Valuer based on multiple factors.

"The details of the approach taken are not fully transparent. To help the public understand the pricing, HDB should give each buyer the breakdown of land sale costs, developmental costs and subsidies."