1. I thank several members of the House for raising issues on the elderly and the low income. This gives me the opportunity to explain how we will cater to the housing needs of these two groups.

Elderly

Home ownership

2. I had earlier assured the House that we will continue to keep flat prices affordable, so that the vast majority of Singapore households are able to own their homes. Many of them will see their flat appreciate in value over their lifetime, as Singapore continues to prosper and as we roll out HDB’s upgrading programmes island-wide. According to a Department of Statistics study that was published in 2005, HDB households each held an average of $154,000 in net equity (i.e. assets net of outstanding loans) in their HDB flat. The figure is likely to be higher today.

3. When these households retire, their flat will be an asset that is of significant economic value. They have paid for this flat over the years with their hard-earned savings. Now when they retire, it is a roof over their heads and a shield against economic uncertainty. Another statistic - most of them have paid off their home loans --- most elderly HDB households above 65 have no outstanding HDB or bank loan. By most, I mean about 90%.

Monetisation

4. The main issue is: how can we unlock the value that is in the HDB flat so that it can contribute to their retirement income. I do recognise that different households and families will have different ways to unlock or monetise their flat equity, depending on their individual circumstances and lifestyle preferences. HDB has, over the years, put in place an array of monetisation options to meet these different needs of elderly households.

Subletting

5. First, they can sublet their flat, and then moving in with family. This is an ideal arrangement because it gives them a steady stream of income and brings them closer to family.

6. HDB has been gradually relaxing the subletting policy so that more households can sublet their flats. So far, close to 18,000 households have taken up the option to sublet their whole flats. A quarter of them are elderly households above 55 years.

7. Zaobao recently highlighted the case of a 57-year-old Mr Wong who sublet his Ang Mo Kio 3-room flat for $1,700 per month. He, his wife and son then went to stay with his daughter and son-in-law in their executive apartment at Jurong West. He told Zaobao that he has more cash in hand now, but more importantly it has brought the family closer. I wanted to highlight this case because I think it is important that more elderly Singaporeans can be like Mr Wong and benefit from the relaxed subletting policy.

8. For those who do not want to sublet their whole flat, they can sublet one or two rooms to earn additional income. Renting out one room can yield a tidy income of $300 - $500 per month. This is also not a bad option.

Downgrading

9. If they do not wish to sublet and want a more permanent arrangement, they can move to a smaller flat or a 30-year lease Studio Apartment. Our Studio Apartments have been very popular with the elderly. There is close to 100% take-up for the 1,754 units that HDB has offered to date. Members have asked for more of such units to be built. I am happy to say that we will do so. This year, HDB plans to launch 400 more Studio Apartments. We will build them in different estates so that elderly can choose a Studio Apartment in a familiar neighbourhood, or better still near where their children stay. Not just Studio Apartments. We are also going to build more 2-room flats which are suitable for both the low income and the elderly.

Lease Buyback Scheme

10. The options that I have described meet the needs of most elderly homeowners. But some lower-income elderly home-owners in smaller flats may need a little more help to unlock their flat equity to meet retirement needs. Last year at National Day Rally, Prime Minister announced that HDB is going to introduce a Lease Buyback Scheme, or LBS for short, to help such households. Let me now give an update of this Lease Buyback Scheme, as requested by members.

11. First of all, the LBS will be launched in 2009. We need time to work out the technical details. It will supplement CPF LIFE which is the lifelong annuity scheme recently announced by MOM in helping the elderly. Under the LBS, HDB will purchase the tail end of the flat lease from the elderly household. In addition to the housing equity unlocked by the purchase of the tail-end lease, HDB will provide a $10,000 subsidy. So the amount from the lease buyback plus $10,000 will form the capital monetised from the Scheme. Out of this, $5,000 will be given to the household as an upfront lump sum, while the remainder will be used to purchase a CPF LIFE Plan to provide the owner with a monthly stream of income for life. The household continues to stay in their flat, which will be left with a 30-year lease.

12. Let me give a specific example to illustrate this. A couple jointly owns a 3-room flat worth $200,000 with a 70-year remaining lease. They are both 62. If they sign on to the LBS, they will get: 30-year flat lease; $5,000 upfront lump sum and a combined payout for life at around $490 per month. This monthly payout, together with their CPF savings, or their monthly lifelong income from CPF LIFE, will help them to enjoy a more financially secure retirement. So don’t forget that the LBS is only one part of the retirement income of the elderly.

13. So who can qualify for the LBS? As this is a subsidised scheme, there will be some eligibility criteria. First, beneficiaries must not have enjoyed more than 1 housing subsidy. Second, it will be restricted to 2- and 3-room HDB lessees because owners of larger flats can take advantage of other monetisation options, such as downgrading. These are the 2 main eligibility criteria.

14. So how many can qualify? We estimate that about 25,000 households will be able to qualify for the LBS. This is 70% of elderly households in 2R and 3R flats. Member has asked that the scheme’s eligibility criteria be relaxed, for example, why restrict those who have taken 2 subsidies? The reason is that the LBS is a public housing subsidy, and we have to limit the number of subsidies per household. Why not for 4-roomers? We can examine this after the scheme’s implementation, taking into consideration the public feedback and responses.

15. I believe that the LBS, together with CPF LIFE, will substantially improve the financial situation of lower income elderly households. In particular, many of today’s elderly do not have much in their Retirement Accounts. I agree that we need to make a concerted effort to actively promote the scheme to the eligible elderly so that they are aware of the LBS, and also to allay their fears.

16. One particular concern that some elderly might have is the housing arrangement after 30 years. I want to assure them that they will have a roof over their heads, if they outlive their LBS lease. We will look into housing options for them. This is similar to Studio Apartment lessees who outlive the 30-year lease. HDB will look into the circumstances of each case to determine the appropriate housing arrangement for them.

17. What I have just said about the LBS may sound a little complicated. Indeed, some of the details can be quite technical. I have asked my staff to simplify it and they have come up with this: L – LIVE in your flat; B – BONUS of $10,000; S – STEADY income for life.

Low Income

Public housing subsidy framework

18. Let me now turn to the low-income. Members have proposed various suggestions to provide more financial help to this group, for example subsidies and concessionary loans for downgrading, as well as subsidies to rent from the open market.

19. As I explained at length earlier, the Government gives generous subsidies for home ownership, as much as $88,000 in housing subsidy throughout the household’s lifetime.

20. However, I hope Members appreciate that no matter how generous the Government is or would like to be, the housing budget is finite. There must be a limit to the amount of subsidy that each household can receive. This is why, for instance, we generally limit households to 1 concessionary loan. However, we do provide a second concessionary rate loan to support upgrading as the family grows.

21. HDB generally does not offer a second concessionary loan to downgraders, as most of the downgraders would have already benefitted from housing subsidies and would have substantial proceeds from selling their larger flat. It does not make sense to provide them with a further subsidy in the form of another concessionary loan. But members are aware that those households who downgrade because of genuine financial difficulty do get special consideration from HDB. For such cases, I want to assure Member that HDB will continue to be flexible.

Personal responsibility

22. On their part, households must help themselves by exercising financial prudence and taking the long-term view. They must be ultimately responsible for their own actions.

23. Home-buyers must exercise prudence by choosing a flat that they can afford. HDB will impose credit assessment guidelines to ensure that home-buyers do not over-commit themselves financially.

24. For those already in difficulty with their existing home loan, they should seriously consider long-term solutions before arrears accumulate and their financial situation worsens. If a room can be spared, the household should think about renting it out to boost the family income. Alternatively, they can downgrade to a more affordable flat. HDB’s assistance measures are only to give the family time to tide over temporary financial difficulties. They are not meant as long-term solutions.

Compulsory acquisition

25. I heard Mr Ong Kian Meng’s speech at the Budget Debate a few days ago, where he said “compulsory acquisition is not the long term answer.” I want to assure Mr Ong and all members that for HDB, compulsory acquisition is absolutely the last resort. It is a serious decision, not taken lightly, carried out only after other measures have been exhausted, and only if lessees themselves do not make any effort to resolve their financial situation. In fact, the purpose of compulsory acquisition is to prevent the family getting into even more serious financial difficulty.

26. Take the case of Mdm Judy Mitchell that the member mentioned. Let me give this House the full picture. She lives in a 5R flat with her adult daughter and mother. This is her third flat. She has bought and sold two previous flats and has made profits of about $190,000. She has enjoyed three concessionary loans. She started having difficulties paying for her housing loan for her current flat, soon after she bought it. On 4 occasions for 6 months each, ie over a period of 2 years, HDB allowed her to defer her mortgage payments or pay only 50% of the instalment amount. However, she did not make any attempt to find a long-term solution, and arrears kept mounting. She was not receptive to HDB’s suggestions to downgrade or include her working daughter to help to service the housing loan. As a result, her outstanding loan has increased beyond the original loan. They have to downgrade, while they can still obtain enough sales proceeds to afford a small flat. I would like to urge Mr Ong to persuade the family to please do the right thing quickly. If they cannot get a bank loan, I will ask HDB to consider providing a non-concessionary HDB loan for them.

27. This case illustrates some of the many challenges HDB faces in helping HDB lessees in mortgage arrears. Unfortunately, not all lessees in need are receptive to helpful suggestions. Worse, they are reluctant to make any effort to help themselves. They expect HDB and the Government to help them indefinitely. I think it is most unwise of HDB to do so. It would be most unfair to the many residents who live within their means, and work hard to pay off their loans, albeit with a bit of help and forbearance from HDB from time to time.

Public Rental Scheme

28. Let me now speak about the Public Rental Scheme. Even as we strive to keep our flats affordable, there will be a group for whom home ownership is not a financially viable option, as mentioned by Member. They cannot afford a flat even with our generous subsidies.

29. The Public Rental Scheme is the final safety net, to help families who are truly needy and who have no other option to turn to. Each rental flat is very heavily subsidised. A 1-room rental flat receives an equivalent of $6,000 per year in rental subsidy. If the family stays in the flat for 20 years, he will have consumed $125,000 in rental subsidy, even more than the subsidy for home ownership flats.

30. This is why we have stringent criteria in place for the Public Rental Scheme, so that the heavy rental subsidies are provided only for the very needy. They are not for existing flat-owners who have decided to cash out of their flat. Yes, we do encourage the elderly to monetise, but they can choose from many other monetisation options, as I had already explained. Member asked about the 30-month debarment. This is why we have the 30-month debarment in place: we do not want people who already own flats to join the rental queue.

Supply/demand of rental flats

31. What about the supply and demand of rental flats? I acknowledge that this is a concern. There is a shortage of rental flats. I have asked HDB to resolve this issue in three ways. First, we will increase the supply of rental flats. Second, we will review the eligibility criteria for rental flats. Third, we will step up enforcement to weed out those who abuse the privilege of rental flats.

32. Today, we have about 42,000 rental flats. We will build more rental flats over the next few years, to increase our stock by 20% in the first instance to 50,000. In 2006, I announced that we would resume the rental flat building programme. Since then, we have built some 2,200 new units. 930 conversion flats will be ready by this quarter. These are rental units converted from vacant blocks, as suggested by Member.

33. We are going to build another 2,000 rental units in 2008. They will be located across different estates in Singapore. They will be ready for allocation to needy families from 2011 onwards.

34. But building more flats, on its own, will not be an adequate nor sustainable solution. We have to better target our rental flats so that they are reserved for the genuinely needy households.

35. We will embark on a comprehensive review of the Public Rental Scheme. This review will put in place a more holistic assessment criteria of rental flat applicants. Who are the people in the rental queue today? Ex-HDB lessees made up two-thirds of the total rental applicants. This means that the majority of the applicants have enjoyed housing subsidies in the past. Did they fall on hard times to require extra help? Yes, some of them. But more than half of these ex-lessees were neither affected by mortgage arrears or divorces. 20% of the ex-lessees had enough money to buy a smaller flat. Many could have stayed with their children or siblings.

36. I hope Members will agree with me that those who can afford home ownership or have family support should not join the rental queue. Otherwise, the more needy cases will be crowded out. Member spoke about elderly who sold their flats, gave the proceeds to their children and then were turfed out of their children’s flats after the relationship soured. I appreciate his understanding that our rental flats cannot be used to support such irresponsible behaviour of the children.

37. The question is, are there other ways to help these families, rather than provide a heavily subsidised rental flat? Member suggested short-term housing for low-income divorcee families. We can look into this idea. But I submit that the issue of dysfunctional families, for example divorcee families, is not just a housing issue. What is the cause for such families in the first place? More than 20% of those applying for rental flats are divorcee families, and the numbers are increasing. We will have to look at the overall issue of low-income dysfunctional families from a wider perspective together with MCYS and other Ministries. The issue cannot be just limited to housing.

38. The Public Rental Scheme review will also examine how we can encourage existing tenants to move into home ownership when their financial situation improves. There are many instances of families in rental flats who moved up. I hope to hear more of such success stories from among our rental flat tenants.

39. Thirdly, we will carry out enforcement to weed out those who do not need or have abused the privilege of a rental flat. One Member told me that one of her rental flat tenants has just installed a split-unit aircon in her flat, courtesy of her children. Another has just asked for a season car parking ticket. Other Members have told me of rental flats being sublet. HDB will not hesitate to terminate the flat tenancy of those who abuse or violate the conditions of the lease, and redistribute these flats to the deserving cases in the queue.

Conclusion

40. In summary, let me say our home ownership programme enables the elderly to monetise their flats to meet retirement needs. For those who are less well off with less monetisation options available, we will offer the Lease Buyback Scheme for them.

41. For low-income families, we will build more rental flats, while reviewing the scheme to ensure that rental flat subsidies are reserved for the genuinely needy. We will continue to be flexible to help families in financial hardship. But, the individual has to exercise prudence and financial responsibility. In this way, we can continue to provide housing subsidies to those Singaporeans who really need help.

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