SDP: Here’s How You Resolve The HDB 99-Year Lease Problem

Singaporeans have been concerned about the recent announcement by Minister for National Development Lawrence Wong that the value of older HDB flats will decline and, eventually, be worth nothing at the end of their 99-year lease.

HDB owners go into heavy debt and spend their retirement savings paying off this debt only to find that their flats decrease in value and have to be returned to the government at the end of the lease.

This doesn’t make sense.

To overcome this problem, the SDP has proposed the Non-Open Market (NOM) scheme for flats. Under this scheme, HDB will base flat prices solely on labour, materials and administrative costs. They will not contain a land cost component as State land does not cost the government any money.

Currently, the HDB factors in the cost of land which jacks up the prices of the flats making them unaffordable for Singaporeans.

Excluding the cost of State land will substantially reduce prices for HDB flats. We estimate that the prices for NOM flats will be effectively halved or more, ranging from $70,000 for 2-room flats to $240,000 for 5-room ones.

But as the name suggests, NOM flats may not be sold on the open market. Owners wanting to sell their flats will have to sell them back to the HDB at a price that will be the original purchase price less the consumed lease.

Current HDB owners will have the option of converting their flats to NOM ones. When they do this, the government will refund the amount of money based on the original purchase price from the HDB and the price of the same type of NOM flat, subject to a cap.

The difference between the current system and the SDP’s NOM scheme is that Singaporeans won’t have to spend so much of their CPF savings and income to buy their homes. This will leave them enough funds for retirement and other pursuits.

Buyers who choose to stay with the current system can continue to buy and sell their flats on the open market. They are, however, subject to the vagaries of the market and face the prospect of depleting their retirement funds by buying hugely over-priced flats.

Experts have reacted positively to the SDP’s proposal (see here, here, and here).

The current system ties up the people’s wealth in government property which, ultimately, becomes zero in value. It increases debt while reducing consumer spending and investment. This is not good for the overall economy.

The SDP believes that housing, in particular public housing, should not be a tradeable commodity. Our flats are our homes where our loved ones live in security and comfort, not profit-making ventures. The NOM scheme is consistent with this principle.

More important, it frees Singaporeans from the crushing debt burden and overcomes the unthinkable problem that our expensive flats for which we spend a lifetime paying become worthless at the end of 99 years.

For more information on this subject, please read our alternative housing policy Housing A Nation: Holistic Policies for Affordable Homes here.



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