Don’t worry about the HDB leasehold controversy, you own your HDB flat

Don’t worry about the HDB leasehold controversy, you own your HDB flat

Many people have been furiously commenting online and saying that HDB home owners are not owners, they’re tenants because HDB flats are sold under the HDB leasehold arrangement. Such arguments apparently have been gaining traction since National Development Minister Lawrence Wong (who used to be our MP!) said HDB will not renew the leases of all old HDB flats under the Selective En-bloc Redevelopment Scheme (SERS). Apparently only 5% of HDB flats will benefit under the scheme.

So these people argue that HDB is essentially an extended rental scheme, that it’s a leasehold. And they point to the HDB lease agreement (the one you’d have signed when you get your keys) which says the HDB flat is a leasehold. On the surface, this seems logical.


Something didn’t seem right

Something seemed strange though. Why are these arguments coming up now? They don’t seem new. It can’t be after 50+ years of HDB housing that we spot some big flaw in the system or some scam job. Has there been new information such that we need to chiong and be the first to buy or sell our HDB flats? The short answer after doing some reading online – NO.

You own your HDB flat, plain and simple

HDB home ownership is not a myth. A HDB flat is a leasehold property, but leasehold owners own their home. There’s an expiration to the lease but it seems to be the same thing in other countries. Anyway, you won’t be able to renovate your flat or do other stuff if you rented your home.

The only thing people don’t own is the land. If you really wanted to share ownership of the land among all the people living in the block, then it’ll be extremely messy and ridiculous. You probably end up owning only like 50 sq cm, unless you want to carve up air ownership as well. Which is stupid.

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99-year leases prevent land from being dominated by some people

Singapore is a small place and it’ll be damn stupid if there’s no time limit for the land. Houses will keep getting passed around from generation to generation. Eventually there’ll be no more land left.

Who benefits? People who already own HDB flats and money grubbing private developers. It’d suck for everyone else.

If my family owns a HDB flat in Punggol, I can’t move to Bedok to be near my office and delicious Bak Chor Mee. I must stay in Punggol. With the family. If my family doesn’t own a HDB flat, then we’re screwed, we’ll end up living in shoebox or sublet homes like in Hong Kong. No one should live like some people do in Hong Kong.

No one should have to live like this. These Hong Kongers are living in squalid conditions, like animals in a cage.
No one should have to live like this. These Hong Kongers are living in squalid conditions, like animals in a cage.

Many private properties are also for 99 years

The funny thing is you run into this problem even if you buy condos. Many private properties are also held on 99-year leases but no one argues they are merely being rented. For these folks, their home prices will also fall when their lease drops. So it’s not an HDB thing, it’s pricing in an expectation that you won’t be able to recoup the money you sunk in.

HDB shouldn’t reward speculation and using HDB flats to get rich

Nevertheless, HDB must still continue to make sure that people do not make use of HDB flats to get rich. Speculating using HDB flats should not be a surefire way to upgrade your bank account. This’d be a bad example of using public funds to benefit private interests of a few. The government also can’t be constantly bailing home owners out at the end of the lease. The lease is not wayang, it’s there for a reason. It’d defeat the purpose of a lease if the government by default extends the lease for everyone.

Home ownership is still good to anchor citizens to the country

HDB flats are still an important anchor to tie Singaporeans to the country. For better or worse. The benefits are obvious. A flat you call your own, which will increase in value and give you some monetary safeguards if times are desperate. But worse because I’d have thought we were better than that, after 50+ years together as a nation. And the anchor principle also works the other way – people will feel very unhappy if they can’t get good access to public housing and their sense of belonging suffers.

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HDB is still the best value for money housing option

Being a city state has its natural challenges, particularly in the form of having to do many things a country needs (e.g. border controls, military defence) with very limited space. At the end of the day, home ownership is still very much a part of what it means to be a Singaporean. Our home ownership situation, despite being a city state, is still one of the world’s best. People still can afford public housing and there are generous subsidies to help people afford their own homes. Compare us with Hong Kong and you can see an immediate disparity. We are far ahead.

Of course, HDB is not perfect and there have been obvious missteps, like when they misjudged demand for HDB homes in late 2000s / early 2010s. But the fundamental principles of home ownership seem sound. Just listen to this for a convincing explanation:

Or if you’re into a more sarcastic-but-still-very-true take:

These explanations are repeated again and again. They aren’t new. But the above concerns have been popping up recently despite clear clarifications. There seems to be some fake news or hot air going around that has made people panic. Hopefully everyone can rise above sensational click bait content/headlines and see the good work that HDB does. The fundamentals are still sound, they didn’t change.


Asset depreciation problem

Apart from the HDB leasehold “controversy”, there does seem to have been some problems with HDB flat depreciation. There’re tons of essays and opinions written so far. I’m no expert, but the short summary of what I gathered is:

  • The government said not every HDB flat will get their lease renewed via SERS.
  • Home owners panic because their flats should get less and less valuable.
  • Buyers have no incentives to buy the older flats at a high price, have difficulty getting CPF (can’t use if the HDB flat is more than 69 years old) / bank loans to pay for old HDB flats.
  • In many cases buyers must avoid older estates altogether.
  • There’s no demand for older flats, so these flat owners can’t move out or encash the value.
  • They must stay in the same house and can’t unlock the flat’s value.
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Enter HIP II, VERS

PM Lee most recently tried to alleviate the problem with the Home Improvement Programme 2 and Voluntary Early Redevelopment Scheme (VERS). It’s a lot of words but these MND infographics help to simplify the announcements:

To be honest, the panic among home owners was real and understandable. The government has been saying that HDB flats should supplement the incomes of older folks if they are encashed, but the way the market looked set for did not follow that route. (If you need to go into a preliminary analysis of the new policies, you can check out Straits Times (ST)’s good report.)

Devil is in the details

The tricky issue is how HDB words and implements the policies. There might be a few details that need to be ironed out:

  • Principle wise, the government needs to balance between ensuring that public funds are not constantly being used to bail out home owners (and therefore also encourage speculative purchases for HDB flats that might go under SERS), and ensuring that HDB policies do not inadvertently lock people into living in the same homes for life. The intent of the policies broadly strikes a balance, but the devil is always in the details.
  • The interactions between VERS and HIP II, as the ST report pointed out, especially as HIP II could potentially be only 10 years before VERS.
  • How VERS is conducted, i.e. similar to the private apartment/HUDC style or closed negotiations with HDB.
  • How much VERS compensates home owners, which must also ensure that it is not a profit-making vehicle but a scheme to solve the problems above.

Everything seems fine

But anyway it’s not like the government didn’t already know this, they probably already had everything worked out months ago haha. We’re generally neutral when it comes to government policies, it seems like the government scored good marks for quickly nipping this issue in the bud. Unlike the HDB leasehold matter, there were genuine concerns that were dealt with, for now at least.

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