INFORMATION NOTE - LegCo · over-subscription for the sale of subsidized sale flats. 1.2 In an...

Legislative Council Secretariat IN26/12-13

Research Office page 1

INFORMATION NOTE

Public housing in Singapore 1. Background 1.1 In Hong Kong, public housing plays an important role in meeting the housing need of the community, with 45.7% of local households living in public housing flats as at the first quarter of 2013. In recent years, rising property prices and flat rentals have resulted in increased demand for public housing, as reflected by the long waiting list for public rental housing ("PRH") and the extent of over-subscription for the sale of subsidized sale flats. 1.2 In an effort to increase the supply of public housing, the Government has announced to provide 79 000 PRH flats between 2012-2013 and 2016-2017, as well as about 17 000 subsidized sale flats over the four years starting from 2016-2017. However, some Members are of the view that the Government has not addressed the fundamental issues such as the difficulty in securing land for residential development and the misallocation of PRH resources. 1.3 At its meeting on 18 December 2012, the Subcommittee on the Long Term Housing Strategy requested the Research Office to conduct a study on Singapore's public housing policy for members' reference. Singapore is often cited as a successful example among the Asian cities in terms of the provision of affordable public housing and high proportion of owner-occupiers among its residents. Since its establishment in 1960, Singapore's Housing and Development Board ("HDB")1 has built more than 900 000 public housing flats to accommodate over 80% of the local population. Among the public housing residents, about 95% of them are currently owner-occupiers and 5% PRH tenants.2

1 HDB is the public housing authority in Singapore and operates as a statutory board under the Ministry of

National Development. It was established in 1960, a time when many Singaporeans were living in unhygienic slums and crowded squatter settlements. The mission of HDB is to provide quality and affordable public housing. In addition to provision of rental housing, HDB also encourages home ownership in Singapore. HDB borrows from the government and commercial banks and issues bonds (or notes) to finance its development programme and working capital requirements.

2 In comparison, about 34% of Hong Kong's public housing residents were owner-occupiers and 66% PRH tenants as at the first quarter of 2013.



1.4 Against the above, the Research Office has conducted a study on Singapore's public housing policy. The salient features of the policy include:

(a) targeting at building up a home ownership society; (b) implementing multi-dimensional measures to build up abundant land

reserves for public housing development; (c) operating a responsive flat supply system ‒ Build-to-Order ("BTO")

system ‒ to provide HDB with the flexibility to adjust its flat production according to the prevailing market situation;

(d) offering a variety of public housing programmes to cater for

households with different housing needs and affordability; (e) providing affordable public housing for the community; (f) launching various home finance schemes to boost home ownership

in Singapore; (g) allowing eligible Singaporeans to buy up to two subsidized flats

during their lifetime; (h) giving priority allocation for new HDB flats to eligible applicants

such as first-time buyers and married children planning to reside together with or live close to their parents; and

(i) making use of public housing programmes to cope with the trend of

fast-ageing population in Singapore. 1.5 The purpose of this information note is to provide a detailed discussion of the above salient features in order to facilitate members' understanding of the uniqueness of Singapore's public housing policy.



2. Home ownership society 2.1 Singapore set home ownership as a national goal as early as in the early 1960s and has since then committed to encouraging its citizens to own their flats.3 According to the Singapore government, home ownership generates pride and gives every citizen a sense of belonging to the country. Against this, the basis of Singapore's public housing policy has hitherto rested on fostering home ownership instead of rental in order to make Singaporeans grow roots in the country. Singaporeans are thus assisted with various financial assistance schemes for home purchase. In particular, low income households are provided with specific government grants to help them achieve the goal of home ownership. 2.2 As to the heavily subsidized PRH flats, the Singapore government considers these flats as a housing option only for households with very low income. Stringent eligibility requirements have been put in place to safeguard the provision of PRH flats for people in genuine need.4 For example, total household gross income must not exceed S$1,500 (HK$9,3155) per month and the standard lease period is normally two years. The arrangement of two-year tenancy period, instead of a lifelong entitlement, enables HDB to regularly review the suitability of tenants for living in the rental flats. In general, families exceeding the income ceiling are required to move out and consider other housing options. Nevertheless, for those higher income families asking for more time to buy a flat, HDB will consider extending their tenancy for another term. But the families concerned have to pay a higher rent aligned to their income.

3 According to Chow (1978), "[f]amilies are also encouraged to purchase their own flats under the "Home

Ownership for the People" scheme introduced in 1964 by making use of their credits with the Central Provident Fund".

4 The tight eligibility requirements might have spared Singapore from dealing with the backlog of applicants on the waiting list for PRH flats. At present, average waiting time for the allocation of a PRH flat is a mere six months.

5 Based on the average exchange rate of HK$6.21 per Singaporean Dollar in 2012.



3. Land reserves for public housing development 3.1 From the mid-1960s to the early 1980s, Singapore embarked on a massive exercise of land reclamation and compulsory acquisition that raised the government's ownership of the total land mass from around 40% in 1960 to more than 80% currently. Being the largest land owner in Singapore, the government can regulate the land supply to ensure the availability of adequate amount of residential sites for public housing development. Apart from land reclamation and compulsory acquisition, Singapore has also resorted to the measure of optimizing land use to support its public housing development. Reclamation 3.2 The Singapore government has undertaken large-scale coastal reclamation since the 1960s to provide the much-needed land for residential and commercial developments. The reclamation project succeeded in increasing Singapore's total land area by 134.3 sq km or 23% from 581.5 sq km in the 1960s to 715.8 sq km in 2012. Reclamation also gave birth to many new towns and residential areas, such as Marine Parade and Punggol 6 , that exist today. Furthermore, it provided land for building HDB flats, as evidenced by the use of 37.3 sq km or 28% of the total reclaimed land for public housing development. 3.3 In January 2013, the Singapore government forecast the country's population to increase by 1.2-1.6 million from 5.3 million in 2012 to 6.5-6.9 million by 2030. As estimated by the Ministry of National Development7, the key ministry responsible for national land use and development planning, Singapore needs to reclaim another 50 sq km of land to accommodate the expected increase in the population size. In particular, 30 sq km of residential site will be made available by 2030 for both public and private housing development.

6 Marine Parade is the first residential estate built entirely on reclaimed land, while Punggol is one of the newest

residential towns built on reclaimed land taken from marshland and the sea. 7 See Ministry of National Development (2013a).



Compulsory land acquisition 3.4 The Land Acquisition Act was enacted in 1966 to grant the Singapore government the power of compulsory purchase of any private land for purposes such as public housing, industrial and infrastructure development, and social facilities. The Act serves as an effective instrument for the government to build up its land reserves, with the increase in its ownership of the total land mass from around 40% in 1960 to the current 87%. 3.5 It was not until 2007 that the Land Acquisition Act was amended to provide for the compensation for acquired land to be based on the prevailing market value. Before that, acquired land was compensated at the rate set by the government rather than the market rate. For example, between 1973 and 1988, the Land Acquisition Act set the compensation for land acquired at the market value of the land as at 30 November 1973 or at the date of Gazette notification, whichever was lower. 8 Such an arrangement allowed HDB to build up considerable land reserves at low costs as 1973 happened to be a year of depressed land prices because of the global oil crisis. HDB's low cost landbank has enabled it to sell its flats at below market prices as they are built on government-owned land compulsorily acquired from private landowners at below market value. Optimization of land use 3.6 In Singapore, the constraint of land scarcity has also necessitated the government to adopt a number of measures to optimize land use. These measures include: (a) adopting a high-rise high-density approach for housing development9, (b) rezoning the underutilized sites for more productive land uses, and (c) redeveloping dilapidated areas. In addition, the Selective En bloc Redevelopment Scheme was introduced in 1995 to put land to more optimal use. Under the Scheme, selected old blocks of HDB sold flats are demolished10 and the vacant sites are redeveloped to much higher densities.

8 The Act was subsequently amended in 1988, 1993 and 1995 respectively to raise the amount of the

compensation for land acquired to be based on the land value at a specific point of time. For instance, the Land Acquisition (Amendment) Act 1988 provided that for land acquired on or after 30 November 1987, the compensation shall be based on the market value of the land as at 1 January 1986.

9 Nevertheless, high-rise residential blocks are interspersed with low-rise developments (e.g. schools and parks) to help reduce the sense of crowdedness and provide visual and spatial relief in a checker-board pattern. The checker-board concept also allows facilities to be brought closer to the residents.

10 The flat lessees involved would be offered new flats at a nearby site. As such, the Selective En bloc Redevelopment Scheme enables residents in the old estates to upgrade to new and better flats within the same neighbourhood and preserves the strong community ties built over the years at the same time.



Land reserves for future housing supply 3.7 The afore-mentioned land administration policy has enabled Singapore to build up abundant land reserves over the years. This in turn facilitates the government to respond more flexibly to society's needs for land and meet future housing demand in a timely manner. Reflecting this, the Ministry for National Development announced in January 2013 to increase the housing supply by as much as 200 000 units during 2013-2016, comprising about 110 000 HDB flats, 80 000 private residential flats and 10 000 Executive Condominiums ("ECs") (see Table 1). The surge in future flat supply is to catch up with the strong pent-up demand resulting from under-building in the past and increasing investment demand in recent years. Table 1 – Singapore's flat supply, 2007-2016

HDB flats Private

residential flats Executive

Condominiums Total

2007 5 063 6 513 0 11 576

2008 3 154 10 122 444 13 720

2009 6 495 10 488 0 16 983

2010 10 161 10 399 0 20 560

2011 17 813 12 469 0 30 282

2012 information

pending 10 329 0

information pending

2013 forecast

13 608 16 100 700 30 408

2014 forecast

28 741 18 400 2 900 50 041

2015 forecast

26 492 23 700 4 000 54 192

2016 forecast

42 318 18 400 2 200 62 918

Sources: National Development Minister's blog (2013) and Statistics Singapore (2012) and (2013).



4. Build-to-Order flat supply system 4.1 HDB flats are mainly allocated through the responsive BTO system introduced in 2001. Under the system, HDB invites applications for the flats to be built on the proposed sites. Interested buyers can apply for the flats from the sites proposed within the application period. A computer ballot will be conducted to determine who are entitled to book flats after the close of the application period. HDB will assess the demand to decide whether to build the flats. Tenders for construction of the new flats will go ahead when most of the flats have been booked. Buyers are then required to make a down-payment when they sign the Agreement for Lease. When the construction is completed, buyers will pay the remaining balance of the purchase price and take possession of their flats. 4.2 Under the BTO system, HDB can adjust its building plans according to real demand. Being the largest land owner in Singapore, HDB can increase flat supply to meet increased housing demand through the launch of more BTO projects. Alternatively, it can scale back the development projects when housing demand slows in order to avoid an accumulation of unsold stock. The BTO system also has an added advantage of providing more certainty to flat buyers in terms of location and flat type. 4.3 Prior to the implementation of the BTO system, HDB relied on the Registration for Flats System to build flats according to the number of applicants on its waiting list. Since applicants were not required to make any down-payment, the number of applications received by HDB might not reflect the actual demand for new HDB flats. Indeed, the Registration for Flats System resulted in an oversupply of flats in the late 1990s when the housing demand plunged after the outbreak of the Asian financial crisis. It took HDB about five years or so to clear the stock of unsold flats. 5. Various types of public housing programme 5.1 Singapore operates a variety of public housing programmes to cater for households with different housing needs and affordability. Nevertheless, its public housing policy encourages home ownership than rental. As such, flat buyers are provided with more choices than rental tenants in terms of the size and type of public housing to live in.



Public Rental Scheme 5.2 Singapore has put in place the Public Rental Scheme11 to provide minimum standard of housing for families whose household income does not exceed S$1,500 (HK$9,315) per month at the time of application. Eligible families are provided with (a) 1-room flats12 with a floor area of between 23 and 33 sq m, or (b) 2-room flats with one living room and one bedroom in about 45 sq m13 (see Appendix I for details of the Public Rental Scheme). Home ownership schemes 5.3 Since 1964, HDB has been offering flats for sale under its Home Ownership Scheme. At present, BTO flats comprise 2-room flats (in about 45 sq m), 3-room flats (with a floor area of between 60 and 65 sq m), 4-room flats (in about 90 sq m) and 5-room flats (in around 110 sq m). HDB sells its BTO flats at below market prices on a 99-year leasehold basis. Yet an eligible Singaporean planning to buy a new BTO flat directly from HDB may need to apply several times before he or she can be picked by the computer ballot to book a new flat. In addition, a successful applicant has to wait about three to four years for the completion of a BTO project before getting possession of his or her new flat. Against this, Singaporeans with immediate housing need may turn to purchase more expensive resale flats in the open market (see Appendix II for details of the eligibility requirements for buying a resale flat). 5.4 At present, HDB flats constitute the major supply of the public housing flats for sale. In addition to HDB flats, there are other types of subsidized sale flats such as ECs and flats sold under the Design, Build and Sell Scheme ("DBSS") and the Studio Apartment Scheme.

11 Based on an email reply from HDB dated 10 June 2013, HDB does not compile any statistics on the average

living space per its PRH tenant. For reference, the corresponding figure of the Housing Authority PRH tenants in Hong Kong was 12.9 sq m in 2012.

12 According to HDB, the living room is counted as one room. As such, a 1-room flat has one living room, a 2-room flat one living room and one bedroom, a 3-room flat one living room and two bedrooms, and so on.

13 In Hong Kong, the Housing Authority sets out a minimum living space of 5.5 sq m per person living in PRH flats. In contrast, HDB has not set any minimum standard of living space for a PRH tenant.



Executive Condominiums 5.5 ECs are essentially a hybrid between a private property and an HDB flat. They were introduced in 1997 to cater for Singaporeans who can afford more than an HDB flat but find private property to be out of their reach. ECs are developed and sold by private developers, with design and facilities similar to private property. The main difference between an EC and a private property is the ownership restrictions during the first 10 years of occupancy.14 Design, Build and Sell Scheme 5.6 DBSS was launched in 2005 to allow private developers to play a part in the design and construction of public housing. DBSS flats are sold under similar conditions to the flats developed by HDB. In 2011, the sale of new DBSS sites was halted. Studio Apartment Scheme 5.7 The Studio Apartment Scheme was launched in 1998 to provide a housing option for those aged 55 and above. Studio apartments come in two sizes: 35 sq m and 45 sq m. With a shorter lease of 30 years and elderly-friendly features, these apartments are customized for independent living of the elderly. 6. Affordable public housing for the community 6.1 HDB has set out various income eligibility limits to cater for potential flat buyers with different affordability, ranging from S$2,000 (HK$12,420) to S$10,000 (HK$62,100) depending on the size and location of the flat. As a result, about 80% of the Singapore's households are qualified for purchasing the HDB flats (see Appendix III for details of home ownership schemes). 14 For the first five years, owners are not allowed to sell their ECs as they have to fulfil a 5-year minimum

occupation period similar to the ownership rules of HDB flats. Only after five years are ECs allowed to be sold in the open market to Singapore Permanent Residents (foreign non-citizens granted permanent residence in Singapore) or Singapore Citizens (permanent residents in Singapore who have obtained Singapore citizenship). After 10 years of ownership, the condominium will acquire a "privatized" status and could be sold to foreigners as well.



6.2 In another effort to boost home ownership, the Singapore government sells the HDB flats at about 30% discount to the prevailing market prices. In addition, it has delinked BTO flat prices with the prices of more expensive resale flats since 2011, thereby keeping BTO flats affordable amid a rising property market. Furthermore, HDB sets the permissible Debt Servicing Ratio15 for BTO flats within the affordability benchmarks of 30%-35%. 6.3 The Singapore government also ensures that the lowest income households are not excluded from the public housing system. At present, about 3% of Singapore's population cannot afford to buy their own flats or rent homes in the private residential property market. They are living in heavily subsidized 1- and 2-room public rental flats under the Public Rental Scheme. In addition, interim rental housing is offered to the families who have financial difficulties or require a transitional accommodation before moving into permanent housing. 7. Financial support for existing and potential flat owners 7.1 The majority of Singapore's public housing flats are owner-occupied dwellings, attributable largely to various financial assistance schemes implemented by the Singapore government to assist potential flat buyers, low income households and existing HDB flat owners. Potential flat buyers 7.2 Over the years, the Singapore government has launched various finance schemes to facilitate home ownership in Singapore. These include the allowance for the use of the Central Provident Fund ("CPF")16 for home purchase, the Housing and Development Board Housing Loan, and the Central Provident Fund Housing Grant.

15 As an indicator of home purchase affordability, Debt Servicing Ratio refers to the proportion of monthly

household income used for housing instalments. It takes into account interest payments and is calculated on an assumed 30-year loan.

16 Started in 1955, CPF is a pension plan to provide social security for the working population in Singapore. Under this pay-as-you-go scheme, both employer and employee make mandatory contributions of a certain percentage of the employee's monthly wage to the scheme. The contribution rates for employees and employers are 5%-20% and 6.5%-16% respectively. There is a gradual reduction in both employer and employee contribution rate as an employee gets older. Savings can only be withdrawn for specific purposes such as home purchase and healthcare, on retirement or on permanent incapacitation of the employee.



Central Provident Fund 7.3 In 1968, the Singapore government allowed people to use a portion of their CPF savings for home purchase. This has lent particular support to bring home ownership within the reach of most Singaporeans. At present, about 80% of HDB flat owners service their monthly mortgage payment from their CPF account without the need for outright cash payments. Housing and Development Board Housing Loan 7.4 HDB provides housing loans at concessionary interest rates to eligible flat buyers. Applicants are subject to credit assessment and mortgage loan criteria. The loan ceiling is set at 90% of selling price or the value of the flat and the maximum loan repayment period is 30 years. The mortgage interest rate charged by HDB is pegged at 0.1 percentage point above the CPF ordinary account savings interest rate.17 Central Provident Fund Housing Grant 7.5 The Central Provident Fund Housing Grant is a housing subsidy (in the form of CPF monies not cash) provided by the Singapore government to eligible flat buyers for home purchase. There are several categories of housing grant catering for various target groups, such as singles, married couples who meet the first-timer18 prerequisite, and families living near parents/married child.19

Low income households 7.6 Apart from the Central Provident Fund Housing Grant, the Additional Central Provident Fund Housing Grant ("AHG") and the Special Central Provident Fund Housing Grant ("SHG") are provided to low income first-timer households for home purchase. 17 The CPF ordinary account savings interest rate currently stands at 2.5% per annum. 18 There are first-timer and second-timer households in Singapore. First-timer households are those who (a) do

not currently own a subsidized flat, (b) have not received the Central Provident Fund Housing Grant for the purchase of a resale flat, or (c) have not enjoyed other forms of housing subsidy. Second-timer households refer to those who (a) currently own or have owned/sold a subsidized flat, (b) have received the Central Provident Fund Housing Grant for the purchase of a resale flat, or (c) have enjoyed other forms of housing subsidy.

19 HDB sets out common criteria applicable to all Central Provident Fund Housing Grant applicants. They must be Singapore Citizens aged 21 and above with at least one family member being Singapore Citizen or Singapore Permanent Resident. In addition, they must be first-timer and are subject to the income tests.



Additional Central Provident Fund Housing Grant 7.7 AHG is an additional subsidy over and above the prevailing Central Provident Fund Housing Grant for Family.20 Eligible first-timers can receive AHG up to S$40,000 (HK$248,400) to offset the price of a resale or new HDB flat, thereby reducing the amount of mortgage loan a flat buyer needs. 7.8 To be eligible for AHG, the applicant must meet the common eligibility criteria applicable to all Central Provident Fund Housing Grant applicants. In addition, the applicant or his/her co-applicant(s) must be in continuous employment for 12 months before the flat application, and they are employed at the time of application submission. Furthermore, the average gross monthly household income for the past 12 months must not exceed S$5,000 (HK$31,050). Special Central Provident Fund Housing Grant 7.9 Introduced in March 2011, SHG is given on top of AHG to help low income families purchase their subsidized flats. Applicants for SHG must meet all the eligibility conditions for AHG and are applying for AHG. In addition, the average gross monthly household income for the 12-month period must not exceed S$2,250 (HK$13,973). 7.10 The amount of SHG received by the applicant depends on his or her average gross monthly household income assessed over the past 12 months. It ranges from S$5,000 (HK$31,050) for income level of S$2,001-S$2,250 (HK$12,426-HK$13,973) to S$20,000 (HK$124,200) for income level of S$1,500 (HK$9,315) or less. As such, the lower the income level, the higher the amount of SHG an eligible household can receive. A low income household can receive as much as S$60,000 (HK$372,600) for home purchase, comprising AHG of S$40,000 (HK$248,400) and SHG of S$20,000 (HK$124,200).

20 Under the Central Provident Fund Housing Grant for Family, households are entitled to receive the basic

Family Grant of S$20,000 (HK$124,200) for home purchase if only the applicant is a Singapore Citizen and the other family members are Singapore Permanent Residents. Households can receive a higher basic Family Grant of S$30,000 (HK$186,300) if the applicant and co-applicants are Singapore Citizens.



Existing HDB flat owners 7.11 Financial assistance measures are available to help existing flat owners who face financial difficulties in servicing their HDB loans. Flat owners are allowed to:

(a) pay the mortgage loan arrears by instalments within a reasonable period;

(b) reschedule the mortgage loan term up to the maximum repayment

period of 30 years according to their eligibility, subject to the 65-year age ceiling;

(c) convert the loan scheme to the reduced repayment scheme for a

period of six months; (d) defer payment of mortgage instalments for a period of six months

and further extend for another six months, if necessary; and (e) include more working family members as joint owners so that their

CPF monies could be used to pay the arrears. 8. Allowance for Singaporeans to buy up to two subsidized flats during

their lifetime 8.1 In Singapore, a flat owner can sell his or her subsidized sale flat in the open market after occupying it for a required period of time (generally five years). Unlike the case in Hong Kong, the flat owner is able to pocket the entire sale proceeds without the need to repay the subsidized premium upon the sale of his or her flat. He or she can then buy a second subsidized flat from HDB or a second flat from the open market or a private developer. In other words, each eligible Singaporean is entitled to buy up to a maximum of two subsidized public housing flats during his or her lifetime.



8.2 Nevertheless, flat buyers are subject to a resale levy if they sell their first subsidized flat and then buy a second subsidized flat from HDB. The arrangement is to maintain a fair allocation of public housing subsidies between the first and second-timer flat buyers through a reduction of subsidy on the second subsidized flats. The resale levy is currently set at a fixed amount of between S$15,000 (HK$93,150) and S$50,000 (HK$310,500), depending on the flat type of the first subsidized flat. With a fixed amount, it will give greater certainty to existing flat owners who are deciding whether or not to buy a second subsidized flat from HDB. 9. Priority schemes for flat buyers 9.1 HDB has implemented a number of schemes to give priority allocation for new HDB flats to eligible Singaporeans such as first-time buyers and married children planning to reside together with or live close to their parents. These priority schemes include: Parenthood Priority Scheme 9.2 The Parenthood Priority Scheme helps first-timer married couples having children or expecting to have a child to buy their first home. HDB sets aside 30% of the new flat supply for applicants of the Scheme. Multi-Generation Priority Scheme 9.3 The Multi-Generation Priority Scheme encourages families to stay close to each other in BTO projects where studio apartments or 2-room flats are integrated with other flat types. Under the Scheme, parents applying for a studio apartment or 2-room flat must submit a joint application with their married child applying for a 2-room or bigger flat type. They will have the opportunity of choosing flats on the same floor or elsewhere in the same project, from the pool of pre-identified flats. HDB sets aside up to 15% of the studio apartment or 2-room flat supply for the elderly applicants and the corresponding number of 2-room and bigger flats for the married child.



Married Child Priority Scheme

9.4 The Married Child Priority Scheme encourages married children and parents to reside together, or within the same estate or neighbouring estate to foster care of aged parents. Applicants are given double the ballot chances as compared with those who are not applying to stay near their parents/married child. Third-Child Priority Scheme 9.5 The Third-Child Priority Scheme encourages families to have more than two children. Up to 5% of the available flat supply is set aside for offer to the applicants of the Scheme. Tenants Priority Scheme 9.6 The Tenants Priority Scheme helps tenants of rental flats to own their homes. HDB sets aside 5% of the 2-room and 3-room flats offered for sale for eligible tenants under the Scheme. Other scheme 9.7 A new scheme will come into place in July 2013 to allow first-timer singles aged 35 and above with a monthly earning up to S$5,000 (HK$31,050) to purchase new 2-room BTO flats on their own directly from HDB. Currently, these singles can only purchase flats directly from HDB with their parents or the more expensive HDB resale flats on their own. 10. Assistance for elderly flat owners 10.1 Same as many developed countries, Singapore is faced with the problem of fast-ageing population. In recent years, the Singapore government has made use of its housing programmes to enable the elderly to receive a lump sum and/or a stream of stable income after retirement. These programmes include down-sizing to live in a smaller flat and reverse mortgage to allow "asset rich but cash poor" elderly to access the equity of their homes.



Ageing-in-Place Priority Scheme 10.2 The Ageing-in-Place Priority Scheme supports the elderly flat owners to move to a smaller studio apartment while remaining in the town or estate they are currently living in. The Scheme was introduced in 2012 to allow the elderly to age-in-place in a familiar environment. In the application for purchase of studio apartments located in the same or nearby town/estate, eligible applicants will be given more chances in the ballot than those who are not applying for the Scheme. Silver Housing Bonus 10.3 A Silver Housing Bonus of up to S$20,000 (HK$124,200) is provided to low income elderly households when they sell their existing flat and purchase a 3-room or smaller HDB flat. To be eligible for the Bonus, the applicant must be a Singapore Citizen aged 55 and above, and with a gross monthly household income of not more than S$3,000 (HK$18,630). Lease Buyback Scheme 10.4 The Lease Buyback Scheme was introduced in 2009. Under the Scheme, the elderly sell the tail-end lease of their flats to HDB and retain a 30-year lease.21 The proceeds will be used to top up their CPF retirement accounts. The top-ups plus the initial retirement account balances will be used to buy a CPF LIFE plan to give the elderly a monthly stream of income for life. __________________________________________ Prepared by Jackie WU and Raymond CHOW 24 June 2013 Tel: 3919 3631 ----------------------------------------------------------------------------------------------------------------------------------------------------------- Information notes are compiled for Members and Committees of the Legislative Council. They are not legal or other professional advice and shall not be relied on as such. Information notes are subject to copyright owned by The Legislative Council Commission (The Commission). The Commission permits accurate reproduction of information notes for non-commercial use in a manner not adversely affecting the Legislative Council, provided that acknowledgement is made stating the Research Office of the Legislative Council Secretariat as the source and one copy of the reproduction is sent to the Legislative Council Library.

21 The 30-year lease term is non-transferable in the open market. That is to say, the flat owner cannot sell the

flat in the open market or sublet the whole flat.



Appendix I

Public Rental Scheme A.I.1 Singapore has put in place the Public Rental Scheme22 to meet the housing needs of low income households, thereby providing a final safety net for the needy Singaporeans.23 HDB sets out the eligibility criteria for renting a flat under the Public Rental Scheme as follows:

(a) the applicant must be a Singapore Citizen, and there must be one other Singapore Citizen or Singapore Permanent Resident in his or her family;

(b) the applicant must be at least 21 years old; (c) total household gross income must not exceed S$1,500 (HK$9,315)

per month; (d) the applicant must have a proper family under the Family Nucleus

Scheme.24 For applicants who cannot form a family, two single Singapore Citizens may jointly apply to rent a flat under the Joint Singles Scheme;

(e) the applicant and listed occupiers must not own, or have an interest

in an HDB flat, or have disposed of such property within 30 months prior to the date of application;

22 The Public Rental Scheme is one of the two public rental housing schemes currently implemented in Singapore.

Another scheme, the Parenthood Provisional Housing Scheme, provides temporary housing for first-timer married couples to support their family needs while they await completion of their new BTO or the Sale of Balance flats. In particular, families with a child aged below 16 are given priority in the allocation of their flats.

23 In addition to public rental housing schemes, HDB has offered the interim rental housing scheme to support (a) households currently in the queue for PRH flats but need urgent accommodation; (b) households in financial hardship which are downsizing to smaller flats under construction; and (c) households which need some time to work out their finances before they are able to afford open market rents or buy smaller flats. On average, a family stays in interim rental housing for about six months.

24 The applicant must have a proper family nucleus defined as follows: (a) applicant and spouse, (b) applicant (if single) and parents, (c) applicant (if widowed/divorced) with children under legal custody, (d) fiancé and fiancée, and (e) orphaned siblings (at least one of the deceased parents was a Singapore Citizen or Singapore Permanent Resident).



Appendix I (cont'd)

(f) the applicant and listed occupiers must not have owned or sold two direct-purchase HDB flats in the open market;

(g) the applicant and listed occupiers must not be existing tenants or

occupiers of HDB flats; and (h) applicants with children who are able to provide accommodation for

them in their own homes or whose children have the financial ability to provide alternative accommodation for them would not be eligible to rent HDB flats.

Flat type A.I.2 As listed in Table 2, families with no or low incomes can apply for 1- or 2-room flats subject to the following eligibility requirements: Table 2 – Eligibility requirements for applying in 1-room and 2-room flats

Flat type 1-room

(23 sq m – 33 sq m)2-room

(about 45 sq m)

Families with no earned income (regardless of the number of persons in the household)

Applicable Not Applicable

Two-persons household (regardless of earned household income)

Applicable Not Applicable

Families with employed members and having three or more persons in the household

Applicable Applicable

Source: Housing and Development Board (2013a).



Appendix I (cont'd) Rents payable A.I.3 When determining the amount of rents payable by PRH tenants, HDB makes reference to a basket of factors such as the monthly household gross income and market rental levels. The current monthly rents are shown in Table 3 below. Table 3 – Monthly rents of the flats provided by the Public Rental Scheme

Monthly rent Monthly household income

Household type 1-room 2-room

First-timer S$26-S$33 (HK$161-HK$205)

S$44 - S$75 (HK$273- HK$466)

Household income of S$800 (HK$4,968) or less

Second-timer S$90-S$123 (HK$559-HK$764)

S$123-S$165 (HK$764-HK$1,025)

First-timer S$90-S$123 (HK$559-HK$764)

S$123-S$165 (HK$764-HK$1,025)

Household income between S$801 (HK$4,974) and S$1,500 (HK$9,315)

Second-timer S$150-S$205 (HK$932-HK$1,273)

S$205-S$275 (HK$1,273-HK$1,708)

Source: Housing and Development Board (2013e).



Appendix II

Eligibility requirements for buying HDB resale flats A.II.1 To buy an HDB resale flat, the potential buyer has to meet the conditions of one of the eight eligibility schemes. The major schemes25 are:

(a) the Public Scheme allowing an applicant to buy an HDB resale flat with his or her family from the open market;

(b) the Fiancé/Fiancée Scheme allowing a couple intending to get

married to buy an HDB resale flat from the open market; (c) the Single Singapore Citizen Scheme permitting an individual to buy

an HDB resale flat from the open market on his or her own if he or she meets certain eligibility conditions; and

(d) the Joint Singles Scheme allowing two to four single Singapore

Citizens to jointly buy an HDB resale flat from the open market if the co-applicant(s) meet the required eligibility conditions.

The eligibility conditions of the above four major schemes are detailed in Table 4 below.

25 Other schemes are the Non-Citizen Spouse Scheme, the Non-Citizen Family Scheme, the Orphans Scheme and

the Conversion Scheme targeted for buying adjoining units of 3-room or smaller flat.



Appendix II (cont'd) Table 4 – Eligibility requirements for buying HDB resale flats

Requirements Public Scheme Fiancé/Fiancée SchemeSingle Singapore Citizen Scheme

Joint Singles Scheme

Citizenship

Applicant must be a Singapore Citizen and his or her family must comprise at least another Singapore Citizen or Singapore Permanent Resident.

Applicant and fiancé(e) must be either Singapore Citizen or Singapore Permanent Resident. Applicant must be Singapore Citizen.

Age At least 21 years old.

(a) singles/divorcees: at least 35 years old; or

(b) widowed/orphan: at least 21 years old.

Family nucleus

Any of the following combinations: (a) applicant + spouse

+ children (if any); (b) applicant + parents

+ siblings (if any); or

(c) widowed/divorced applicant + children under legal custody.

Applicant + fiancé(e). Applicant only. Applicant + up to three other single co-applicants.

Gross monthly household income ceiling

No income ceiling unless applying for the Central Provident Fund Housing Grant and/or the Housing and Development Board Loan.

Source: Housing and Development Board (2013b).



Appendix III

Subsidized home ownership schemes A.III.1 HDB has been offering flats for sale under its Home Ownership Scheme since the mid-1960s. HDB flat buyers are subject to similar eligibility requirements as PRH tenants in terms of citizenship, age and family status. Nevertheless, they are subject to specific requirements in terms of property ownership and income ceilings when buying the HDB flats. Property ownership A.III.2 For the first five years, owners are not allowed to sell their HDB flats in order to fulfil the 5-year minimum occupation period. Only after five years are HDB flats allowed to be sold in the open market to Singapore Citizens or Singapore Permanent Residents. After 10 years of ownership, the HDB flats will acquire a "privatized" status and could be sold to foreigners as well. Income ceilings A.III.3 The gross monthly household income ceilings for various types of flat are as follows:

(a) S$2,000 (HK$12,420) for a 2-room flat in non-mature estates26; (b) S$5,000 (HK$31,050) for a 2-room flat in mature estates; (c) S$5,000 (HK$31,050) for a 3-room flat in non-mature estates; and (d) S$10,000 (HK$62,100) for a 3-room Standard flat in mature estates,

a 3-room Premium flat27, and a 4-room or bigger flat.

26 Non-mature estates refer to the housing estates located in less developed towns. 27 While buying an HDB flat, buyers may opt for a Standard unit or a Premium unit. Standard units do not

include fittings and decoration, allowing home buyers to organize and decorate their homes according to their needs and tastes. Premium units include porcelain ware, sanitary ware and timber stripped flooring, suitable for those who want to move in immediately after purchase without going through the hassle of furnishing their home.



Appendix III (cont'd) Pricing and affordability A.III.4 In Singapore, HDB uses Debt Servicing Ratio as an indicator of home purchase affordability. The ratio refers to the proportion of monthly household income earmarked for housing instalments. It takes into account interest payments and is calculated on an assumed 30-year loan. A.III.5 As mentioned above, BTO system constitutes the main supply of the HDB flats for sale. The permissible Debt Servicing Ratio levels for BTO flats are set within the affordability benchmarks of 30%-35%. With generous and targeted grants, the typical buyers of 2- and 3-room flats can enjoy a low Debt Serving Ratio of 11% and 23% respectively. In addition, most HDB flat buyers can make use of their CPF savings to pay for their monthly mortgage instalments. As shown in Table 5, 2-room flat buyers service their monthly mortgage payment entirely from CPF savings without using their take-home pay. Buyers of 3-room, 4-room and 5-room flats only incur S$4 (HK$25), S$109 (HK$677) and S$50 (HK$311) respectively for serving the monthly mortgage payment. Table 5 – Debt Servicing Ratio for new subsidized housing flats located at

non-mature estates in 2012

Flat type

New flat selling price(1)

Median household income of

applicants(2)

Additional Central

Provident Fund

Housing Grant(3)

Special Central

Provident Fund

Housing Grant(3)

Net selling price (less grants)

Monthly instalment

for mortgage

loan(4)

Monthly instalment

to income ratio

Instalment payment by cash

2-room S$112,000

(HK$695,520) S$1,500

(HK$9,315) S$40,000

(HK$248,400)S$20,000

(HK$124,200)S$52,000

(HK$322,920)S$164

(HK$1,018) 11%

No payment required

3-room S$194,000

(HK$1,204,740) S$2,500

(HK$15,525) S$30,000

(HK$186,300)Nil

S$164,000 (HK$1,018,440)

S$579 (HK$3,596)

23% S$4

(HK$25)

4-room S$303,000

(HK$1,881,630) S$4,100

(HK$25,461) S$10,000

(HK$62,100)Nil

S$293,000 (HK$1,819,530)

S$1,052 (HK$6,533)

26% S$109

(HK$677)

5-room S$384,000

(HK$2,384,640) S$5,800

(HK$36,018) Nil Nil

S$384,000 (HK$2,384,640)

S$1,384 (HK$8,595)

24% S$50

(HK$311)

Notes: (1) Selling prices are based on new flats offered in non-mature estates under BTO in 2012. (2) Median household income is based on first-timer applicants in non-mature estates in 2012. (3) The Additional Central Provident Fund Housing Grant and Special Central Provident Fund Housing Grant are used to

offset the 90% maximum loan where applicable, assuming that buyers have sufficient savings for the 10% down-payment.

(4) Monthly mortgage instalments based on concessionary interest rate of 2.6% over 30 years. Source: Housing and Development Board (2013d).



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