PM Lee Hsien Loong's suggestion of the Voluntary Early Redevelopment Scheme (VERS) and Home Improvement Programme (HIP) II is clearly a panicked response than a well-thought out policy.
It is plain that Mr Lee is reacting to National Development Minister Lawrence Wong's bombshell admission that HDB flats will become worthless after their 99-year leases expire.
Mr Lee said that under the HIP II, older flats reaching 60-70 years old will get a second round of upgrading. Singaporeans should remember that under the first round of HIP, the government made residents pay upwards of $10,000 for the upgrading.
These flats will have zero value in another 30-40 years when their leases expire. Why do HDB owners have to fork out more money just to see the value of their flats diminish?
The PM also introduced the idea of VERS. Under the scheme, residents will be polled to see if they want to sell their blocks back to the government. Major questions arise:
How logical is it to have your flats upgraded through HIP II and then 10 years later sell the flat through VERS? Isn't this a monumnental mishandling of public resources and funds?
How much will the government compensate owners who decide to sell their flats en-bloc? Where is the money going to come from?
How will it affect elderly residents who will find relocating away from familiar surroundings and family and friends too stressful? As it is, the elderly are finding life lonely and desperate to the point that a record number are committing suicide.
How will VERS feed the habit of people buying older flats to profit from the monetary compensation like SERS does? The government will have to make the scheme financially attractive enough to assuage the unhappiness of HDB owners over the 99-year-lease expiration issue. High monetary compensation – apart from the question of where the funds are going to come from as mentioned – will keep resale flat prices unreasonably high. This will mean even more buyers depleting their CPF savings to buy their flats. Already, there are entire generations of retirees who are left with no income because they've used their CPF funds to pay for their flats.
We've seen how residents in the past have reacted when it comes to en-bloc sales of their residences, many resulting in bitter fights and acrimony. The government will pit neighbour aganist neighbour in such a scheme and destroy social harmony in the process. Is this worth it?
The PAP is clearly trying to stem the political bleeding arising from admission that HDB flats will eventually become worthless.
Mr Lee's announcement, far from well-grounded and properly researched considerations, are reminiscent of the fiction that his party told voters that HDB flat prices would rise indefinitely. This spurious and irresponsible claim has led Singapore to the current massive housing and financial problem.
But instead of doing the right thing to remedy the situation (see SDP's proposal below), the PAP is trying to sell the people more snake-oil with its eye firmly on the next elections. As we have noted, the PAP will say and do anything to win votes – future consequences be damned.
SDP's alternative housing proposal:
Introduce Non-Open Market (NOM) scheme where new flats are priced at cost (labour, material and administrative costs) minus the land “cost”.
This will substantially lower flat-prices (ranging from $70,000 for 2-room flats to $240,000 for 5-room flats).
Cheaper NOM flats will take an estimated 9 to 15 years to pay off compared to about 30 years under the present system.
NOM flats cannot be re-sold in the open market. Owners wishing to dispose of their NOM flats will have to sell them back to the HDB.
Current owners can continue to sell their flats in the open market or choose to convert their flats into NOM flats. The government will return them the difference between the original price of their flats and the price of an equivalent NOM flat, subject to a cap. This money will be credited back to the owner’s CPF account for retirement use.
The rationale behind the NOM scheme is to prevent the government from profiting from public housing and depleting the people's CPF savings. Public housing is a social good and should be used to meet the housing needs of the population and not become a profit-making venture.
Click here to read the SDP's housing proposal, Housing A Nation, in full.
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