Rental discrimination in Singapore: Why it happens

By Jeremy Chen

On 2nd May 2014, The Online Citizen posted an article titled “End discrimination in rental market, President & PM urged wherein it was reported that the president of the Nevada-based Universal Society of Hinduism (USH), Rajan Zed, called on the Singapore government to “put an end to blatant discrimination reportedly prevalent in the rental housing market of Singapore.

Rajan’s statements may be readily interpreted as an accusation of racism. Even if they are not, it is useful to make sense of rental discrimination, which obviously exists, and consider more rigorously what is behind the phenomenon.

I would like to argue that the main driver of rental discrimination is economics. But before moving on, let me attempt to be more precise. Broadly speaking, discriminatory behavior based on stereotypes are driven by answers to questions like the following:

  1. Will non-discrimination hurt me and my loved ones physically? What is the likelihood of various kinds of harm?
  2. Will it hurt me and my loved ones economically? How likely is it? How likely is X-dollars in damage?
  3. Can I not accept that they look different from me?
  4. Can I not accept that they live different kinds of lives?
  5. Do I despise them for having less money than me?

I’m attributing rental discrimination to dominantly to people asking question (2). Subsequently, I hope to describe this in greater detail.

Personally, I think discrimination on the basis of (1) or (2) is morally different from discrimination on the basis of (3), (4) and (5). It is for this reason that I refuse to condemn those who practice rental discrimination. I do not like it, but I am conflicted over the matter because I don’t see it as entirely wrong. I believe that landlords’ answer question (2) sincerely, because it is in their interest to be as accurate as they can be. Can we fault them entirely for sincerely held fears?

Since some find this to be an emotive topic, I hope to be clear on what I am saying. To say there is no racism on the lines of (3), (4) and (5) among Singapore landlords is naive, but to claim that it is the dominant cause or even a major one without justification is insulting, naive and wilfully ignorant.Justifying the claim that many Singaporeans give up rental income on the basis of disliking another race/nationality for irrelevant reasons (as in questions (3), (4) and (5)) rather than doing so for more tangible economic reasons demands a more substantial burden of proof than mere “say-so”. I believe that most landlords are ultimately renting their houses for the money and would rent to almost anyone if the relevant (perceived) risks are covered.

Economic Risks of Bad Tenants

Though I said mere “say-so” is far from the gold standard of argument, let me begin with a personal anecdote, because personal anecdote is a major driver of the economics in this setting. I have personally seen (and smelt) the effects of tenants that are not “house proud”.

In one instance, the “scrubbing” and refitting was worked on by a brother-sister pair for over two weeks before the family moved back in. It was nasty. One readily obtains accounts of such horror stories where the safety deposit fails to cover the direct expense in time and money for remediation of breakage, significant wear, lasting odours, stains and a host of other forms of damage. And that does not even cover “rental downtime” when the property cannot be viewed and generates no rental income. (See, for instance, the comment threads here on the TOC’s facebook)

One other danger that is pertinent to owners of HDB flats is illegal subletting. HDB has clarified that the onus is on flat owners to ensure that no illegal subletting occurs (read here). Furthermore, the law is very clear on the point that “the one who will get into trouble is the flat owner” and though “[he] doesn’t have to do checks”, if the law is violated, “[he] cannot say that [he] doesn’t know.” (link)

First-hand accounts of such occurrences (especially in the former category) are common, and it is not exceedingly rare to hear first-hand accounts of such occurrences from trusted friends. What is the upshot of this information being passed around? It reinforces the notion that renting property, though providing income, can be risky. Now, this conclusion is not based on mere “say-so”. Rather, part of it points to the fact that anecdotes shape perceptions of risk, and perceptions of risk shape behavior.

Landlords’ Response

Risk-averse landlords respond by either requesting high safety deposits or even setting exclusionary clauses to avoid perceived “high risk tenants” entirely. The most emotive lines are drawn by ethnicity or nationality because of perceptions that such groups are “not house proud” and are likely to cause damage that requires the landlord’s time and money to remediate, and renders the property un-leasable (and un-viewable) in the interim. But there are also landlords who choose to not to rent to younger Caucasian singles due to fears of debauched house parties. (On the positive end, Caucasian families are regarded as the best tenants although they can be the choosiest.)

What Now?

Rental discrimination seems to be dominantly a strategy by which income seeking landlords attempt to manage risk with only imprecise information to work with. Where there is non-negligible risk of negative externalities, the risk should be properly priced. But simple market logic would lead to different (discriminatory) rental deposits for different groups because groups viewed as “less risky” would be able to get leases with lower deposits (and groups viewed as “more risky” would have to settle for higher deposits).

The unfortunate fact is that there are few reliable signals for a landlord to accurately predict whether a tenant will be good or bad. Perhaps the only signals that might be used are “whether a prospective tenant seems considerate”, “whether a prospective tenant seems educated/cultured”, as well as ethnicity and nationality. That means that “racial/nationality-based discrimination” occurs because there are no better signals (as perceived by landlords) of whether a tenant would be “good” or “bad”. Unfortunately, there is no reason this will change any time soon. It is necessary for the diffusion of rental horror stories to abate.

Will certain ethnicities/nationalities have to choose between exclusion and higher deposits? This does not seem to be right. Furthermore, high deposits put tenants at risk, and that is also an emotive issue for some.

Protecting Tenants Deposits: Binding Arbitration

When I put forth the position that rental discrimination was more about the economics and not “racism”, I got one angry response that I felt was unreasonable. But it seemed that a lot of the anger with the “externalities must be priced” position came from her experience as a tenant. She said that Singapore does not protect tenants from landlords. She said “we are at the mercy of being duped out of the deposit every time we move for the stupidest made up reasons”. This is a real concern if safety deposits get higher. Tenants should be protected against unscrupulous landlords, who certainly do exist.

One solution is to provide education for renters, possibly through HDB rental paperwork as a start, to inform them to be careful to take note of “existing defects” and have them acknowledged by the landlord. A complementary solution would be binding arbitration. With binding arbitration, an impartial party is given the authority to determine the incidence of fault and appropriate cost of damage. In combination, tenants gain the protection they need. This way, deposits (and higher deposits) will no longer a big risk for tenants.

(Note: The reason I prefer higher deposits plus education and binding arbitration is that landlords will largely remain around to deal with legal issues. Tenants, especially foreign tenants, are flight risks. Sad but true.)

Being Grounded and (More) Precise in What We Say

In this piece, I talked about how stereotypes relevant to rental cause the bulk of differential treatment. This is unfortunate and somewhat distasteful. But if this screening were forcibly not allowed, the question is whether landlords sincerely believe they would suffer economically. My sense is that those with “skin in the game” (for whom rental income is a substantial fraction of their income) would answer “Yes”. The reality is what it is.

The fact is, it is hard to see how stereotypes irrelevant to rental play any substantial role in most differential treatment.

Therefore, in rental, I believe that racism/xenophobia, as defined above, does not play a significant role. In spite of the (unfortunately widespread) existence of casual racism, there is nothing that suggests it factors much into landlords’ calculations. Far more credible is the proposition that the connection between race/nationality and discrimination is mediated by perceived risk on the part of landlords. The arguments above should make more credible the hypothesis that rental discrimination has a primary basis in economics. It is not a nice reality.

Discrimination in rental is an issue — a very touchy issue. But let’s have a grounded discussion.