Andrew Loh / Leong Sze Hian / Picture from Wikimedia
‘There’s no question that our policies are designed for the good of the people. While there may be certain parts of the policies that are not favourable, overall, I think these policies are for the well-being of the people and are good for the country.’ – Minister for National Development, Mah Bow Tan, Straits Times, 31 Jan 2010. (Source)
Blogger Hazel Poa, who once worked for the Administrative Service, relates how a friend of hers (we’ll call her Ms Tan) will soon join the ranks of the homeless because of inflexible HDB policies. Apparently, the HDB has ordered Ms Tan and her ex-husband to sell the flat which they co-own. The reason for this is because with the divorce, the couple no longer forms a ‘family nucleus” which is one of the pre-requisites for buying or owning a HDB flat. Even though they agreed to retain and service the flat’s mortgage loan, so that their children would continue to have a home, the HDB insists that they sold it or that either party bought over the share of the flat from the other party.
The problem is that neither party has the means to do so.
Ms Tan, who has custody of the children, would also not qualify for a public rental flat from the HDB, as the rule states that anyone who has sold a flat would not be eligible for a rental flat for the next 30 months. So, if she cannot afford to rent a flat in the open market – and she can’t because of the high rental rates in the market at the moment – she would have nowhere else to go.
Ms Tan has decided to go and live in Malaysia and leave her children with relatives here in S’pore, until her eldest son, who is presently in National Service, completes his NS in about two years. After that he could perhaps purchase a flat together with his mother.
In short, a family is not only deprived of a home but is also being broken up by HDB’s inflexible adherence to its own rules.
[Read Hazel’s write-up here on her blog: Homeless and homeless-to-be.]
But Ms Tan’s predicament is not unique. Many of the homeless people we met tell of similar problems with HDB’s rules.
When Mdm Sharifah could no longer service the mortgage loan she had taken from the bank, she was forced to sell her three-room flat. Unfortunately for her, the sale did not bring her any profits. Instead, she lost about S$50,000 as the flat was sold for less than when she bought it, she told The Online Citizen. With her children also facing problems servicing their mortgage loans, she had no one to turn to. So, she applied for a rental flat from the HDB. Her application was denied on the grounds that she has sold her flat and thus does not qualify for a public rental flat. She has to wait 30 months before she is eligible.
Thus, she ended up at Sembawang Park.
Mdm Lee (not her real name) was formerly a housewife. She recently divorced her husband and is presently living with her five children in a room in a HDB flat which she rents for $500. Her salary is just over $1,000. She has about $160,000 in her CPF but that is not enough to buy a flat with. Because of her low income, no bank will lend her a housing loan to buy a HDB flat either. She is not eligible for a HDB loan as she had sold her previous flat because of the divorce. According to HDB rules, once you divorce, the flat must be sold or transferred to one of the divorced persons (requiring a new loan to be arranged and return of CPF used plus accrued interest) – regardless of whether you have children or not, or as in the case of Ms Tan mentioned above, even if the couple agree to continue to service the loan.
In the case of Mdm Lee, if the HDB were to give her a HDB loan of say about $50,000 (which her monthly CPF OA contribution is able to support), or give her a rental flat, her current cash-flow predicament can be eased. She would be able to have a home for her children and herself. But HDB’s policies are so rigid that no amount of commonsense seems able to change it.
These are just three of what we suspect are many stories of the effect of inflexible HDB policies on home owners.
“The number of home buyers defaulting on their home loans for three months or more has risen significantly over the last five years,” reports the Straits Times in January 2010. “From one in 20 borrowers being in arrears, the proportion is now one in 12.” (Source: Asiaone)
This constitutes 8 per cent of all HDB loans.
The number who may have defaulted on bank loans is unclear. Also, there are no statistics on HDB bank loan foreclosures or in arrears.
According to the article “Special report: Homeless wanderers – Number of homeless people doubles” (Sunday Times, Jan 31),
“About 60 flats are voluntarily surrendered to the HDB every month, the Sunday Times understands”.
The last time the Straits Times did a story about the homeless, it mentioned that it understands that about 60 HDB flats are also foreclosed by banks every month. So, how many of these homeowners may end up to be homeless?
Why would anyone voluntarily surrender their flat to the HDB? One possible scenario is this: HDB tells those who cannot pay that if their flats were acquired, they would be sold at 90 per cent of valuation. So, of course, these flat owners are advised to sell their flats in the open market at valuation plus Cash-over-valuation (COV). In short, the threat of having their flats sold at 90 per cent of valuation by the HDB after acquisition forces the owners to sell their flats as soon as they can in the open market.
So, every time this happens, the flat disappears from the “in arrears” category and does not fall into the “voluntarily surrendered” statistics – even though the truth may be that they were forced to sell their flats.
If so, then why are there still about 60 who “voluntarily surrendered to HDB” every month? Well, many of these may be Ethnic Quota cases which have difficulty finding a buyer or can only be sold at a much lower price than valuation. Or, they may be cases whereby the flat-owner has nowhere to go, and thus to avoid being homeless, waits until the last moment when they receive HDB’s Compulsory Acquisition notice giving them 30 days to vacate the flat.
Here are perhaps (in addition to those highlighted in the cases above) the top 10 reasons why HDB policies may be contributing to homelessness in Singapore:-
1) Banks were allowed to do HDB loans from 1 January 2003 – banks are generally less reluctant to foreclose than HDB. For banks, if there is a short-fall in the housing loan after foreclosure, the flat-owners may be sued for bankruptcy. Bank loans’ interest rates have been generally higher than the HDB Concessionary Loan’s 2.6 per cent from the fourth year onwards – this may cause more financial stress
2) HDB’s Market Subsidy Pricing policy has been pushing up flat prices which increasingly makes affordability an issue – up till the 1980s, I understand that the typical HDB loan tenure was only for 20 years, instead of the typical 30 years now
3) Rental flats policy change – rents will increase gradually for household incomes over $800 a month, depending on income and how long the flat has been rented, up to 70 per cent of market rent. Former private property owners are no longer eligible as well as those with children who have larger flats with a spare room.
4) When you take your name out from your parents’ flat to apply for your own with your spouse, you may not be eligible for your “2 times” HDB Concessionary Loan if you upgraded once with your parents.
5) Policy change to use average age of flat-owners to calculate maximum loan tenure instead of youngest age. Many are thus in a way forced to take bank loans.
6) Income Ceiling of $2,000 and $3,000 for 2-room and 3-room flats, may be forcing people to buy bigger flats than they can afford.
7) The Resale Levy may leave people with less cash to tie over bad times.
8) The Cash-over-valuation (COV) policy may also leave people with less emergency cash reserves.
9) Change in loan eligibility policy – lower-income with larger families may get a lower quantum of HDB loan granted, affecting their ability to purchase a flat to use CPF to ease their open market rental cash- flow.
10) More CPF and cash used for flats means less for retirement – when money runs out when they are old, they may become homeless.
To put it briefly, the HDB needs to update its policies, rules and regulations to better address the many different situations which home owners face. Having a one-size-fits-all set of policies may instead contribute to the growing number of homeless people – a number which has doubled over the last year. And this, even by any stretch of Mr Mah’s imagination, cannot be “good for the country.”
It certainly is not good for those who are most affected by these rigid policies. In fact, these policies may be the very reasons why some end up in our parks.