Leong Mun Wai questions the viability of VERS in adjournment motion about AMK SERS

Leong Mun Wai questions the viability of VERS in adjournment motion about AMK SERS

SINGAPORE —  Mr Leong Mun Wai, in an adjournment motion on Monday (9 Jan) about the Selective En bloc Redevelopment Scheme (SERS) at Ang Mo Kio Avenue 3, raised serious questions about the viability of the Voluntary Early Redevelopment Scheme (VERS) to address the issue of aging HDB flats.

He said that the Government has shown a lack of transparency and compassion by offering a compensation package that requires top-up to the Ang Mo Kio residents in April 2022 without explaining the reasons for it.

The Non-Consituency Member of Parliament (NCMP) from Progress Singapore Party (PSP) expressed dire concerns over the implications for all Singaporeans beyond the residents that are affected and how it will affect the future of their aging HDB flats, urging the Government to clarify how it intends to compensate residents of VERS in future because Singaporeans need certainty on the lease decay issue as soon as possible.

He referred to the AMK SERS as an epochal event in the history of Singapore’s public housing and noted that this is the first time where residents selected for SERS must top-up cash to get an equivalent replacement flat with a new 99-year lease.

This was confirmed by Mr Leong  during the deliberations of the Public Petitions Committee, where he had persistently asked the Ministry for National Development (MND) for past examples of SERS where the residents had needed to top-up cash for an equivalent flat with a new 99-year lease.

According to Mr Leong, the MND finally provided a memo to the Public Petitions Committee on 14 November last year stating that in a previous SERS at West Coast Road, residents who bought equivalent flats at the “designated” West Coast Crescent site, near their existing flats, had received cash payment from the Government of $51,000 for a 3-room flat and $61,000 for a 4-room flat respectively.

MND noted that only residents who opted for “a more centrally located replacement site” at Clementi Avenue 1 were required to top-up cash.

However, this would mean that the Government’s example of West Coast Road SERS cannot be taken as an example of past SERS residents having to top-up cash for an equivalent flat as an equivalent flat is defined as one that is the same flat-type, same size and located at a designated site near the current site.

“The Government has repeatedly stated it has used the same model and approach as other SERS to compute the compensation for the Ang Mo Kio SERS but has not admitted that the outcome of the Ang Mo Kio SERS is different from other SERS.” said Mr Leong.

He claims that the Government is being disingenuous for not having admitted to the different outcome up till today, even though the outcome is undeniably different.

“If the outcome was not different, there would have been no need for the Government to introduce the 50-year lease and Lease Buyback Scheme as a new option for the Ang Mo Kio residents.” said Mr Leong.

“Short of admitting the different outcome, Minister Desmond Lee had tried to give the reason for the different outcome in his response to Ang Mo Kio Member Ms Nadia Samdin’s Adjournment Motion speech in July 2022. The reason given is the lease decay.” said Mr Leong.

He noted that while Mr Lee explained that in past SERS, the flats were generally younger at the point of the SERS announcement, with around 70 years of lease remaining but the flats affected by Ang Mo Kio SERS are older, with a lease balance of about 57 years.

Furthermore, Mr Lee’s explanation does not fully explain why the compensation given to Ang Mo Kio residents is insufficient for them to buy an equivalent flat with a new 99-year lease like in other SERS, said Mr Leong.

Mr Lee also did not explain why the residents affected by Marsiling SERS which was announced slightly later than the Ang Mo Kio SERS, did not need to top-up cash although the Marsiling flats have a lease balance of only 58 to 59 years which is not much longer than the 57 years remaining for the Ang Mo Kio flats.

“In my opinion, the full explanation is that lease decay has affected prices of old HDB flats in mature estates more than the ones in non-mature estates. At the same time, the prices of new flats in mature estates have risen much faster because they enjoy the benefits of good amenities and location.”

“Therefore, there is a larger price difference between the existing old flats and the new replacement flats in Ang Mo Kio than in Marsiling. This is the key reason why the Ang Mo Kio residents have suffered a worse outcome than that of the residents of the Marsiling SERS and previous SERS when the effect of lease decay had not set in.”

Mr Leong said that the Government should have admitted to the different outcome and offered this full explanation to the Ang Mo Kio residents upfront but that is not to be.

As to why the Government has avoid admitting the different outcome, Mr Leong suggests that the reason is because it would mean that the VERS is not a viable solution to the lease decay problem.

VERS was first announced by Prime Minister Lee Hsien Loong during his National Day Rally speech in 2018, following a public outcry in response to a blog post by Lawrence Wong in March 2017 where he cautioned home buyers not to assume that all old HDB flats will be automatically eligible for SERS.

Under VERS, the Government may buy back older HDB flats before their 99-year leases run out, and compensate residents whose flats are taken back early.

Residents, who have to vote for VERS, can then use the proceeds to buy a new flat. The scheme will only start in about 20 years, said Mr Lee when some flats reach 70 years old.

Mr Leong said that Singaporeans are expecting VERS to be like “SERS for all” but it is a different story if VERS is actually “Ang Mo Kio SERS for all”. This is because the original SERS means residents get paid while Ang Mo Kio SERS means residents must pay.

“Since the market-based compensation formula that the Government had used for SERS all this while has failed to enable Ang Mo Kio residents to exchange their 42-year-old flats for new ones without having to top-up cash, VERS cannot be a solution to the lease decay problem, as the flats under VERS will be even older at more than 70 years old. This will be especially true if the price disparity between new and older flats in mature estates which we see today continues to persist.”

“If the Government uses the same formula as SERS to compensate VERS residents, it is certain that the VERS residents will have to pay a lot more cash or move to a cheaper area with the proceeds from VERS. The likelihood of any VERS proposal being approved will also be nil because Singaporeans have come to associate “en bloc” with windfalls and new homes, and the redevelopment of mature estates envisioned by VERS will not materialise. VERS will be doomed if the Government uses the same compensation formula as SERS.”

By not admitting to the different outcome of the Ang Mo Kio SERS and the financial plight of the Ang Mo Kio residents, the Government continues to keep silent on the non-viability of VERS, said Mr Leong.

“The right thing to do is to clarify to Singaporeans whether it would be devising a new compensation formula for VERS or proposing some other solutions for the lease decay problem which has serious implications on the financial well-being and retirement plans of Singaporeans, especially those who bought older flats in mature estates before the lease decay issue was thrown into the spotlight.”

He argued that it is time for Singapore to reassess the Land Acquisition Act with regards to its power to displace Singaporeans from their homes without adequate compensation for them to afford an equivalent replacement home in the same area.

“Had the Ang Mo Kio SERS residents not protested, this issue would not have been drawn into the national spotlight and we would not be able to assess its implications for VERS in future.” said Mr Leong.

He said that the Government has failed to appreciate how stressful and unfair it is to the Ang Mo Kio residents for them to fork out tens of thousands of dollars to move to a new location forced upon them by national development.

“I urge the Government to further improve the compensation package for the Ang Mo Kio residents although a final compensation has been announced on 7 November last year.”

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