Tuesday 22 November 2011

Rents down for 1,100 rental flats, up for 5,100 since 2009

National Development Minister Khaw Boon Wan says those with lower incomes pay less for heavily subsidised units
By Toh Yong Chuan, The Straits Times, 22 Nov 2011

A TOTAL of 1,100 rental flat tenants saw their rents lowered in the last two years, even as another 5,100 had their rents increased.

This was revealed in Parliament by National Development Minister Khaw Boon Wan yesterday.

He was responding to a question from Dr Lily Neo (Tanjong Pagar GRC), who wanted to know how the Housing Board (HDB) adjusts its rents and how many people were affected in the last two years.

In 2009, the HDB tightened eligibility criteria for its heavily subsidised rental flats, so that it is not just a tenant's income that is taken into consideration, but also his assets such as savings and car ownership.

This affected tenancies that came up subsequently for renewal. 'HDB rentals are adjusted at the time of tenancy renewal, if the income of the tenants has changed,' Mr Khaw explained.

Those with lower incomes pay less, while those who earn more pay higher rent. 'The percentage increase in rental rate will depend on the extent of the increase in household income,' he said.

Stressing that 'the principle of charging higher rent for higher income is sound', he said such a policy ensures that those who earn less will receive higher subsidies, while those who have improved financially will be encouraged to move on to own their own homes, thus freeing up their rental flats for needier families.

The rental flats are let on two- year leases. There are 46,000 flats under the scheme and the monthly rent ranges from $26 to $275.

Dr Neo was worried about the 5,100 tenants who faced higher rents. She asked: 'In our present climate of rising cost of living and stagnant wages for the lowest-income, are we not putting too much pressure... (on them)?'

Associate Professor Muhammad Faishal Ibrahim (Nee Soon GRC) shared Dr Neo's concerns and asked what was being done to help those unable to cope with higher rents.

Responding, Mr Khaw pledged that the HDB 'would always be sympathetic' and try to find a way out for the families.

He reiterated several times that the Government wants to help those renting flats to eventually own them.

'My objective will always be for permanent ownership rather than permanent tenancy because tenancy, as Dr Lily Neo puts it, is consumption rather than investment in a property,' he said.

The minister provided calculations to show that those earning $1,500 a month can afford a two-room Build-To-Order flat with a government grant and will be able to service their monthly instalments using only their Central Provident Fund savings.

HDB rental flats and home ownership for the low-income had a full airing in the House, with five MPs asking questions.

Mr Khaw said the $1,500 income ceiling adequately covers the lowest 20 per cent of households.

He added that the HDB already practises flexibility so that some households earning above $1,500 can still get a public rental flat if they are unable to purchase a flat, or have no family support or other housing options.

Probed by Mr Pritam Singh (Aljunied GRC) of the Workers' Party (WP) for details on how the HDB exercised flexibility, Mr Khaw replied that the circumstances surrounding families differ.

'It is not uncommon to have households earning more than $1,500 and living in our rental flats,' he said.

Another WP MP, Mr Gerald Giam (Non-Constituency MP), chipped in: 'Would the minister consider a formula whereby even those who are earning above that certain amount can get a rental flat but have to pay a higher tier of rental?'

Mr Khaw agreed to consider the idea. 'Whether we can have higher rental, (for those earning) above $1,500... above what is currently prescribed, is something we can take a look,' he said.

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