Debated in Parliament on 9 Jan 2023.
Mr Speaker, Sir, I beg to move, "That Parliament do now adjourn."
Question proposed.
Mr Speaker, Sir, the Selective En bloc Redevelopment Scheme (SERS) at Ang Mo Kio Avenue 3 which I shall call "Ang Mo Kio SERS", is an epochal event in the history of our public housing. This event has important implications for all Singaporeans beyond the residents that are affected, but the media and Government have downplayed these implications. Therefore, I will be using my Adjournment Motion speech today to explain to Singaporeans why they should be concerned about the Ang Mo Kio SERS and how it will affect the future of their ageing HDB flats.
Some Singaporeans may not fully understand how and why the Ang Mo Kio SERS is different from other SERS exercises in the past. I will first explain briefly how Ang Mo Kio SERS is different from past SERS.
The key difference is, this is the first time that residents selected for SERS must top up cash to get an equivalent replacement flat with a new 99-year lease. 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.
I confirmed this during the deliberations of the Public Petitions Committee, where I persistently asked the Ministry of National Development (MND) for past examples of SERS where the residents had needed to top up with cash for an equivalent flat with a new 99-year lease. MND finally provided a memo to the Public Petitions Committee on 14 November 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. Only residents who opted for "a more centrally located replacement site" at Clementi Avenue 1 were required to top up with cash. Thus, 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.
This confirms that the Ang Mo Kio residents are the unlucky first SERS residents to be financially burdened. For the first time, residents of a SERS must fork out cash for an equivalent flat with a new 99-year lease.
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 the Government has not admitted that the outcome of the Ang Mo Kio SERS is different from other SERS. It is disingenuous of the Government to have not 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 (LBS) as new options for the Ang Mo Kio residents.
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. The Minister explained that in past SERS, the flats were generally younger at the point of the SERS announcement, with around 70 years of lease remaining. However, the flats affected by the Ang Mo Kio SERS are older, with a lease balance of about 57 years.
But the Minister'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 exercises. He 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 with 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 exercises when the effect of lease decay had not set in.
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.
So, what is the reason that the Government has avoided admitting the different outcome and, as a result of that, is unable to provide a full explanation to the Ang Mo Kio residents and Singaporeans?
I think the reason is, by admitting to the different outcome of the Ang Mo Kio SERS, it means the Voluntary Early Redevelopment Scheme, or VERS, is not a viable solution to the lease decay problem. Since 2018, the Government, however, has touted VERS as a solution to the lease decay problem.
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". The original SERS means residents get paid; while the 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 the 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 resident 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 it did for the Ang Mo Kio 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. The right thing to do, however, 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 the mature estates before the lease decay issue was thrown into the spotlight.
Mr Speaker, the Government has shown a lack of transparency and compassion by offering a compensation package that requires topping up, to the Ang Mo Kio residents in April 2022 without explaining the reasons for it. Even though the Government has followed the same model and approach, as a government responsible to the people, it should have thought through the implications of the different compensations and come out with more palatable solutions beforehand.
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 needs. 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.
Fifty years after the introduction of the Land Acquisition Act, it is time for us to reassess the 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 SERS in future. Singaporeans, especially those who live in older flats with decaying leases, should be aware that the Ang Mo Kio SERS possibly foreshadowed what could happen to them in the future if the Government uses the compensation formula applied to the Ang Mo Kio SERS for VERS in future.
We urge the Government to clarify how it intends to compensate the residents of VERS in the future, because Singaporeans needs certainty on the lease decay issue as soon as possible. Singaporeans deserve better – for country, for people.
Senior Minister of State Sim Ann.
Mr Speaker, Sir, Mr Leong has raised the issue of the Ang Mo Kio SERS by submitting a Petition to the Public Petitions Committee, and MND as well as the Housing and Development Board (HDB) had replied to the issues that he has raised and have also sent memoranda to the Public Petitions Committee several times. He has raised some issues again and I would like to take this opportunity to recap what has transpired in the case of the Ang Mo Kio SERS.
First of all, SERS compensation has never been intentionally pegged to the price of a new flat of similar size, in a similar location, on a fresh 99-year lease. It has not been pegged or designed this way, although in his speech, Mr Leong has sought to make it so.
How does it come about that a flat that has, say, 70 years left on its lease can be worth more than a similar flat, in terms of size and location, with a full 99 years to run?
This is largely because the new flat on a 99-year lease comes with Government subsidies, which are so substantive that after netting off some additional financial support from the SERS grant and the payment of reasonable expenses by HDB, eligible buyers can actually pay less than what a similar flat with 70 years left would fetch on the resale market.
During earlier SERS exercises, the flats that were acquired were generally younger, such that most unit owners would be able to afford a subsidised replacement flat of similar attributes on a fresh 99-year lease.
The compensation framework was based on independent assessment, which, in turn, was based on market value. It was not pegged to the subsidised price of new flats, nor designed to create a windfall. It so happened, during past SERS exercises, that the outcome was quite advantageous for most flat owners, because the age of their flats was not so old.
A different outcome would occur if the age of the flats involved in SERS were older. Because a flat with, say, 57 years left, would fetch a lower value on the resale market than one with 70 years left. And this was what happened in the case of the Ang Mo Kio SERS exercise; and would, in fact, be the case in future SERS exercises if the flats involved are of similar vintage.
What did Government do in this case?
First, the Government has maintained consistency in our approach with previous exercises. This is quite in contrast with the picture that Mr Leong was trying to paint, which is that somehow, an epochal moment was made possible without the Government admitting so. I am afraid Mr Leong is painting quite an incorrect picture here.
In addition, the Government also listened to the residents and once we heard their key concerns, we introduced flexibility to meet their needs by offering more options, such as the 50-year leases, as well as the LBS for seniors and allowing flexibility for the residents to apply for a site that is different than the original designated replacement site at Central Weave at Ang Mo Kio.
So, we reject the characterisation of a lack of empathy. We have been walking the ground and we have also been listening to residents. While we have maintained our approach towards the valuation of flats, we have also introduced flexibility after listening from the residents, and also the representations of their representative, Ms Nadia Samdin.
And as a result of that, 99% of flat owners need not top up to purchase a similar type of flat with a full 99-year lease or a similar sized flat on a 50-year lease. I feel that we need to repeat this: 99% of the flat owners who were involved in the Ang Mo Kio SERS exercise do not need to top-up to purchase a similar type of flat with a full 99-year lease or a similar size flat on a 50-year lease.
So, the Government, in determining the compensation for SERS flats has been consistent in applying valuation principles that are well-established. In addition, we have been giving our SERS households considerable support. All these have been enumerated in our public communications and I feel that it is not necessary for us to repeat that here.
Mr Leong then goes on to characterise what has happened in the Ang Mo Kio SERS case as one that is due to an effect of diminishing leases and then to use that to shape certain expectations of the public of the VERS scheme. I feel that it is important for us to make very clear here.
I have explained why residents need to top up when they swop a 57-year lease for a new 99-year lease. This was also made clear during our public communications with our residents in Ang Mo Kio, as well as in response to the public Petition. And I believe that Mr Leong acknowledges that.
However, it seems that he does not prefer this outcome. That does not make it an unfair one.
SERS is not meant to extend a decaying lease for free to 99 years. I have mentioned that. That is not the basis upon which SERS compensation is determined. It is determined by a fair, independent assessment and that, in turn, takes reference from market value.
Nor is VERS. VERS, like SERS, is not meant to extend a diminishing lease for free to 99 years. The alternative to SERS or VERS is for the residents to stay in place until their lease runs out, at which point they would have to find a new flat on a new lease.
So, I believe what Mr Leong is doing here, is to shape certain ungrounded expectations of VERS which are at odds with what we have shared so far.
The details of VERS have yet to be announced but the Government has already made clear that the terms for VERS will not be as generous as for SERS and that there are no replacement flats. So, if we examine what Mr Leong has been doing, I think he has been reshaping people's expectations of the scheme and I cannot help but wonder why he is doing so.
Be that as it may, it does not seem very inconsistent with what Mr Leong has been doing because, as I have explained, the SERS scheme compensation was not designed for flat owners to be able to purchase a same size flat on a fresh 99-year lease in a very similar location. But Mr Leong has painted it as the objective. In his speech, he characterises what has happened in Ang Mo Kio as some threshold having been crossed. And I think what Mr Leong is doing here is blurring the distinction between a market expectation and a policy commitment.
We can understand in the case of SERS that residents or flat owners may hope for more compensation. We can understand if they have formed these expectations based on the experiences of previous flat owners who have gone through the SERS exercises.
But this cannot be the case for all SERS exercises, and we have explained that.
So, I think that far from the Government being disingenuous, far from the Government having been non-transparent or non-empathetic to ground concerns, I would put it, Mr Speaker, to the House that it is Mr Leong who is being disingenuous in blurring the distinction between a market expectation and a policy commitment, and also shaping expectations of a policy whose parameters we have given some outline to, but he has shaped it the other way. And I can only wonder at his purpose for doing this, Mr Speaker.
I am mindful that Mr Leong has been making various arguments – in our opinion, erroneous arguments – outside of the House with regard to the valuation and the pricing of Build-To-Order (BTO) flats and also, by extension, the proper use of national Reserves. I also believe that we will have an opportunity to debate fully in this House on these matters.
But I hope that instead of conflating issues, confusing issues or quite deliberately misleading the public by shaping ungrounded expectations of schemes, creating goalposts as it were, I hope that Mr Leong will engage in the upcoming debate responsibly. To do otherwise makes it harder, not easier, for us collectively to balance the needs of Singaporeans, and I am talking about the current generation as well as the future generations.
Mr Leong.
Speaker, I thank the Senior Minister of State for responding to my speech. However, contrary to what the Senior Minister of State has said, I think the Government has actually shaped certain expectations in our society already. I am not the one who is reshaping the expectations.
For example, SERS, for all the past SERS exercises, the residents had received cash and gotten an equivalent flat with a 99-year lease. Is that not an expectation cultivated by the Government? Am I reshaping expectations? I am just saying the Ang Mo Kio SERS residents have a totally different package and Government, please admit to it. That is the first communication that you have to be frank with the Ang Mo Kio residents. And I am not necessarily —
So, I would like to the Senior Minister of State to clarify.
The second question is, does she think again the expectation on VERS is not my shaping the expectations in our society. The Government has given the expectations, first of all, that HDB flats are an appreciating asset. And now, there is a lease decay.
Mr Leong, can you keep your clarification succinct, please?
Yes, and as an answer to the lease decay, the Government has suggested VERS. So, the Government has shaped the expectation. I am asking the question. Even before, with this Ang Mo Kio SERS incident which points to the fact that the compensation would be very different – of course, the guidelines for VERS have not been totally clear or announced at the moment – but does the Senior Minister of State agree that if we draw an analogy of VERS with the Ang Mo Kio SERS exercise, then the VERS compensation will not be attractive to Singaporeans?
Mr Speaker, Sir, Mr Leong says that it is the Government who has been shaping certain expectations of SERS in the way that he has characterised it. Mr Speaker, I would like to share with Mr Leong once again actually what the Government has been putting out with regards to SERS.
We have said more than once that the selection of sites for SERS necessarily has to be limited, that only about 5% of sites could be suitable for SERS and that, in fact, many suitable sites have already gone through the exercise. So, how have we not been shaping the expectations and putting out information in a transparent way?
So, Mr Speaker, I think that what Mr Leong is trying to do, once again, is to confuse the public.
I believe that the information that we have been putting out is transparent and we also have been consistent in doing so.
With regard to diminishing leases, again the Government has also been upfront in letting residents know about this, in being clear to home owners in terms of the relativity between VERS and SERS. If Mr Leong takes a look at our article on Gov.sg, I think it cannot possibly be clearer.
So, Mr Speaker, I think what Mr Leong is trying to do here is something that is increasingly evident to everyone.
*The Question having been proposed at 6.51 pm and the Debate having continued for half an hour, Mr Speaker adjourned the House without question put, pursuant to the Standing Order.*
Adjourned accordingly at 7.21 pm.
PAPERCUTS