Housing and Development Board (Amendment) Bill

Mdm Deputy Speaker, with COVID-19's business and individual relief soon expiring in the months ahead and the business climate still remaining sluggish, there is a likelihood that businesses and individuals will require more credit lines to tide over the crisis. For MAS to establish a new Singapore dollar Term Facility to provide liquidity to local banks in Singapore through inclusion of a wider range of collaterals, this would be a welcome move. Hopefully, it will provide another form of credit relief for businesses and individuals alike.

With regard to the amendments made to section 6, 51(C) and 56, there are four areas of potential concerns and clarifications, I wish to seek from the Minister.

First, the duration and effectiveness of this Facility.

Will this Facility be a temporary relief measure and if so, how long will this Facility last? On contrary, if the Facility will continue post-COVID as a permanent scheme, what are some of the benefits to the financial sector and will it be practiced in similar form as other jurisdictions, as the Minister mentioned earlier? Given that the intent is to assist local businesses in obtaining greater liquidity, what financial controls on the Facility will be in place to ensure the extended liquidity will be flowed to local businesses instead of investments that are related to the banks' overseas portfolio?

Second, the notification of homeowners on the banks pledging of the properties to MAS for the Facility.

When the banks pledge the properties to MAS for loans, are the banks not required to inform the homeowners as part of the notification process even though it is an administrative procedure and I know it does not impact the existing service loan contract between the homeowner and the bank, but just as a notification process, is that still necessary? If homeowners are not informed, how would the following cases be handled?

One, I think Minister has already touched in his briefing just now. For example, if the property is bequeathed under the Will to the homeowner's next of kin. In the unfortunate event when the mortgage is still outstanding and the homeowner is demised, then the beneficiary is below 21 years of age and is not of working age to be able to continue servicing the home loan, what are the implications to the property and the beneficiary? I think the Minister touched upon how the property will not be compulsorily repossessed.

The second case I want to raise is there is an increasing trend of cross-marriages and in particular, across countries. So some of the homeowners have foreign spouses who are on LTVP or even LTVP+. Some of them we know they are unlikely to be offered Permanent Residency whether it is due to age or other reasons. If the homeowner has passed on or is incarcerated, how will HDB address the situations where the foreign spouse only has LTVP, so they cannot effectively takeover ownership of the home, or for a spouse who is a foreigner but the couple has Singapore-born children? So, from the perspective of MAS, can the property continue to be pledged as collateral given the change in ownership?

The third area, this is in respect to the amendment on the Board Appointments. While I agree for HDB to have direct management of the Board Appointments to better support their plans and also their programmes, so that they are better oversight on their Statutory Board performance, I would like to understand two areas.

One, what is the rationale to increase the number of Board Members instead of reviewing the role and the scope of the existing Board? Would this expertise not be available if the right composition of Board members were judiciously selected to have the right diversity and provide the missing areas of expertise?

The next is, before the decision to increase the number of board members, were other alternatives explored such as seeking external consultants and industry experts for advice on an ongoing basis rather than to formalise this expertise within the Board members?

And the final area, in response to the greater empowerment of HDB to compulsorily acquire a flat, under the fact that there is a false or misleading declaration, I would like to know, since Minister has said the chances of this misrepresentation or even false declaration is very low, then what is the rationale for including this in the amendment, in the terms of HDB flats and private properties, since it is going to be very low in this perspective? Are the current rules not sufficient to ensure that only eligible persons are able to purchase or retain the flats and properties?

Mdm Deputy Speaker, notwithstanding the clarifications I have raised, I support the Bill and the broad principles of the amendments made to address the immediate challenges the financial sector and the market needs.

Mdm Deputy Speaker, all of us understand the importance of public housing and the role it has played, is playing and will continue to play in Singaporeans lives.

Today, more than 80% of Singapore's resident population resides in HDB flats, while homeownership rates among resident households for HDB dwellings is high at 92%. It is therefore of utmost importance that there is sound governance and proper oversight responsibility by the Board on matters relating to HDB, while also ensuring that public housing is not abused and remains affordable for those who need it the most. It is here that I would like to seek clarifications on two fronts, with regard to the proposed amendments to the Bill.

The first is the amendment to section 6 of the HDB Act. The amendment proposes to make the role of Deputy Chairman of the Board discretionary rather than mandatory. Based on my review of HDB's annual reports and the organisation structure of the Board enclosed within – the role of Deputy Chairman was not filled since Mr James Koh retired as Chairman on 30 September 2016 and was succeeded by Mr Bobby Chin who was the then Deputy Chairman.

I acknowledge, however, that from 1 October 2020 Prof Lily Kong will assume the role of Deputy Chairman for the new term of the HDB Board. The current Act seems to require the Deputy Chairman role to be filled. I would therefore like to clarify if any member of the Board has been serving as Deputy Chair from October 2016 to 30 September 2020. I would also like to clarify what the reason the role was made discretionary and the initial intended role of the Deputy Chairman on the Board. Who will be taking over that job scope should there be no Deputy Chairman appointed, once the amendments are passed? In the event that the Chairman is absent from duty, how would the Minister decide on the member of the Board to act temporarily as Chairman?

The second amendment I would like to seek clarification on the proposed amendment to section 56. The paragraph extends the list of possible reasons for the compulsory acquisition of a property if the owner has made a misleading or false statement in his application to the Board for his acquisition or transfer of interest of a flat from or to a related party respectively.

I would like to seek clarification on the motivations for the amendment to the subsection. What was the reasoning for the inclusion of this amendment, and did it come from an observed trend on specific events and fact patterns, which the HDB has discovered when it comes specifically to related person transactions? How many of such transactions took place and did the HDB suffer damages as a result of these transactions between related persons? As compulsory acquisition is a harsh measure, I believe it is imperative for the Government to clarify further the rationale for the change. This is especially so when clause 6 states that, "Flat owners who make misrepresentations whether innocently or otherwise, will be liable to have their flats acquired."

Mdm Deputy Speaker, notwithstanding my clarifications on the amendments, I support the Housing and Development (Amendment) Bill.

Madam, this Bill makes two key changes. First, it enables banks to use HDB loans as collaterals to borrow from MAS. Second, it empowers the HDB to seize flats in certain cases where homeowners provide falsehoods to HDB.

I agree with these changes. They help banks release funds into a tight economy. They penalise the use of falsehoods by HDB applicants.

Sir, I have three clarifications to make. My first clarification is about HDB loans. The Bill allows banks to use HDB loans granted by them to obtain credit facilities and repurchase transactions from MAS. Previously they could not. This empowers MAS to inject more liquidity into our financial system. Indeed, MAS has recently created a new credit facility that allows certain banks to pledge home loans as collateral.

But there are risks. In this crisis economy, homeowners will increasingly feel the brunt of unemployment and salary cuts. More home loans will become delinquent or default. MND itself said in 2018 that prolonged unemployment and drops in household income are two main reasons why households fall into mortgage arrears. If households cannot repay their loans, banks will find it harder to repay MAS.

To clarify the significance of this amendment, I have two questions.

First, can Minister share data on what has been the default rate of HDB bank loans in the past five years? Second, what is HDB's forecast of the default rate of HDB bank loans in the next 24 months? I was initially going to ask if HDB will continue to suspend late payment charges on HDB mortgage arrears. I am glad the Minister has announced that given the current economic conditions, HDB will further extend this to 31 March 2021. This is indeed a much needed lifeline for many Singaporeans. Sir, ensuring that homeowners can repay their bank loans is in the interest of homeowners, banks and our financial system.

My second clarification relates to falsehoods, transfers and acquisitions. This Bill gives HDB new powers to compulsorily acquire flats in certain cases. In particular, HDB now has the power to do so in cases where applications for flat ownerships in an acquisition or transfer between relatives contained a false or misleading statement. I have two sets of questions related to this proposal.

One, in relation to both the existing section 56 and the new amendment, can Ministry clarify whether homeowners are allowed to amend the false or misleading statements in HDB applications they have submitted? If so, what are the channels for them to amend their statements? We must take a strong stance against the use of falsehoods in HDB applications. But where such falsehoods are assessed to be innocent or non-material, we should provide channels for voluntary correction.

Two, the amendment of section 56 introduces the terms "transfer" and "acquisition". There is no definition for either term in the Act for the purpose of section 56. Can Minister clarify what situations do "transfer" and "acquisition" refer to? In particular, does the definition of "transfer" in section 56 differ from its definition in section 49, which expressly states to cover only section 49? Section 56 has significant impact on lives, as it empowers HDB to compulsorily acquire flats. Clear definitions with examples, provided on Parliamentary record, will help avoid any doubt in its interpretation.

My final point is that we have not gone far enough in reviewing our HDB policies. The policy of not allowing the keeping of cats in HDB flats has to be reviewed and changed. I have spoken up about this for more than a decade now. I know this is not part of this Bill but I hope Minister will address this point.

Let me reiterate what I said in this House in March this year, "HDB has stated that cats are generally difficult to contain within the flat. When allowed to roam indiscriminately, they tend to shed fur and defecate or urinate in public areas and also make caterwauling sounds, which can inconvenience your neighbours. It does not make sense that one is allowed to keep a dog and now a big dog, but not a cat, not even a little kitten. Dogs can also shed fur and defecate or urinate in public areas. What is more, they bark. HDB's concerns can be easily addressed. We can ensure that pet cats do not roam indiscriminately and are sterilised. Sterilised cats do not make caterwauling sounds. I have seen first-hand how all these simple measures can be taken and people can keep cats in their flats without affecting their neighbours."

In response to my question, MND said, "When HDB receives a complaint, they go down and investigate. If the cat is not causing any disamenities, the resident will not be asked to remove the cat". I appreciate this reply but my question then is, what is the point of having a rule that we do not enforce? So many people are already keeping cats in HDB flats. Many of us, as Members of Parliament, see this during our home visits and some of us even take photos with our HDB residents and their cats.

Sir, I sincerely hope that MND will amend the Housing and Development (Animals) Rules to reflect what we already accept in reality – that HDB residents are allowed to keep cats, which can be removed if they are found to cause disamenities in the community.

Sir, notwithstanding my clarifications, I stand in support of the Bill.

Mdm Deputy Speaker, in the last year, Singaporean families have stayed at home through the pandemic and, thankfully, most of us have been able to keep ourselves safe from the COVID-19 virus. We have worked from home, studied from home and our homes have sheltered us.

For some 3.2 million Singaporeans like me, that home is an HDB flat. And for many Singaporeans who may face difficult times from the economic repercussions of this virus, holding on to our homes is one of our highest priorities. I support the HDB's efforts and measures to help Singaporeans during this period. For example, the suspension of late payment charges on HDB mortgage arrears till March 2021; and that households living in public rental flats will receive a 50% rental rebate between 1 October and 31 December 2020. These were welcome announcements.

I am certain that this Bill on the Housing and Development Act will be of interest to many people who will want to know if they and their homes will be affected. I also support the clear message from the Minister that the proposed amendments in this Bill will not impact HDB flat owners adversely. However, I would like to raise some points.

One of the amendments in this Bill aims to allow our domestic banks to use HDB mortgages as collateral for a grant of facility from MAS. Our domestic banks can borrow from MAS as a lender of last resort, or for precautionary liquidity. When they do so, these banks may have to offer some kind of assets as collateral or security for the loans. Through this amendment, MAS will be able to recognise HDB residential mortgages placed with these banks as collateral and these banks will then be able to obtain more liquidity from MAS.

With this, banks can then extend a greater supply of credit to Singaporeans and Singaporean businesses. This is in line with efforts by MAS. For example, the MAS Singapore Dollar Facility for ESG Loans provides a line of credit to our banks and finance companies at 0.1% interest per annum, to ensure vital credit for our SMEs during these difficult times.

Mdm Deputy Speaker, in that light, I support this amendment. However, I have some clarifications. It is critical for us to communicate to our fellow Singaporeans the impact of these changes, and make it clear if this amendment will affect HDB flat owners' rights. We want to prevent the proliferation of false narratives. We should also aim to provide clarity as to what would happen in the event that the collateral is enforced. I appreciate that this would be an unusual situation, but given that we are living in unprecedented times, I believe Singaporeans want to be prepared for any outcome.

First, in the event that MAS enforces on the HDB mortgages as collateral, will MAS, HDB or the bank provide prompt notice of the change to the affected HDB owner? What administrative steps will HDB owners need to take in such a scenario? They would likely have to change the bank they make their monthly mortgage payments to. Many of my residents are seniors, some of whom may not be technologically savvy or mobile, and unable to reproduce documents from a long time ago. What is the process and timeline for the appointment of a replacement bank and how will mortgage payments be managed in the meantime? What happens if some HDB owners accidentally continue to make mortgage payments to the former bank?

Second, when the HDB mortgage is administered by a replacement bank, will the commercial terms of the mortgage be kept the same vis-a-vis HDB owners? It is a fairly standard term in bank documentation that commercial banks may reserve the right to change the applicable interest rate without prior notice. Needless to say, an increase in interest rates on the loans may have a hard financial impact on homeowners.

Third, aside from the effect of this amendment on HDB owners, I wish to ask the Minister whether this intended use of HDB mortgages as collateral, especially given the financially troubled times ahead, may lead to an increased pressure on the banks to foreclose on HDB mortgages with outstanding arrears more quickly in order to balance their books. In other words, will Singaporeans who are unable to keep up with their loan installments be at greater risk of losing their homes?

Mdm Deputy Speaker, I believe Singaporeans will accept the risk of a potentially different holding bank for their HDB mortgages if they are well-informed of the change, if they are assured of the commercial terms of the loans that they had signed up to and if their concerns about any potential foreclosures are addressed.

I turn now to the second point I would like to make about this Bill – compulsory acquisition. This Bill also intends to add in a further ground for HDB to take compulsory acquisition, or CA action, of a HDB flat if the owner of that flat and I quote – "... made a misleading statement in his application [to the HDB], or a misrepresentation of a material fact (whether innocently or otherwise)" in relation to the acquisition of that flat or an interest in that flat, or in the transfer of an interest in that flat to a related person. I note that sections 56(1)(f) and (g), which are not amended, already allow the HDB to take CA action over a flat if an owner made a misleading statement or misrepresentation of a material fact relating to the purchase of that flat.

This amendment to introduce the new section 56(1)(ga) appears to extend the existing grounds in two ways. HDB can now take CA action against flat owners who had made a misleading statement or material misrepresentation. One, in the transfer of a flat, and not just a purchase; and in relation to an owner's acquisition of an interest in the flat or the transfer of an interest in the flat to a related person, including a spouse, brother, parent or a remoter lineal ancestor or issue.

I would like to make two points. I note that this CA action right is intended to apply even if the person who made that misleading statement or misrepresentation about their eligibility to own the flat, did so innocently. It seems a little harsh for HDB to take CA action over an innocent misrepresentation or misstatement, especially for eligibility factors which are straightforward or provable. What are some examples of the misleading statements or misrepresentations relating to eligibility which prompted this amendment and why is it that these factors cannot be independently verified?

The consequences of a CA action are understandably severe: (a) in accordance with HDB's compensation policy, owners of a flat subject to CA action will obtain compensation decided by the HDB; and (b) their future applications for a flat may be affected if they have used up their allocated number of HDB concessionary loans. What factors will be taken into consideration in determining the compensation in the event of an innocent misrepresentation?

Second, this amendment will apply section 56 to purchases or transfers – to acquisitions or transfers of interests in a flat in both a sole, or a multi-owner situation. Mdm Deputy Speaker, I wish to ask the Minister, where the entire flat is compulsorily acquired by the HDB due to the actions of one of its owners, how will HDB balance the rights of the other co-owners of that flat who may be innocent and unaware of the actions of the owner who had made the wrongful statements or representations? If the co-owners are not complicit and have done nothing wrong, it may come across as unfair to them to suffer the same severe consequences.

For example, will they be first given the opportunity to sell the flat on the open market? Or will these innocent co-owners be prejudiced by the compulsory acquisition in any future applications for another HDB flat? It would help if innocent co-owners are allowed another HDB concessionary loan if they had used up their entitled HDB concessionary loans for the previous flat which was subject to CA action. I believe some clarity on how innocent HDB owners will be treated will assure many of us.

In conclusion, Mdm Deputy Speaker, I appreciate the opportunity to share some of considerations and views which I felt are important to be raised. I wish to state my appreciation for the difficult task that the Minister and HDB has in protecting and ensuring a fair outcome for HDB owners while ensuring that access to our HDB flats is not abused and used only by eligible persons as intended. And I believe most Singaporeans do share that same appreciation. Notwithstanding the above clarifications, I conclude my speech in support of this Bill.

Mdm Deputy Speaker, I would like to thank Members for their comments on the Bill. Allow me to address the issues raised.

Ms Cheryl Chan asked if the MAS Singapore Dollar Term Facility is a temporary or permanent facility and if MAS can direct the banks to on-lend the funds borrowed from MAS to local businesses instead of chanelling them to overseas investments.

Madam, the facility is a pre-emptive measure to strengthen the resilience of the banking sector, given the significant economic headwinds created by COVID-19. The facility will remain in place throughout the COVID-19 crisis. After the crisis is over, MAS will review if the facility needs to be retained.

The intent of the facility is not for the banks to directly on-lend the funds borrowed from MAS. Instead, the facility serves as a backstop that will provide banks with greater certainty of funding and provide the banks assurance and, in doing so, supports their lending to businesses and households during periods of heightened market uncertainty.

Ms Cheryl Chan also asked if HDB flat owners will be notified when banks pledge their HDB loans to MAS. Ms Nadia Samdin asked about the administrative implications on flat owners when MAS takes over the HDB loans and if the terms of HDB loans from banks will stay the same.

The borrower-lender relationship between the HDB flat owner and the bank, as set out in the terms and conditions of the housing loan, remains unchanged when the bank pledges the HDB loan to MAS. HDB flat owners continue to service their HDB loans with their respective banks and the bank still retains the legal title to the loan. There is, therefore, no change in the relationship between banks and the flat owners and, therefore, MAS will not require the bank to inform the HDB flat owners that their loans have been pledged to MAS as part of a portfolio of loans, both private and public, in return for this facility.

But in the highly unlikely scenario where a bank defaults on its loan from MAS, MAS will take ownership of the HDB loans and will appoint an agent bank to administer the loans on MAS' behalf. Under this scenario, HDB flat owners will be promptly notified to re-direct loan repayments to the agent bank. This is an administrative process and the terms and conditions of the HDB loans, including the interest rates charged, will not be affected in the process. Again, we emphasise that this is a very unlikely scenario, as banks in Singapore are well capitalised and maintain healthy liquidity buffers and this is, indeed, a pre-emptive measure.

Mr Louis Ng shared his concerns that increased default rates on home loans during periods of economic uncertainty may increase the likelihood of banks defaulting on their loans from MAS and asked about the current and projected default rate of bank loans on HDB flats. The current housing non-performing loan ratio remains low and stable at around 0.5%. The majority of borrowers are able to service their mortgages and should continue to avoid further build-up of debt. But, we will keep a close watch on the situation as the crisis unfolds.

As Mr Ng has pointed out, economic and employment conditions remain challenging for many households, and we can expect homeowners to face difficulties in the period ahead. For borrowers in financial difficulties, MAS has worked with financial institutions on further support measures that allow them more time to resume their monthly mortgage instalments. These measures, which were announced yesterday, will help ease individuals’ cashflow while gradually encouraging them to resume their home loan repayments in 2021. This complements HDB's own loan arrangements which were announced a couple of days before MAS.

Ms Nadia Samdin also asked if the use of HDB loans as security will increase the pressure on banks to foreclose loans with outstanding arrears. The MAS facility does not impact how banks manage their residential property loan portfolio. As banks now have access to an added layer of liquidity insurance provided by MAS, their ability to deal with liquidity stress should in fact be enhanced.

Finally, Miss Cheryl Chan asked how the proposal would interact with various scenarios relating to material changes in the ownership of the flat. In short, there is no impact on how such cases will be handled. The existing HDB policies will continue to apply. The banks will also continue to administer the loans based on their existing procedures.

I have sought to respond to Members’ queries regarding the amendments made to enable the MAS SGD Term Facility. If there are further technical queries relating to this or to the financial system, my colleague Minister Ong Ye Kung will be here to address them.

Next, let me address the points made regarding compulsory acquisition.

Ms Nadia Samdin asked if this would excessively penalise flat owners who may be innocent and unaware of the false statements or misrepresentation of facts. I would like to assure the Member that HDB will not exercise its powers to compulsorily acquire flats lightly, and will generally only contemplate such action as a last resort for egregious and severe cases, and where the flat owners refuse to regularise the ownership of the flat. Before initiating acquisition action, HDB will investigate each case thoroughly. Depending on the circumstances of each case, HDB may instead consider imposing a financial penalty or issue a warning. HDB will consider the interest of the parties involved, including any non-complicit owners and occupiers of the flat, and may allow the flat to be sold on the open market if there are extenuating circumstances.

The statutory appeal channel to the Minister under section 56 of the Act serves as yet an additional safeguard to the interests of potentially non-complicit owners.

Mr Louis Chua asked about the rationale for this amendment and, like Miss Cheryl Chan, also asked if there had been a significant rise in false statements or misrepresentations in the transfer of flats. I would like to clarify that this is not the case. By and large, HDB's existing process and system checks are able to reduce such occurrences. In fact, HDB had found around 10 such cases in the past three years. They principally revolve around false statements or misrepresentations about eligibility, about ownership of other properties, both locally and abroad and, of course, other statements that are material to the transfer or to purchase. This is thus a pre-emptive move to deter any such potential infringements in relation to the transfer of flat ownership.

Mr Louis Ng asked about avenues for owners to amend unintentional or non-material errors in their applications to HDB. I would like to assure the Member that we will apply this provision to those who intentionally make misleading statements or misrepresentations.

He asked also about the specific definitions of the terms “acquisition” and “transfer” in the amendment. The Member is right that the definition of the term "transfer" in section 49 applies expressly to that section only. Section 49 sets out the various transactions for which HDB may act for parties who do not engage their own solicitors. Such transactions include, among others, the purchase, sale, transfer of ownership interest, and surrender of HDB flats. The definition of "transfer" in section 49 is therefore purposefully broad, to cover the range of transactions where HDB can act for, some of which do not apply to the intended amendment in section 56.

For the purposes of section 56 amendment, we should take the ordinary meaning of the terms "acquisition" and "transfer". To explain, the term "acquisition" in this amendment refers to the obtaining of an interest in the ownership of the flat by an incoming owner. The term “transfer” here refers to an interest in the ownership of the flat being passed to an incoming owner. Let me use an example to illustrate. When a couple includes their child as a co-owner of a flat, the child acquires an interest in the flat, while the parents transfer an interest in the flat to the child.

Finally, Miss Cheryl Chan and Mr Louis Chua raised some queries with regard to the amendments relating to the HDB Board.

As I mentioned earlier, the HDB Board plays a strategic role in guiding the development of the Board. When appointing Board members, we seek a diverse representation of perspectives to cover the breadth of its work. In fact, with the current Board size, HDB has had to make trade-offs in selecting and bringing on expertise.

On the Member’s question as to whether HDB had considered enlisting the help of external consultants or industry experts instead, I would like to share that HDB does, indeed, engage such experts when dealing with specific projects or issues. For example, HDB has several advisory panels comprising industry experts to guide HDB in technical areas such as Architecture, Research, and Civil and Structural Engineering. Such panels are useful when HDB needs advice in more specific and technical areas. But they will not be able to replace the Board’s role in offering strategic guidance and contributing diverse viewpoints, including beyond their core areas of expertise, to guide HDB’s overall development.

With the expansion, HDB’s Board size will be comparable to that of other Statutory Boards such as the LTA, CPF Board and JTC Corporation.

Mr Louis Chua had asked about the appointment of a Deputy Chairman prior to the appointment of Dr Lily Kong as Deputy Chairman with effect October 2020. Prior to appointment, at the start of each term of HDB's Board, there would be appointed in HDB's Board a temporary chairman who would for all purposes and intents perform the role of a Deputy Chairman in managing the Board and holding Board meetings in the absence of the Chairman. This amendment brings the structure and composition of the HDB's Board in line with other Boards such as JTC, URA and LTA.

Finally, let me address an issue that is unrelated to the Bill but is very close to Mr Louis Ng's heart. This Bill relates to credit, compulsory acquisition, courts and candidates for the Board – four Cs – and that does not include the cats. Nevertheless, let me address Mr Louis Ng's point about the need to review HDB’s policy that disallows the keeping of cats in HDB flats.

Let me first declare that I am a cat lover and I have had four stray cats in the course of the last 15 years. HDB’s pet ownership policies seek to strike a balance between residents who are pet lovers and those who are not. We will continually review and I assure the Member that we will review and update our pet ownership policies to ensure that they are effective and balance the needs of different stakeholders. Mdm Deputy Speaker, I beg to move.