Rationale for Selection Criteria and Less Generous Compensation under VERS

Mr Low Wu Yang Andre asked the Minister for National Development (a) how does the Ministry define and quantify the less generous compensation terms of VERS as compared to SERS particularly in relation to a flat’s market value; (b) what safeguards will protect homeowners whose VERS compensation could be lower than their outstanding mortgage; and (c) what is the projected median cash top-up required for displaced households to secure replacement housing.

Mr Low Wu Yang Andre asked the Minister for National Development (a) what is the primary policy rationale for compensation under VERS being less generous than SERS; (b) how does the shift away from the SERS lottery effect support the goal of long-term housing affordability; and (c) what assurance can the Ministry provide that VERS will primarily serve as an orderly renewal programme and not a wealth-generating one.

Thank you, Sir. My reply will also address a related question by Mr Andre Low for written answer on 24 September.

Starting from the late 2030s, we will begin to see more HDB flats reach the 70-year mark of their 99-year leases. The Ministry of National Development (MND) and the Housing and Development Board (HDB) will adopt a multi-pronged approach to keep our older flats and estates liveable and vibrant.

First, we will upgrade the ageing flats to ensure their safety and liveability. These older flats would have already benefited from one round of upgrades under the previous Main Upgrading Programme (MUP) or the current Home Improvement Programme (HIP) for flats that have passed the 30-year mark. We plan to introduce a second round of upgrades via HIP II for flats which pass the 60-year mark. HIP II will ensure that our older flats are able to last the flat owners till the end of their 99-year lease.

Besides the flats, HDB will also upgrade our older estates and neighbourhoods through programmes such as the Neighbourhood Renewal Programme (NRP) and the Silver Upgrading Programme (SUP). We will ensure that residents who are staying in older estates can continue to enjoy a vibrant neighbourhood with refreshed facilities and greenery.

Complementing these efforts is the Voluntary Early Redevelopment Scheme (VERS). The primary purpose of VERS is to facilitate the orderly redevelopment of ageing estates by spacing out the redevelopment and construction works in towns where there are many older blocks that were built around the same time.

As I had explained in an earlier media interview, VERS is a complex policy and a long-term undertaking for our society. It will impact existing flat owners and future generations of Singaporeans. So, the policy must be designed carefully to be fair and sustainable for both groups. We aim to firm up as many of the policy details as possible during this term of Government.

After we have established the VERS framework and parameters, we can then start with a few selected sites, likely in the first half of the next decade. We will continually review our processes as we go along and progressively scale up the VERS programme by the late 2030s, when more HDB flats reach their 70-year mark.

Sir, while the details of the scheme are still being firmed up, I would like to highlight three key considerations which I hope we can have broad agreement on from both sides of the House.

First, in managing ageing flats and estates, our first priority is to ensure that Singaporeans have a home for life.

Today, about 2.5% of HDB households do not own flats that cover the owners to at least age 95. So, 2.5%. The current median lifespan of Singaporeans is 84. Hence, almost all our HDB households own flats with leases that can cover the owners for life.

We will continue to closely monitor the proportion of HDB households who do not own flats with sufficient duration of leases that can cover the owners to the end of life and keep this number as small as possible.

Second, as I mentioned earlier, the primary purpose of VERS is to facilitate the orderly redevelopment of towns where many older flats were built within short periods of time. This will allow redevelopment works to be carried out in phases within such towns, which will be less disruptive to residents and heartland businesses.

Based on this approach, it is not necessary for every older flat to go through VERS, as we are mindful of the disruption to our residents who will need to relocate when their flats undergo VERS. In addition, VERS, as the "V" suggests, is voluntary. So, there could be instances where residents who are offered VERS, collectively decide not to proceed.

For residents who do not go through VERS, they can continue to stay in their flats until the leases run out. The Government will support them in other ways to keep their flats and estates liveable and vibrant, including through upgrading programs like HIP II, SUP and NRP, which I spoke about earlier.

This area of work is an important part of our review as we want to look after residents who go through VERS and also those who do not go through VERS.

Third, HDB flats are sold with 99-year leases. A leasehold system ensures fairness to future generations. After 99 years, the land is returned to the state and we can recycle it to build new homes for future generations. This approach allows our current generation to enjoy a diverse range of affordable and accessible housing, while also taking care of the needs of future generations. It improves inter-generational mobility and prevents our society from being split into property owners and those who are not.

Mr Low asked how the VERS package would differ from the Selective En bloc Redevelopment Scheme (SERS) package. We had explained previously that VERS and SERS have different objectives. SERS is for selected precincts with high redevelopment potential, unlocked through compulsory acquisition. In contrast, VERS is also to spread out, space out the redevelopment of older towns over time and it will be voluntary in nature.

Flats offered VERS will have shorter remaining leases compared to the flats which were previously offered SERS, so the overall compensation for VERS would be lower compared to SERS.

Based on the questions from Mr Foo and Mr Low, I note that there is broad agreement from both sides of the House that VERS should not create a lottery effect or end up becoming a wealth-generating programme. I agree with these views from both Members.

MND is working out the details of the compensation package. Just as how the valuation of flats varies today, the compensation amount would similarly vary across different VERS sites and flats. We are also studying details such as the voting process and how to support the various demographic groups across different VERS sites with relocation options.

MND and HDB will engage Singaporeans on the framework and policy parameters when we are ready with the draft proposals to take in further views and feedback before we finalise the policy and implementation details.

Speaker, I thank the Minister for his response. I appreciate it is early days for the VERS policy and I appreciate that we are also in broad agreement about its objectives.

I think I just want to raise some supplementary questions to clarify and hope the Minister can clarify that these topics are under consideration as we build up this policy.

Firstly, as a preamble, I think we can agree that most of the residents who may be subject to VERS will probably be seniors and the elderly. A lot of them will have paid off their mortgages. They would have been expecting to live in these flats until they pass on. So, how can we assure the public that we will consider these considerations when we try and ensure that these seniors are not left with, let us say, outstanding mortgages that the compensation amount cannot cover, or they are forced to deplete their retirement savings in order to top up with cash outlay, in order to secure replacement accommodation?

And secondly, I understand the voting process is also being worked out. Perhaps the Minister can also clarify if we are thinking about doing the voting at the estate level or at the block level? How will we deal with situations where let us say three blocks in a five-block cluster have agreed to it, but two blocks are hold-outs? And also, I understand voting is part and parcel of existing programmes like upgrading. However, the consequences of being in the minority that disagrees and is brought along when the majority agrees to the VERS programme, are much heavier for those who are unwilling to participate. So, how will we make sure that the needs of the minority who disagree are met?

Mr Speaker, I would like to first thank Mr Andre Low for re-affirming that the Workers' Party and the Government are in broad agreement on the objectives of VERS, as I shared in my main reply earlier. I thank him for that.

Mr Low has also raised some very valid questions in terms of how we are going to carry out the VERS policy. These are indeed some of the key considerations that my colleagues and I are currently discussing. I agree with Mr Low that the large majority of the flat owners for the flats that are going through VERS, would likely be seniors. If we can maintain the gatekeeping for people to buy homes that can last them for life, so by the time the flats reach the time that they need to go through VERS, which will be at least about 70 years or more, we would expect that most of the residents staying in these older flats would be seniors and hopefully, they would have already paid off their mortgages.

So, that is why we feel that it is important to have that upfront gatekeeping, to ensure that when people buy homes, we keep the number of people who cannot stay in these homes till the end of their lives to be as small as possible, so that homes can be for life.

I also agree with Mr Low that the voting process needs to be looked at carefully. Because the stakes are higher, as Mr Low pointed out, compared to say, going through HIP. So, certainly I think we would have to pay careful attention to how we manage the voting process to ensure fairness to different stakeholders. Whether we do it at the estate level or at the block level, I think these are important issues that we need to look at. I do not want to jump too far ahead, so I do seek Mr Low's understanding that these are details which I think we would have to share after we have carefully considered the different options.

But if you think back on the objectives of VERS, which is to facilitate the orderly redevelopment of older towns where there are many flats that were built around the same period, I think you do need to implement some of this redevelopment, not block by block, but at least a cluster of a few blocks, so that it will be a more orderly process for the redevelopment works.

Thank you, Speaker. My view is that indeed we should not create a lottery effect with the implementation of VERS. I am also glad that the hon Member, Mr Andre Low, has also agreed that it should not be a wealth-generating tool. In fact, Mr Low has also raised important points that the Minister has agreed should be considered.

I have two further clarifications, I think they elucidate the complexity of the issue.

First, the Minister has shared that the intent of VERS is to ensure an orderly redevelopment. At the same time, because it is going to be voluntary, it is going to be subject to voting. My question is what levers do we have to ensure that there will be a certain amount of success in the voting process? If not, then, how does the orderly redevelopment take place.

My second clarification is, to ensure that VERS does not become a lottery, indeed, as the Minister said, to ensure that we have homes for life, it means that the alternatives to ensure that all our Singaporeans have homes that are good and fit for accommodation for the entire duration of the tenures, will need to be important. So, NRP, HIP II – these are important programmes.

However, the more attractive these programmes are, HIP II and NRP, the less likely you may have residents who will vote for VERS. Therein the inherent complexities of this. So, it is not an enviable task that the Ministry and the Minister has to deal with. I fully appreciate the challenges. My question is, will we look at VERS together with HIP II and NRP, weigh the considerations in the implementation?

Mr Speaker, I thank Mr Foo for his two supplementary questions. Indeed, I think this consideration between how we can help residents who go through VERS and how we can also look after residents who do not go through VERS, is an important one.

I would say that while we are firming up the policy parameters and the details of VERS, it should not stop us from being clear. Because there will be residents who do not go through VERS – either because they are not offered VERS or because they voted not to proceed with VERS collectively – that we will have to make sure that their flats and their estates can remain liveable, can remain safe and can remain vibrant.

This is something which we will have to pay careful attention to. We will share more details of HIP II when we are ready. But the concept of HIP II is, say, at the 60-year and above mark, to be able to invest in upgrading the interiors of the older flats to keep them safe and liveable and to also pay attention to looking after the needs of the residents as they age together with the flats. So, the upgrades will also have to pay attention to making the flats senior-friendly and safe.

That is something which, I think, we are quite clear. That regardless of what the package for VERS is, this objective of upgrading our older flats to keep them liveable, safe, upgrade our estates to keep our estates vibrant and liveable; that is something that we will do.

On top of that, there will be a need to think through the parameters of VERS. Because Mr Foo is correct that if we do not have anyone voting for VERS, supporting VERS, going through with VERS, then we cannot achieve the objective of orderly redevelopment.

So, that is something we will have to think through and strike a careful balance on, so that we are fair to both the existing flat owners, but also to future generations and to keep this sustainable.