MAIN AND DEVELOPMENT ESTIMATES OF SINGAPORE FOR THE FINANCIAL YEAR - 1ST APRIL, 1991 TO 31ST MARCH, 1992
Sir, before we adjourned yesterday there were three main topics that were raised by Members. The first one was on the tendering system for shops. The second one had to do with the upgrading of HDB flats, and the third one, the problems arising from the new booking system. Since the booking system has given rise to quite a lot of wrong impressions and complaints from the public, I would like to give a reply to this last item first. Sir, when we started on the booking system in July 1989, we had 45,000 applicants on the waiting list and these had to be cleared first. While we were clearing these applicants on the waiting list, the HDB was of course receiving new applications. The booking system has now reached a stage where we have cleared the 45,000 applicants that were on the waiting list in July 1989. Many of the problems that were mentioned by Mr Chng Hee Kok were problems relating to the transitional phase of the booking system. The experience during this transitional phase has shown that the booking system has been successful in one very important respect in that it has identified real demand from those who require flats and has filtered out those who are not in pressing need for housing. Of the initial 45,000 applicants, 11,800 or 26% withdrew their applications when the booking system was introduced. A further 10,200 or 23% switched to the walk-in selection scheme or bought HDB resale flats on the open market. Only 23,000 applicants or 51% of the total 45,000 eventually made booking for HDB flats. The acceptance rate for those allocated flats has also improved from 60% under the previous waiting list system to between 80-90% under the booking system. So the booking system has been very, very effective in weeding out those who are not in pressing need for housing. During these 18 months of transitional phase from July 1989, HDB received a total of almost 50,000 fresh applications. Some of these were repeat applications. As a result of the high withdrawal rate amongst applicants on the old waiting list, HDB was able to offer about 10,400 flats during the transitional phase to some of the fresh applicants. These successful applicants have already been invited to book flats. As the new applicants were only balloted for flats not taken up by applicants on the previous waiting list, their chances of booking a flat were correspondingly lower. We had to give priority to those who were on the waiting list in July 1989. However, if we had continued with the old waiting list system, these fresh applicants would probably not have been allocated any flat yet, because they would have come after the 45,000 that were already on the waiting list in July 1989 and they would have been delayed by choosy applicants registered ahead of them who are not in urgent need of a flat. The problem that Mr Chng brought up, and which has also been expressed in letters to the press of applicants having to wait for a long time before being informed of the outcome of their application, was really due to this transitional phase and was also only confined to those who applied for flats in a few new towns. As I mentioned earlier, during the transitional phase, priority had to be accorded to clearing applicants on the old waiting list. The new applicants, ie, those who applied after July 1989, were processed for each new town in turn. The length of time that new applicants had to wait before being informed of the outcome of their applications depended on the schedule for the various new towns. For example, those who submitted applications during the transitional phase for Bishan and Geylang New Town were informed by May 1990 of the outcome. On the other hand, those who applied for flats in Chua Chu Kang, Pasir Ris, Jurong West and Tampines were processed only in January 1991, and applicants were informed of the outcome in February. This was because the flats were completed later and the old applicants had to be cleared first. I would like to emphasize again that this was a transitional problem and that this would not recur. In the first quarter of 1991, we have entered the mature phase of the booking system. In this mature phase, HDB will announce, at the start of each quarter, the building programme for that quarter, and invite applications for these flats. Applications submitted will be balloted by the second month of that quarter, and successful applicants will be invited to book their flats by the third month. Hence, applicants will only need to wait two months before being informed of the outcome of their application. Fears were also expressed that many people may be balloted a number of times before they would succeed or maybe if a person is a real Jonah he would never get a flat for a long long time. Because of this, some Members have suggested that HDB should keep track of the number of times an applicant has been unsuccessful in booking exercises and accord some priority to those who have been unsuccessful a number of times. This I think would not be very prudent. Those who are not in urgent need would then be tempted to apply for a flat early so as to obtain some sort of priority to book a flat at a later date when they are in real need for housing. The number of applications for flats might then be grossly inflated and HDB will find it difficult to assess the genuine demand and we will be back with the problems that we had under the old waiting list system. The preferred solution and, in fact, the solution that we intend to adopt, is to build more flats, increase the supply of flats. One of the key advantages of the booking system is that it enables HDB to assess and respond quickly to changes in demand levels. Applications received during the transitional phase indicated a high demand for flats in Jurong West, Pasir Ris, Chua Chu Kang and Tampines. HDB has released 4,000 flats in these four estates for booking in the first quarter of 1991. Unfortunately, this is well below the number of applications. But in the next three quarters, from April 1991 to December 1991, HDB will increase the supply of flats, from the original programme of about 10,600 to more than 18,000. We are accelerating the building programme. In particular, for the next quarter from April to June, some 7,000 units will be offered for booking. This is nearly double the amount that we had actually planned for the second quarter. HDB will closely monitor demand patterns and adjust supply accordingly. The majority of applicants should be able to move into their flats within three years of first application. If the problem persists of some people applying many times and not being successful, we can at that stage think of how we can resolve it. But for the moment, I would like to leave the system as it is and try and solve the problem of applicants not being successful in many ballots by increasing the supply as much as possible. The other problem that was raised was the change in the applicant's income levels during the period of waiting or when he is unsuccessful in one ballot and then has to apply again. The Member mentioned that under the old system once a person has applied, his income level is fixed and he can wait for five years but any increase in income would not affect his application. The present ceiling on household income for the purchase of HDB flats is $5,000 per month for nuclear families and $8,000 per month for extended families. This was set in 1989. The Labour Force Survey shows that 91% of the households in Singapore have a total income of less than $5,000 and will thus be eligible for HDB flats. Only 4% of the households have total incomes in the range of $4,000 to $5,000 and these are the people who are likely to exceed the $5,000 during any waiting period. So the number of applicants likely to breach the income ceiling between successive booking exercises is relatively small. We will be reviewing the income ceiling periodically and we will monitor the situation and, if necessary, the income ceiling will be revised. Nevertheless, because of the problems arising from the transitional stage and for the immediate future, HDB has implemented a number of measures to help applicants whose income is close to the ceiling. First of all, HDB exercises flexibility in accepting applications whose household incomes exceed the ceiling marginally. In other words, we do not apply the $5,000 ceiling very strictly. Marginal increases of income beyond $5,000, will still be accepted. With effect from the second quarter of 1991, an applicant who is unsuccessful in a particular booking exercise will be allowed to re-apply for subsequent booking exercises, based on his income assessed at the time of first application, until he is successful in the ballot for a flat. So we are in fact "freezing" his income. An applicant who is successful in a ballot and is invited to book a flat, but who chooses not to select a flat for whatever reason, will then have to re-apply, and his income will not be frozen any more. His income will be re-assessed as though it was his first application. This is the best way to ensure that demand for flats is not inflated by those who are not in any real need for housing. This arrangement, which I have outlined of "freezing" household incomes for unsuccessful applicants, will only apply to applications for new towns where land is available for flat development. For this year's building programme, this would comprise developments in Pasir Ris, Tampines, Chua Chu Kang, Woodlands and Jurong West New Towns. The arrangement will not apply to applications for flats in isolated re-development projects in older estates. Members will remember that we are demolishing one-room flats for re-development. There will be about 2,000 flats in development areas in the course of the year. For those who apply for this type of flats, we cannot freeze and hold their income because the application for this type of flats is very high, many times the number that we can build. But for those who apply for the new towns that I have mentioned, we will "freeze" the income. Again, in order to overcome some of the transitional problems, we have implemented a number of measures for the convenience of applicants who are unsuccessful in the ballot. HDB has provided all unsuccessful applicants with an option form with a list of flats available for booking in various new towns in the next quarter's booking exercise. If these applicants wish to re-apply, they need not call personally at the HDB office to submit a fresh application and they need not submit $10 administrative fee, which Mr Chng also mentioned was not fair. They only need to indicate their choice of new town and flat type on the option forms and return them by post to HDB before the stipulated date and they will be considered as new applications. We have instituted these measures to overcome the problems in the transitional phase. And I hope that they will meet the problems that some of the applicants have faced. Now I come to the other questions raised. Dr Koh Lip Lin raised the question of tenders for shops. Sir, the rent and purchase price of HDB shops are determined by market forces through the open competitive tender system. HDB does not try to maximize the rental or the sale price by holding back supply. The release of shops is tied to the completion of flats. Dr Koh Lip Lin mentioned in particular shops in Yishun that were completed and not sold, and he was told that they were not released because of some conversion and he did not understand why new shops were being converted. The answer is very simple. The shops were not being converted. But the flats above the shops, which were 3-room flats, were being converted. These shops were on the ground floor of blocks, which were 3-room flats, and because of the change in demand and since there was no demand for 3-room flats, we have to convert these 3-room flats. During the period of conversion, in order to avoid all the inconvenience of conversion and carrying on trade at the same time, HDB did not rent out these shops. Otherwise, shops are rented out as soon as the flats are completed. He also mentioned about lack of electricity supply in these shops. HDB of course cannot anticipate the electricity demand of every successful tenant or purchaser of shop. They try to work on the average. According to the figures that I have from HDB, 90% of the requests for additional supply can be met from the spare capacity already available which HDB has laid to these shops. Another 6% of cases involved modification of works which can be completed within six weeks. But there is a small percentage of about 3% which involves the upgrading of the PUB station before the supply can be met, and this could take as long as three to four months. A very small per cent of 1% might require major changes to the PUB sub-station and this can take as long as nine to 18 months. I think it will be very wasteful for HDB to lay supply on the basis that demand will be the type of demand required by that 1%. So 90% has been satisfied by HDB's projections of demand for electricity, and the others will take a slightly longer time. As regards the tender system, I am afraid we have not been able to come up with a system that is better than the tender system in determining what is the market price. If Members have some other better system which can be applied impartially and objectively and still reflect market demand, I will be more than glad to hear of such proposals. But we do recognise that some people may bid very high rentals because they are not quite familiar with the demands in the trade. To minimize the chances of unrealistically high rentals or purchase prices, HDB has in fact implemented various safeguards such as allowing tenderers to make two tender bids. Under the two tender bids system, if both bids submitted by one tenderer are higher than any other bid, he will be awarded the tender at the lower of his two bids. In other words, if somebody bids for $10,000 and $6,000, and the next highest bid is $4,000, then that person will be offered that shop at $6,000, and not at $10,000. So every tenderer is allowed, whether for rental or purchase, to make two bids. Secondly, we also have a limit on the increase of rent that HDB imposes on expiry of tenancy. The tenancy period is left entirely to the tenant. It can be one, two or three years. And if a tenant chooses to sign a one-year tenancy agreement, then the revision of rent at the end of the one-year tenancy agreement would not exceed 10%. If he signs a two-year tenancy agreement, it will not exceed 20%. And if he signs a three-year tenancy agreement, it will not exceed 30%. There is a limit on the increase, and this limit will apply for a period of two tenancy agreements. So if somebody signs a three-year tenancy agreement, then there will be limits on the increase of rentals when the tenancy agreement expires for a total of six years. We leave it entirely to the tenant to read the market and decide what kind of tenancy period he wants to enter into. I think these are the only kinds of safeguards that we can introduce at the present moment. Just to mention an example. In spite of the increases, the HDB's rentals do not come anywhere near what the market is prepared to pay for current new shops. In the case of Yishun New Town, the revised rent paid by shop tenants averages about $29 per square metre per month. This is after the revision which could be a 10%, 20% or 30% increase depending on the type of tenancy. This is well below the assessed market rental based on the latest tender in Yishun which is $49 per square metre per month. So we are talking of a very big difference. And because we let out these tenancies earlier, these tenants continue to enjoy relatively low rentals. Now I come to the problems of the upgrading exercise that Mr Chin Harn Tong raised. He asked for the reasons for the delay. Yes, we did have dialogue sessions late last year, and we thought that the feedback that we gathered would enable us to come up with the final plans by February this year. But the feedback did show quite a lot of things that we had not anticipated. And as a result of that, we have to make adjustments to the upgrading package. These changes to the package would increase the average cost per flat from our projected $30,000 to $38,000. We are in the course of finalizing the package and when we have got the package ready and the latest estimates of costs, we will then call the Chairman and members of the Working Committee and inform them of the outcome. We will also of course inform grassroots leaders. Mr Chin also mentioned about some blocks which are very close to each other and in the extensions of balconies or bathrooms this will cause the flats to be even closer to each other. The vast majority of HDB flats have enough space between blocks for us to do the kind of changes we are thinking of, which is, additional bathrooms and balconies. But there are some flats in the older neighbourhoods where the present space between blocks is very little. In such cases, the kind of changes or upgrading that we can introduce will have to be quite different. We probably cannot introduce balconies or bathrooms. So we have to make some changes or adopt a slightly different approach for flats in such older blocks. Dr Low Seow Chay raised the problem of resettlement. All Members are aware that we do give resettlement priority, and HDB reserves 12% of new developments for resettlement cases. Problems arise when resettlement cases demand flats in particular and very popular areas, and we are not able to meet that. As a whole, we are able to meet the demand for resettlement cases. In fact, as of January 1991, 85% of resettlement cases were already allocated flats. Those who insist on flats in very popular areas and where we require their land immediately for public purpose, we have no other option but to move them into rental flats temporarily until the flats in the new town are available. But for the vast majority, we are able to meet the demand.