11/17/2006

Leong Sze Hian, what is your problem?

Leong Sze Hian, what is your problem? I refer to the article 'HDB rents to be phased in over two tenancy renewals' (ST, Nov 13). It states that 'existing tenants will be given three months' notice of their new rent before their current tenancy is up'. According to HDB's press release 'More help for those who need rental flats', from 1st March 2007, one-room tenants who rented HDB flats before 1st October 2003, with household income from $801 to $1,500 will pay 30 per cent of market rent, instead of the current 10 per cent, at the second renewal. Tenancy renewals are on a two-year term tenancy. This is a three-fold increase, from the current $26 - $33 to about $78 - $99. For two-room tenants who started renting after 1st October 2003, with household income from $1,501 to $2,000, their rental will increase from the current 30 per cent of market rent to 50 per cent, from the first renewal. This is an increase of 67 per cent, from $123-$165 to $205- $276. From 13th November 2006, new $800 and below household tenants who have previously sold one subsidised flat in the open market (i.e. second-time households), will be charged 30 per cent of market rent, instead of 10 per cent, an increase of 200 per cent. For $801-$1,500 households, they will pay 30 per cent and 50 per cent of market rent for first-timers and second-timers respectively. Obviously Leong Sze Hian did not read the reasons given by Mah Bow Tan to adjust the rentals for these flats. Two reasons actually. The first is that the tenant of subsidised rental flats must not be allowed to abuse the system. And when their salary increases, they should pay more. Secondly, by making them to pay more, it is for their own good. This is a way to nudge them into becoming flat owners instead if renting flats. Now the problem is that this increase plus the increase in GST will be going to be a big hit to these lower income earners.

2 comments:

gecko said...

"Two reasons actually. The first is that the tenant of subsidised rental flats must not be allowed to abuse the system. And when their salary increases, they should pay more. Secondly, by making them to pay more, it is for their own good. This is a way to nudge them into becoming flat owners instead if renting flats."

Hi Redbean,

I will leapfrog this argument a little and ignore what Leong Sze Hian did or what Mah Bow Tan said.

Eventually, the government will be more keen to rent out flats instead of selling flats.

Why?

Think of how the government moved from the COE to ERP method of controlling the car population which incidentally resulted in a paradigm shift in revenue collection for their coffers. The ERP method allowed far more revenue to be collected than the COE method.

Already as it is, HDB has difficulty in getting rid of unsold flats. The demographics of our population works against the favour of HDB's mission. What better way to generate more revenue for government coffers through HDB than rental? (Of course, I refer to rental as rental of shorter timespans than the technical 99-yr and <99-yr lease of sold HDB flats)

Think about it and tell me what is your opinion.

redbean said...

hi gecko,

looking at the trend and the changes in rental flat policy, you may be preempting what the govt is planning to do.

you are right to say that the primary objective or motivation is to raise revenue. the consideration is which method is more effective.

for renting flats to be successful, they have first to circumvent the use of cpf to pay rents. and the other drawback is that the occupiers have no regard to the conditions of the flats and there is a cost to upkeep them.

further, for the ah kongs and ah mas, what is the use of a lease property when they only need that last few years to live. even 30 lease can be 30 years too long.

the sale of 30 year lease flats to the retirees is a funny concept.

maybe the foreign talent market is what they are aiming at if not already in the works.