New HDB classification system will prevent social stratification: Minister Desmond Lee

Following the announcement of the new classification system which differentiates Build-To-Order (BTO) projects by its locational attributes, the Ministry of National Development (MND) held a post-National Day Rally dialogue session on Sep 16. 

To be implemented from the second half of 2024, the new system will categorise flats into Standard, Plus – a new model – and Prime.

Standard flats are flats which can be found across all locations, and will continue to form the majority of housing supply. They will come with the standard subsidies and standard restrictions that are applied to all BTO flats.

Plus flats are a new category of flats, in choicer locations within each town, near transport nodes and town centres.

As for Prime flats, they are located in the choicest locations, in the city centre and surrounding towns, including the Greater Southern Waterfront. Plus and Prime flats will have more subsidies and tighter restrictions.

Attended by 70 participants, Minister for National Development Desmond Lee touched on the critical aspects of Singapore’s evolving public housing framework at the dialogue.

Here are some takeaways from the session:

A point of contention was the minimum occupation period (MOP). 

The MOP is a rule that prevents HDB flat homeowners from selling or renting out the entire flat in the first five years of ownership. During this period they are also not allowed to purchase another private property. The rule helps to prevent flipping of flats for a quick profit. 

For the new Plus Model, additional restrictions will be applied to discourage quick flipping and support genuine homebuyers – one of which is a longer MOP of 10 years.

While participants recognised the intent behind it, some felt that the duration could be daunting.

One participant highlighted that it could affect family planning, especially since most Singaporeans secure their first flat in their 30s and those 10 years are a critical period. He suggested that a way to moderate this could be to reduce the MOP but increase subsidy clawback.

Another participant opined that the MOP would “make more sense” for a five-room flat in a Mature estate.

Mr Lee acknowledged their concerns but reinforced that a tight MOP is necessary. “If it’s too loose, Singaporeans will get upset if HDB increases the subsidy clawback,” he explained, adding that the MOP also prevents abuse of subsidies and deters people from using housing as a “speculative investment”.

Another way in which the Government is protecting young, aspiring homeowners who have financial constraints is by maintaining the 30-month wait-out for individuals moving from private to public housing. 

Currently, individuals who own or recently disposed of ownership of a private property, can only apply for a flat 30 months from the date of disposal of their property.

It’s a measure MND will “likely keep for the long term” to make clear that those who had resources to go into private don’t compete with those who started off with public housing, said Mr Lee. There’s also the 15-month moratorium, applicable to individuals looking to buy an unsubsidised flat. It’s a temporary cooling measure which enforces that private home owners have to wait 15 months after selling their homes before buying a resale flat.

By ensuring flats are priced “within reach for more Singaporeans”, MND is leaning away from stratification with the new framework. This move aligns with the public housing model’s key aim of maintaining a diverse and inclusive social mix, ensuring the individuals from varying backgrounds and socio-economic statuses have equal opportunities to live in the same neighbourhoods. 

Under the new classification system, singles can apply for two-room Flexi BTO flats in all locations, across all three projects. Furthermore, they can purchase Standard or Plus flats of any size in the resale market, with the exception of three-generation flats. Previously, they could only apply for two-room Flexi BTO flats in Non-Mature Estates. 

In response to concerns regarding the income ceiling of $14,000, Mr Lee responded that Prime and Plus flats entering the resale market will still have an income ceiling as it’s a “deliberate move” so singles who are modest in income can secure flats in these choicier locations.

Nonetheless, he did affirm that as the country develops, the ministry will continue to review the income ceiling to ensure it remains relevant and fair. Based on most recent statistics, $14,000 covers eight in 10 Singaporean households, shared Mr Lee.

Another point of discussion centred on the clawback of grants for Prime and Plus flats and its potential impact on resale prices. Mr Lee explained that adjusting subsidies is essential to maintain stable prices every BTO launch, allowing for fair allocation of flats across various socio-economic strata. The six percent clawback when the first owner sells a flat is intended to prevent excessive windfall gains and promote affordability.

During the dialogue, Mr Lee also stressed the importance of Singaporeans’ understanding regarding the challenges faced by HDB in delivering quality housing. The issue of defects was raised during the session, along with questions about the impact of geopolitical issues on construction timelines.

Replying to the participant’s concern, Mr Lee shared that productivity in construction had faced challenges due to public health constraints during the global pandemic. HDB is now trying its best to catch up. However, as the newer flats have more complex designs, the construction has been lengthened. Such premium features include dry walls and beamless structures which allow for more flexibility when it comes to interior design. 

He also assured participants that there’s a Building Service Centre in every BTO project. While defects are inevitable, HDB makes efforts to inspect and rectify where possible. He emphasised the need for Singaporeans to realise the scale of HDB’s operations, with 18 projects across the island and a current construction volume of 100,000 flats.