larger Housing and Development Board (HDB) flats and private residential properties will be allowed to house eight unrelated persons, up from the current cap of six.

The rental occupancy cap will be relaxed temporarily between Jan 22, 2024, and Dec 31, 2026, to better meet rental demand, said HDB and the Urban Redevelopment Authority (URA) on Wednesday (Dec 20).

It will apply to four-room and larger HDB flats, living quarters of HDB commercial properties where the living space is at least equivalent to a four-room flat, and private residential properties of at least 90 square metres.

HDB and URA noted that any extension of the relaxed occupancy cap beyond 2026 will be subject to review, based on the open market situation then.

Minister for National Development Desmond Lee said in a Facebook post that the sharp increase in residential rents was largely led by strong demand amid Covid-19 construction delays.

He noted that the government “(anticipates) the need to maintain a healthy rental supply to support those looking to rent”.

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“To mitigate this, we ramped up housing supply with close to 100,000 homes expected to be completed by 2025,” he said.

He added that the increased supply of new homes will allow Singaporeans renting while awaiting project completions to vacate their rental units sooner, further freeing up rental supply.

“This temporary measure will only apply to larger properties, which can accommodate more occupants with minimal impact on those around them, in order to maintain a conducive living environment for the larger community.

“We will monitor the situation closely and take action against any infringements or serious disamenities, including revoking the homeowner’s rental approval,” Lee added.

Residential property owners who currently house up to six unrelated persons will need to apply – to HDB for owners of HDB flats, or to URA for owners of private residential properties – to include additional occupants.

Private property owners can do so by registering their properties through URA’s e-services with a S$20 administrative fee.

“Upon successful registration, the owner will be informed that they can use the residential property to accommodate up to eight unrelated persons, each subject to a minimum stay duration of three consecutive months,” said the agencies.

The current rule for HDB flat owners, as well as HDB commercial property owners and tenants, to get HDB’s approval before the tenancy commencement date, still applies.

“Applications to rent out HDB flats or bedrooms may be submitted online via HDB’s e-services,” said the board, noting that an administrative fee is payable with each application, at S$10 per bedroom or S$20 per whole flat rented out.

“HDB commercial property owners and tenants who wish to rent out their living quarters can apply via the GoBusiness Licensing Portal. The administrative fee is S$100 per application,” it added.

Wong Siew Ying, head of research and content at PropNex, agreed that the temporary relaxation of the occupancy cap, on top of the progressive completion of private homes, should help to foster “the healthy leasing demand in the near term”.

She also expects that long-stay serviced apartments, once ready, will further cater to those in need of transitional housing.

While analysts agreed that budget-conscious tenants can now pay less by sharing with more roommates, they had mixed views on the measure’s impact on the rental market.

OrangeTee & Tie noted that the new measure may affect more than 60 per cent of the HDB rental market, and is expected to “benefit lower-income groups, students, blue-collar foreign workers, some Singaporeans and big families”.

The real estate agency also noted that the change may bring some challenges to landlords owning smaller homes. “The overall rental volume may drop slightly due to fewer units being leased, as bigger units can now accommodate more people.”

Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, said: “On the upside, the resale prices of bigger condos and HDB flats may climb higher, especially older units,” noting the potentially higher rental demand for the bigger units.

Meanwhile, Huttons expects rents to face downward pressure in the short term while rental supply catches up. But it highlighted that the impact on rents should not be significant, as it is a short-term fix to stabilise the market situation.

On the other hand, Lee Nai Jia, head of real estate intelligence of data and software solutions at PropertyGuru, said that the impact on market is “indeterminate” as the listing supply may rise correspondingly while enhanced affordability increases demand.

“Asking rents for the whole unit may rise in the short term, even though each individual renter pays less. That said, we expect the impact to be limited to some segments of market,” said Lee.

Analysts also had differing opinions on how the new ruling would affect other stakeholders besides tenants.

Eugene Lim, key executive officer of ERA Singapore, noted that companies employing many foreign workers will benefit from the measure as “they will require fewer rental units to house their staff”.

But Savills Singapore’s executive director of research and consultancy Alan Cheong highlighted that the measure will affect the HDB market more than the private segment, due to stronger demand for HDB rentals from S Pass holders. “The private market is less impacted because even if rents fall by 20 per cent, the rents are still beyond reach of these S Pass holders,” he said.

“However, the one common point arising from this is that landlords who increase their tenancy headcount will end up paying higher property taxes.”

Nicholas Mak, chief research officer of property search portal Mogul.sg, highlighted that while residential landlords could benefit by subdividing their rental unit to squeeze in more tenants, relevant risks such as fire hazards and hygiene issues might arise.

“The authorities must conduct surprise inspections of such subdivided units in both private and HDB properties,” he added.