Keep Vers for HDB flats simple and fair

[SINGAPORE] There is ample time to develop the framework for the voluntary early redevelopment scheme (Vers), as the scheme – which has yet to be rolled out – will be implemented only from the first half of the 2030s.  

Nonetheless, Minister for National Development Chee Hong Tat said a priority during this term of government is to develop the framework for Vers. 

Under Vers, owners of Housing & Development Board (HDB) flats aged 70 years and older will vote on whether the government should buy back their homes before their leases run out. This helps address lease decay – the erosion of a flat’s value as the end of its 99-year lease approaches.

Also, as HDB flats and estates age, Vers will help to facilitate orderly redevelopment and rejuvenation of HDB towns and estates.

Expect extensive public consultation to go into developing Vers’ framework as the scheme, when rolled out, could affect many households with differing needs. Vers is a complex undertaking, involving detailed long-term town planning. 

Might Vers face stiff resistance if some flat owners expect to be richly compensated under the scheme? 

Chee said that unlike the selective en bloc redevelopment scheme (Sers), which involves precincts with high redevelopment potential and is highly selective, there is less financial upside with Vers since the flats are older. 

Under the latest Sers project announced in 2022, owners of HDB flats in Ang Mo Kio Avenue 3, which were about 43 years old then, received compensation of up to S$450,000. Affected owners received a grant of S$30,000, a removal allowance of S$10,000 to defray the relocation cost, and payment of stamp and legal fees for buying a replacement flat equivalent in value to their Sers flat.  

In addition, the said owners were offered new flats at Ang Mo Kio Drive at subsidised prices frozen at the time of the Sers announcement, as well as other rehousing options.

On reflection, I think Vers should be simple so owners of ageing HDB flats find it easy to understand and fair to those who are offered Vers as well as the general public, given the government is the buyer of the flats under Vers.

Support threshold

One, consider setting the support level for Vers at 80 per cent of flat owners in particular precincts. Currently, a collective sale of a private property development requires the support of at least 80 per cent of owners by share value and strata area for developments that are 10 years or older.

An 80 per cent threshold represents a sufficiently high hurdle that recognises the rights of the various owners, yet one that is not prohibitively high such that a small minority can thwart the wishes of a large majority of owners. 

Also, it can be fair that each owner has an equal say regardless of the size or value of his or her home when voting on Vers.

Market valuation

Two, under Vers, homeowners can be compensated guided by market valuation. 

For example, one can ascertain the value of a 20-year leasehold flat by referencing the market value of a comparable 99-year leasehold flat nearby with adjustments made for land tenure, age of building and so forth.

According to a table showing leasehold values as a percentage of freehold value that the Singapore Land Authority uses, a 20-year leasehold property and a 99-year leasehold property are worth 48 per cent and 96 per cent of the value of a freehold property, respectively. In short, a 20-year land lease is worth half the value of a 99-year land lease.

Voting opportunities

Three, consider allowing owners up to two opportunities to vote on Vers.

When a particular group of flats is between 70 and 74 years old, offer the owners a chance to vote on Vers. Should owners not give Vers the go-ahead then, let owners vote again on Vers when the said flats are, say, between 85 and 89 years old.

Giving owners of ageing HDB flats some certainty around the timing of when Vers is offered to them can help in their planning. Also, allowing owners up to two chances to vote for Vers seems fair. After all, having close to 10 years left on a land lease versus nearly 30 years left can make a big difference as to whether some owners opt to support Vers.

Buying a replacement home

Four, restrict any additional help that owners receive under Vers largely to a removal allowance and payment of stamp and legal fees for the purchase of another HDB unit. 

Sure, there may be elderly homeowners who did not support Vers but are forced to sell their homes under the scheme. Still, eligible seniors can use existing schemes to buy affordably priced HDB flats with shorter land leases of 15 to 35 years or 15 to 45 years, provided the chosen lease lasts until all buyers and their spouses are at least age 95.

Understandably too, a Vers-affected homeowner may seek a replacement home nearby. While prioritising said owners to achieve such aspirations can be helpful, this might add undue complexity.

With private housing developments that have undergone successful collective sales, affected owners are largely left to fend for themselves in securing replacement homes.

Provided HDB flat owners are fairly compensated under Vers and there continues to be a choice of affordable public housing options islandwide in the primary and secondary markets, Vers-affected households should generally be able to find suitable replacement homes fairly easily.

As it is, HDB resale prices can vary widely based on unit type, location and remaining land lease tenure among other factors.

Of course, finding replacement housing can be particularly tough for Vers-affected elderly households with limited financial means. Possibly, much more work will need to be done to address rehousing such households.

The state sells leasehold land for various uses in the Republic. Selling such land allows for the land to return to the state when leases expire so there is land available to satisfy future development and public needs.

Any private or HDB homeowner should expect that the value of a home with an initial 99-year land lease will run down to zero when it expires.

With Vers, owners of ageing HDB flats who may find difficulty selling their units in the resale market can have an exit route offered by the government. At the same time, Vers will not be implemented unless enough owners support it.

Ultimately, while many details of Vers are still being worked out, owners of ageing HDB homes should welcome the rolling out of such a scheme, but be realistic on the compensation package and help given to find a replacement home. After all, the government needs to be prudent in using resources including funding Vers.