Little-known fact: HDB flats can be turned into dual-key homes

DUAL-KEY homes in private condominiums have been around for years, but much to the surprise of many, HDB flats can also be turned into dual-key concepts.

While this possibility gives owners of Housing and Development Board flats an interesting option to reconfigure their homes for rental, it has also left analysts wary over their potential impact on the public-housing market.

A dual-key home is one that has been divided into two units, but with a common foyer and main door. Typically, the homeowner lives in the larger unit and can rent out the smaller studio space. Such homes first hit the private-housing market in 2009, when Frasers Centrepoint Homes launched its Caspian condominium.

But in the HDB market, such units have been few and far between.

Dan Ho, senior division associate director at OrangeTee, said that he has come across fewer than 10 dual-key HDB flats in the past decade.

These studios are well-received by tenants, especially if they are in mature towns such as Bedok, where rents could range from S$1,800 to S$2,500 per month. Rent for a bedroom in a regular flat would range from S$750 to S$1,200.

For a higher rent, the tenant enjoys privacy and a space of almost 350 square feet (sq ft) with the studio option, compared with just 120 to 180 sq ft in a bedroom. “A private studio in the same location can easily set the tenant back by S$3,500 to S$4,000,” he added.

Depending on the contractor and materials used, Ho estimated that the cost of renovating a flat into a dual-key one could start at S$10,000, based on the cheapest, “industrial-style” design.

Gaining interest

Interest might be picking up for this little-known option though.

“We have received many enquiries,” said Dawn Tan, director of business development at Goodman Interior, which has reconfigured “a handful” of such HDB flats into dual-key units since 2017. “Many are surprised and excited that an HDB flat can be converted into a dual-key concept.”

She said homeowners who initially planned to downgrade to smaller HDB flats found the option attractive. With a dual-key unit, older flat owners can age in place while maintaining privacy, even as they earn passive income from their tenant.

From her experience, flat owners keen on the concept include singles in their 40s who plan to rent out part of their home, and elderly homeowners living with their adult children who want to rent the entire flat to two tenants. With both dual-key segments of the flat rented out, they can fetch a higher combined rental than if the flat was rented out as a single unit.

In response to The Business Times’ query about the rules and regulations concerning conversions of HDB flats into dual keys, HDB said: “Generally, flat owners are allowed to install partitions or partition walls within their flat, to meet their lifestyle needs and preferences.”

However, flat owners have to ensure that renovation works carried out by their appointed contractors are done in accordance with HDB’s guidelines. They must also apply for relevant approvals and permits.

In addition, those who wish to rent out their flat or bedrooms must obtain HDB’s prior approval and comply with conditions such as the minimum occupation period and the limits on the number of occupants for their flat type.

Khai Toh of design company Ktarch said that “jumbo” flats – large flats created from combining two adjacent three- or four-room flats – are the easiest to turn into dual-key units.

In Ho’s experience, however, most of the dual-key HDB flats he has encountered are smaller, three-room types which were turned into two studio units.

Potentially, the new “white flats” to be piloted in Kallang-Whampoa that come without partitions and beams could also make them suitable for dual-key designs.

Possible implications

While dual-key flats may lead to an increase in housing supply and lower HDB rents for tenants, Christine Sun, chief researcher and strategist at OrangeTee Group, said there could be other potential impacts.

For instance, owners who lease out both units in a dual-key flat are using it for investment purposes. “This may encourage homeowners to own multiple properties since HDB flat owners can already own private homes; now they can effectively lease out two HDB flats in a dual-key,” she reasoned.

It may also spur others to purchase larger flats with the intention of splitting them into two separate units. Down the road, this could lead to a rise in million-dollar flat transactions, she said. “And because many of these large flats are older, there will be a rise in the number of old flats being sold for a million dollars.”

Nicholas Mak, Mogul.sg’s chief research officer, cautioned that HDB flat owners may also have an overly optimistic view of the rental demand for studio units, leading to too many flat owners converting their flats into dual-key concepts.

He pointed to the limited demand for dual-key homes in the private housing market, where few projects offer dual keys. And those that do make up under 10 per cent of the development’s total units.

“The reason is that every square foot is valuable, and dual keys are less space-efficient because there is always a foyer where the entrance leads to two doors,” he said. “You also need two kitchens or kitchenettes, which represents another loss of efficiency.”

And then there are the utilities.

“There is only a single bill for gas, water and electricity,” he noted. “What if the tenant is an irresponsible user?”

Dual keys are also more popular in locations with strong rental demand, such as in the city and city-fringe areas near MRT stations. In contrast, most buyers of suburban condos are owner-occupiers. “And since most HDB flats are in the suburbs, this means there is even lower demand for dual-key HDB flats,” he said.

Finally, dual-key flat owners may find it challenging to sell their homes later.

“You’ll need a buyer who doesn’t require all the space in the unit and not everyone wants to give that up in order to collect rent,” said OrangeTee’s Ho. This means sellers must be prepared to pay the cost of reinstating their dual-key flats to a single unit.