99-year leases for HDB flats most practical, fair for future generations, says PM Lee

SINGAPORE - A lease of 99 years for HDB flats is practical, as it allows people to live in their flats until old age or even death, while making it possible as well for the Government to continually rejuvenate public housing for future generations.

Prime Minister Lee Hsien Loong made this point on Sunday (Aug 19) in the English portion of his National Day Rally speech as he addressed an issue that has been in the spotlight in the past year.

One fundamental reason HDB leases are 99 years is that "we need to be fair to future generations", he said.

A 99-year lease means a flat can be handed down only to one or two more generations before it must be returned to the state.

But if flats were to be sold as a freehold property, the Government would eventually run out of land to build new flats for future generations, Mr Lee said.

There would be other long-term repercussions as well.

Owners would pass down their flats to some of their descendants, many generations into the future, he said.

Those not lucky enough to inherit a property would get nothing.

"Our society would split into property owners and those who cannot afford a property, and that would be most unequal, and socially divisive," Mr Lee said.

That is why 99-year leases are not just for HDB flats, but also for private housing. He pointed out that land for private housing is sold only on 99-year lease.

On a more practical note, buildings tend to look worn even before they reach 50 years.

"After a century, I am sure the mechanical and electrical systems will be obsolete and even if we could fix all that, the recurrent maintenance costs would be very high."

So it is better to let the leases expire, take the blocks back, demolish them and rebuild afresh, he said.

"We may keep a few blocks which have historical or heritage value, or which will remind people what the old days were like, but these should be the exception," he added.

"For the others, we can rebuild newer, better, more liveable flats, blocks and townships, more suited to what our grandchildren and great-grandchildren will want to live in."

Further, 99 years is a very long time, he said.

If a couple buy a flat in their early 30s, they will be at least 130 years old at the end of the lease.

"If you have children, they will also be very old, almost as old as the flat itself. And if you have grandchildren, your grandchildren will already be grandparents," Mr Lee noted.

And when a couple retire after having lived in the flat for 30 or 40 years, it would still have more than 60 years of lease left, he added.

"That is long enough for it to retain substantial value, and be a good retirement nest egg."

The home owners could then choose to continue living in the flat, rent out a room for income if needed, and one day bequeath the flat to their children.

Alternatively, they could sell the flat and move to a smaller unit, or opt for the Lease Buyback Scheme.

The scheme allows retired home owners to return the remaining lease on their flat to HDB, then use the money they receive to fund their senior years.

The 99-year lease is also long, even if someone had bought a resale flat, Mr Lee said.

After all, Singapore's oldest flats are at most 52 years old, with a remaining 47 years on their lease.

HDB estimates that fewer than 2 per cent of households, including those who bought resale flats, will outlive their leases, he said.

Of the total stock of about one million HDB flats, 70,000, or 7 per cent, are more than 40 years old. About 280,000 units are between 30 and 40 years old.

Mr Lee also said that even if a home owner had to return his or her flat at the end of its lease, the Government will help them get another flat to live in.

This might be a Built-to-Order flat from HDB with a fresh 99-year lease, if the person is eligible, a resale flat on a shorter and cheaper lease, or a two-room flexi flat.

This is a flat offered under the two-room Flexi Scheme, which allows elderly citizens to choose the length of lease on their two-room flat, based on their age, needs and preferences.

Adapted from The Straits Times August 19 2018