2nd Reading Opening Speech by Minister Desmond Lee on the Housing & Development Act (Amendment) Bill

Oct 6, 2020

Introduction

The Bill seeks to amend the Housing and Development Act (“the Act”) in four areas.

First, it will allow approved financial institutions to use their security interest in property loans involving HDB flats as security for liquidity from the Monetary Authority of Singapore (MAS); Second, it will enable compulsory acquisition action to be taken, as a measure of last resort, against flat owners who deliberately make misleading or false statements, or misrepresent a material fact, when transferring a flat between related persons; Third, it will standardise the forum in Court to which HDB applies to (i.) deposit compensation related to compulsory acquisition, or to (ii.) deposit compensation when the flat is vested in HDB; Fourth, it will enhance HDB’s ability to manage its Board appointments.

Let me briefly run through these areas in turn.

Allow approved financial institutions to use security interests in property loans involving HDB flats as collateral for MAS’ liquidity facilities

First, let me set out the proposal to allow approved financial institutions to use their security interests in residential property loans involving HDB flats as security to access liquidity from the MAS.

Like other central banks around the world, MAS lends to banks against good collateral, if the need arises, to tide them through short-term liquidity needs or times of financial market volatility. Timely and ample liquidity provision by MAS can pre-empt and mitigate liquidity strains in banks, reducing the likelihood of spill-overs to the broader economy. 

On 28 Sep this year, MAS launched a Singapore Dollar Term facility to provide banks an additional channel to borrow SGD funds at longer tenors (and) with more forms of collateral. MAS is introducing this Facility pre-emptively, in light of current economic headwinds, to provide greater certainty of access to central bank liquidity. This will help to contain any liquidity strains before they pose a serious challenge.

MAS intends to accept the security interests in residential property loans, for both private property and public housing, as security to enhance the banks’ access to MAS’ SGD lending facilities. While banks in Singapore are well capitalised and maintain healthy liquidity buffers, greater and more certain access to MAS liquidity will strengthen their resilience to any future financial market stresses. Strong and stable banks are in a better position to support the financing needs of both individuals and businesses here in Singapore. The acceptance of security interests in residential property loans as security for central bank liquidity is an established practice among major central banks around the world.  

Clause 4 of the Bill will therefore lift current prohibitions in Section 51(1) of the Act in a limited way by allowing approved financial institutions to pledge their security interests in residential property loans involving HDB flats as security to MAS in exchange for liquidity. 

Let me assure this House that HDB flat owners will not be adversely impacted in any way by this. In particular, this arrangement will neither affect flat owners’ rights to their flats, nor result in any change to the terms and conditions of their housing loans. Over the period where the collateral is being pledged to MAS, HDB flat owners will continue to service their housing loans with the approved financial institution. 

In the highly unlikely scenario where an approved financial institution defaults on its loan from MAS, MAS will take over the residential property loans and HDB flat owners will be asked to re-direct their loan repayments to another approved financial institution appointed by MAS. The terms and conditions of their housing loan will, for all purposes and intents, remain exactly the same. 

Extend power to compulsorily acquire flats in acquisitions or for transfers of flats between related persons 

Let me move on now to the second batch of amendments in the Bill.

Currently, under the Housing & Development Act, HDB is empowered to compulsorily acquire flats if owners commit major infringements, such as unauthorised subletting. Compulsory acquisition is a decision that is not taken lightly and is generally invoked only as a last resort or for very egregious infringements. Unfortunately, such powers are necessary to allow HDB the ability to take commensurate action against the very small minority of flat owners who flout HDB’s rules, and to safeguard our limited public housing supply for those who need it. 

Today, the Act allows compulsory acquisition action to be taken against flat owners who deliberately make a misleading or false statement, or a misrepresentation of a material fact, in relation to their purchases of the flats. 

Clause 6 of the bill will extend these powers to instances where the flat or an interest in it has been acquired from a related person, or an interest in the flat has been transferred to a related person. This will enable HDB to undertake compulsory acquisition if flat owners had intentionally made misleading or false statements, or misrepresented material facts in the transfer of flat ownership.

The incidence of such cases is very low. Nevertheless, this will strengthen HDB’s position to take action as a last resort should owners prove uncooperative and refuse to regularise the ownership of the property.

Standardise judicial forum for application to deposit compensation 

The third set of amendments, in clause 5 of the Bill, are purely administrative. 

Currently, when a flat owner passes away and there is no surviving co-owner, family members who are eligible may apply to take over the ownership of the flat. However, there are situations where there is no one to take over the flat. In such cases, HDB may step in and have the flat vested in HDB instead of leaving the flat vacant for a protracted period. HDB will compensate for this vesting. However, if there is no party to receive the compensation, or if there are disputes as to which  parties should be, HDB will apply to deposit the compensation with the court where the compensation is held until there is a claim or the dispute is determined. 

Clause 5 changes the judicial forum to which HDB applies to deposit compensation related to the vesting of a flat on the demise of the owner, from the High Court to the Registrar of the Supreme Court. This is to streamline the process for HDB and the Courts. 

There will not be any material change or impact on processes, other than a change in the judicial forum hearing HDB’s applications for payment into Court. 

Enhance HDB’s ability to manage its Board appointments

Finally, and this is the fourth set of amendments, the Bill will make amendments to enhance HDB’s ability to manage its Board Appointments. 

Since HDB’s establishment in 1960, HDB has benefitted from the strategic guidance of its Board in the performance of its statutory functions, and the development of  plans and programmes. The diverse expertise of its Board members has also helped HDB to navigate challenges, and to develop as an organisation.

HDB sees the need for more diverse views, experience, and skillsets on its Board to guide its efforts in providing even better-quality homes and continuing to enhance the HDB living environment in a financially sustainable manner. These efforts will benefit from fresh insights, for example, in the areas of new technology that can help us develop greener, smarter, and more sustainable towns, and in the area of healthcare and ageing issues to guide our efforts to provide a quality living environment for an ageing population. Clause 2 of the Bill therefore increases the maximum number of Board members to 15, up from 12 currently, to allow HDB more room to bring in additional expertise and new perspectives to complement the existing Board.

The other Board-related amendments in clauses 2 and 3 are more administrative. First, they clarify that the Deputy Chairman position is a discretionary one and will be appointed by the Minister when required. Second, they will allow the Minister to temporarily appoint an acting Chairman, Deputy Chairman, or Member of the Board, in the event any of the individuals holding these positions is absent from duty or from Singapore. Third, the amendments will update the quorum for Board meetings to one-third of the total number of Board Members in office.