Speech by Minister Desmond Lee at the PA-MND Kopi Talk on New Flat Classification Framework

Nov 6, 2024

Good evening and thank you for joining us.

This is actually the first in our latest series of outreach sessions organised by my colleagues at MND and HDB, together with our partners from the People’s Association. Through these sessions, we want to gather views and address questions that you might have about public housing. Public housing is not just about brick and mortar or about layout and estate – it is about memories, families, growing up and growing old, and keeping Singapore strong.

Some of you may recall, we held a similar series of community engagements last year on public housing affordability and accessibility. So, what about this year? This year, we are doing another round of outreach, like this one, to share our thinking behind some of the recent major enhancements to our public housing system, including our new flat classification framework – Standard, Plus, and Prime – and to address the questions that you may have. As it was just launched recently, we thought to go around to explain to people, reinforce the rationale, and get the sounding from the community.

Affordability and Accessibility

In Singapore, home ownership is not just an infrastructure development programme, it is a major social policy and a fundamental part of the Singapore story. Not just a story of the Singapore as a nation, but very much the heart of many of our own families’ story. In fact, we commemorate 60 years of our Home Ownership for the People (HOPE) programme, this year.

Today, around 8 in 10 Singaporeans live in HDB flats, and our homeownership rate is one of the highest in the world. It is quite remarkable, considering that we are a small island city state.

We have enabled this by providing significant subsidies for Singaporeans buying HDB flats. At the prevailing income ceiling, we cover more than 8 in 10 of Singaporean households.

Some of you may be concerned about rising housing prices in the HDB resale market. Headlines about million-dollar flats or HDB flats with very high resale prices have attracted a lot of public attention recently. Some of you may have the impression that every resale flat is going at such prices, and wonder if your children will be able to afford a home in future – it is very understandable.

The reality is that million-dollar flats make up a small minority of all resale transactions. What are these flats? These are typically larger flats such as Maisonettes (2 storeys), Executive Apartments and jumbo flats (two units combined to become one flat), or 5-room units in very good locations, on very high floors or with very long remaining leases, some of them also have very good amenities – very central, near MRT. For 4-room and smaller flats, the most expensive ones are predominantly located in HDB estates that are in, or very near to the city centre. Often, buyers of such flats are prepared to pay significantly above market value to secure them, because of their attractive attributes.

In the coming years, we are likely to see more of such flats enter the resale market, because we had built new flats over the past few years in areas such as Queenstown Dawson, Toa Payoh Bidadari, and parts of Kallang/Whampoa among others. Correspondingly, we will continue to see a small proportion of high-priced transactions for flats with very good attributes in attractive locations.

While this may be the case, our priority is to ensure that there is a diverse range of housing options across different locations and price points, for Singaporeans of different income levels. And we do this not just through the resale market and grants, but also through our BTO exercises. This is in order to cater to a wide spectrum of home buyers at different life stages, with different budgets and needs.

We will also continue to ensure that HDB flats remain affordable – my colleague will elaborate on this later. But as an illustration, last year, over 8 in 10 first timers who bought BTO or resale flats could service the mortgage payments on their HDB loans using their CPF contributions, with little or no cash outlay.

Let me now set out the thinking behind our latest move, which is a major move, to classify new flats as Standard flats, Plus flats and Prime flats. If you think about it, in successful cities around the world, especially cosmopolitan cities, vibrant cities, homes that are in more attractive locations naturally command higher value because they are highly sought after. Over time, some of these estates gradually become gentrified, accessible only to the wealthier segments of the population. And you see that in cities – those who cannot afford living in the city get pushed out further and further into the suburbs.

Singapore is an island city state, but no way are we immune from such forces. Without intervention, there is a real risk that housing prices in different parts of Singapore will diverge significantly, which can in turn cause greater wealth inequality and social segregation, where people of different income levels live in different parts of Singapore. This is not the society that we really want to become and we have seen other cities become just like that.

That is why we have put in place measures to avoid such outcomes and try to ensure that public housing remains accessible to as wide and broad a segment of Singaporeans as possible. In other countries, public housing caters to maybe the bottom 5%, and the majority live in private housing –  they buy, rent, or live with their family. But in Singapore, 8 out of 10 Singapore households live in public housing – so it is a very different paradigm.

We price new HDB BTO flats at a significant discount below their market value, so that Singaporeans at different income levels can afford to own a home. On top of that, we provide housing grants to give more support to those in the lower- as well as the middle-income first-time buyers to own a home.

But these measures on their own are not enough. This is because we give broadly the same market discount for flats of the same type across the island, in the same launch, to be fair. As a result, what you will see is that flats that are launched in choicer locations, including more central locations, would still cost more than those in more standard areas of Singapore. That is the first challenge that we have to tackle, especially if we build in central and choicier locations.

The second challenge is that, as we build more flats in choicer locations, we risk BTO exercises becoming like a lottery exercise. So, if you try to ballot for flats in these good locations, with very high demand, and if you get it, it is like winning the lottery. Those who successfully ballot for these flats may enjoy a significant windfall gain upon resale as a result. Singaporeans may say, how fair is that? And this is not fair to those who miss out.

To manage this, some may say, just let it be – if you can afford the flats in attractive locations, good for you. If it is lottery, so be it – it is your luck. Some may say it is not fair, so do not build in central locations at all, build HDB flats further out, and leave these choicer locations to the private sector to build. I think this will worsen the problem.

So, we need to find a better way out and we do this by fundamentally rethinking our public housing framework as Singaporeans’ income levels change and as our society and city evolve.

New Flat Classification Framework

That is why we launched the new flat classification framework with three categories – Standard, which is the majority, Plus, in choicer locations and Prime, in the choiciest locations. This new framework was implemented last month.

Let me outline some of the key characteristics of the new framework – my colleagues from MND and HDB will elaborate more later.

First, we now classify HDB flats, not based on the town that they are in –  because mature and non-mature towns now look increasingly similar – but based on their locational attributes. This more accurately reflects their value and attractiveness to buyers.

Second, Plus and Prime flats come with additional subsidies, on top of generous market discounts that apply to all new flats. This ensures that all HDB flats, including those in attractive locations, remain affordable for a wider group of Singaporeans and not just the better off.

Third, because of the additional subsidies that we give to those who buy flats in very good locations to keep these flats affordable for Singaporeans, we have to impose tighter restrictions on such flats, including a longer Minimum Occupation Period (MOP) – Standard flats is 5 years, and Prime and Plus are 10 years. We restrict rental – those who buy Prime and Plus flats, you must live in the flat and you cannot rent out the whole flat to other people. And we control who can buy them in the resale market – you can only sell them on resale to Singaporeans and to those who earn below the income ceiling. On first resale, we will recover the additional subsidy upon first resale.

This keeps our system of subsidies fair, prevents buyers from ‘flipping’ their flats and reaping windfall gains, and seeks to keep such flats affordable, not just at BTO launch, but on the resale market as well.

Together, this framework seeks to address the three challenges I mentioned earlier. It helps to ensure homeownership remains affordable, for a wider group of Singaporeans, including those looking to buy in more attractive locations. It helps us to maintain a good social mix across Singapore, because more Singaporeans across income levels can afford flats in good locations as well, and thirdly, it keeps the system of allocating the subsidies, by the government, fair.

Let me now move on to how our home ownership programme supports the changing needs and aspirations of our society.

In fact, public housing is not just an infrastructure development – it is about society, family, our safe harbour. Our public housing policies have always played a big role in supporting our social compact, of which family support is key.

In the early years, it was common for many generations of family members to live together. HDB introduced larger 3Gen flats in 2013, specifically designed for multi-generation families who wish to live together under one roof.

Amongst young couples and singles who choose to live independently by moving out of their parent’s place, there are also many who still want to live near their parents. So they want to have their own independent life, not live with their parents.  You see far fewer 3 generation families. But, married couples as well as single children also want to live near their parents.

This allows them to better care for their parents as they age. For those with young children, grandparents continue to be an invaluable source of caregiving support, and impart values.

Our housing policies have evolved to support these aspirations.

1. For example, in the 2000s, we started providing priority access for married children and their parents to live near each other through what we call the Married Child Priority Scheme.
   

2. In 2015, we introduced the Senior Priority Scheme. This is to support seniors looking to live closer to their married children or who choose to age comfortably in familiar surroundings.
   

3. In 2018, we enhanced the Proximity Housing Grant, or PHG, to encourage married couples, singles and their parents to purchase a resale flat to live together or live nearer each other.
   

4. This year, with the new flat classification framework, we also expanded access for singles, who now can buy 2-room Flexi flats, not just in non-mature estates, but island wide – whether it is Prime, Plus, Standard. With this change, both married and single households will have options to purchase flats near their parents, many of whom may live in older estates today.
   

For young families, we tightened the rules for non-selection of flats in August last year. Because we found that quite a significant number of young couples got a queue number, were invited to select, but did not want to. And as a result, people who are genuinely waiting for flat, did not get a queue number if they were further down. This caused genuine home seekers to delay getting their first home. We also introduced the First-Timer (Parents & Married Couples) priority category in October last year. These are couples below 40 years old, with children or have already ROM, and are buying their very first home – we give them additional priority. Since then, we have observed that most FT(PMC) applicants have had a chance to book a flat.

Across our BTO launches up to Feb 2024, about 9 in 10 FT(PMC) applicants had a chance to book a flat. But it is early days. Moreover, we just launched our first Standard, Plus and Prime flats, so we will continue to monitor the success rate of these first-timer young couples looking to settle down and buy their first home.

We will continue to do more.

Family Care Scheme

Today, adult children who are single do not have priority access when balloting for new flats. We recognise that caring for one’s parents is important, regardless of whether you are married or single. In fact, adult children who are single tend to carry a heavier burden of caring for ageing parents.

Recognising this, Prime Minister Lawrence Wong announced at the recent National Day Rally this year that we will further strengthen intergenerational family support. Moving beyond just access, to now providing priority access, to new flats to all parents and their children – whether they are married or single.

We will call this the Family Care Scheme, or FCS. The FCS has two components:

1. The first is the Family Care Scheme (Proximity) or FCS (Proximity), this will give parents and their children – whether married our single - priority access when they are applying for a new flat to live near each other or with each other.

• This will replace two of today’s existing schemes: (a) the Married Child Priority Scheme, which only applies to married children; as well as (b) the Senior Priority Scheme, for seniors who purchase a flat near their parents or married children. We will implement this, FCS (Proximity), in the middle of next year.
• The Senior Priority Scheme, or SPS, for seniors who wish to live near their old homes, will remain unchanged.

1. The second is what we call Family Care Scheme (Joint Balloting) or FCS (Joint Balloting). This will allow parents and their children – whether married or single - to jointly apply for two new HDB flats in the same BTO project.

• This will replace today’s Multi-Generation Priority Scheme (or MGPS). Under the current scheme, parents and married children, who are applying for two units in the same project – whether same block, different floor, or different blocks but same project, we will give them priority. We will implement this at the end of next year.
  

We will share further implementation details in due course. Meanwhile, I would like to assure married couples and seniors that even with the Family Care Scheme, you will continue to enjoy the same benefits and priority as well.

With the recent October BTO launch, we have seen strong demand for 2-room Flexi flats, especially coming from singles, because we have now widened the access for them. We expect this demand to stabilise over time and will continue to ensure a sustainable supply of 2-room Flexi BTO flats across Singapore, to meet the demands from both singles and seniors.

Conclusion

Let me conclude. As the needs and aspirations of our people change, we will continue to adjust and improve our public housing policies. It is not possible to cater to every kind of situation and circumstance, but you can see that our housing policies are social policies that support social goals and family goals – they are not purely a developers’ project like you see in other countries or in the private sector. So, these will have to be adjusted overtime, and every time we make some change to the policy, it may create new demand and we need to make sure that other groups who also need access to housing are not affected adversely as a result. This is because our housing policies and schemes are not just about building flats – they must reflect the society that we want our younger generation to inherit.

An inclusive society, where people from diverse backgrounds continue to live and thrive together, and a society where families can continue to grow together and support one another. Thank you all and I look forward to a fruitful time of discussion with all of you later.