99-year lease is only way to recycle land for future generations to buy BTOs

Today, over 80% of Singaporeans live in public housing. Compared to public housing in most parts of the world, our HDB flats and home ownership model is the exception rather than the norm.

Singapore’s housing policies have been uniquely successful. We are the only major city in the world where nearly every young couple getting married can afford to buy their first home immediately.

Why 99-year lease?

99 years is a very long time. Most people will not outlive their lease.

There is one fundamental reason why HDB leases are for 99 years and that is, we need to be fair to future generations.

As Prime Minister Lee Hsien Loong explained in 2918 during the National Day Rally, “HDB sells the flat to you for 99 years. You own it, and you can pass it on for one or two generations. After that, the flat returns to the state, the Government redevelops the land, and builds new flats for future generations. This is the only way to recycle the land and ensure that all our descendants can buy new BTO flats of their own.”

You see, land in Singapore is a very scarce asset. If the government had sold HDB flats on freehold, sooner or later, they would run out of land to build new flats for future generations.

Those who are owners would pass their flats down to some of their descendants, many generations into the future.

The lucky ones become flat owners. Those not lucky enough to inherit a property would get nothing.

“So our society would split into property owners and those who cannot afford a property. I think that would be most unequal, and socially divisive,” PM Lee said.

The PAP Government does not offer freehold land in the Government Land Sales (GLS) programme. The 99-year leases are not just for HDB flats. For private housing also, the Government only sells land on 99 year leases.

Panellists at the Institute of Policy Studies’ Singapore Perspectives conference in January this year (2022) said that selling land on limited leases is necessary for a small country like Singapore as it allows for the land to be recycled for future generations.

Besides the 99-year lease on HDB flats, land and property for commercial and industrial uses is typically sold on a 30-year lease.

A practical reason for 99-year lease

There is another – practical – reason for a 99-year lease.

No building lasts forever, especially in our hot tropical climate. In Singapore, we are fortunate that our homes are not left to decay after we have bought them from the HDB.

To keep our homes in liveable conditions, the HDB embarks on various programmes like the Home Improvement Programmes (HIP) and Lift Upgrading Programmes (LUP).

The HIP takes place when the flats are about 30-years old. It is an essential upgrade and highly subsidised. The Government pays up to 95 per cent, so residents pay as little as a few hundred dollars for the upgrading.

Maintenance problems, like spalling concrete, ceiling leaks, and damaged pipes are fixed in this upgrade. So too is the electrical supply. Residents also get to choose optional features for which they will pay a bit more like a brand new toilet or new doors and gates.

Still, no upgrade defies the law of thermodynamics. By the time the flats are 60 or 70 years old, they will be showing their age again.

Second round of HIP upgrading...

The PAP Government has committed themselves to do a second round of upgrading (HIP II), at about the 60 to 70-year mark. This will help keep the flats safe and liveable.

If you own a private property, you are fully responsible for its upkeep and upgrading. But because HDB is public housing, the Government will upgrade each HDB flat not once, but twice during its lifespan.

But no matter how many times upgrading takes place, there are things you cannot do. Some older flats do not have piped gas, for example.

The older the flat, the greater the cost of maintenance. The first HIP will cost the Government more than $4 billion. HIP II will probably cost even more, because the flats will be twice as old by then.

Ultimately, there will be few takers for flats that are 100 years old with obsolete mechanical and electrical systems. Imagine living in a flat serviced by a lift built 90 years ago?

The neighbourhoods will change and become shabby. It is better for the government to take back the flats and redevelop the towns to keep Singapore a vibrant and attractive place to stay than to allow estates to deteriorate into shabbiness.