Sim Ann criticises Leong Mun Wai's 'misleading' claims, says SERS not designed to create a windfall

Sim Ann said Leong Mun Wai was blurring the distinction between market expectation and a policy commitment.

Sulaiman Daud | January 09, 2023, 10:22 PM

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Leong Mun Wai, Non-Constituency Member of Parliament from the Progress Singapore Party and Sim Ann, Senior Minister of State for National Development, clashed again, this time in Parliament.

Leong, who was recently involved in a back-and-forth exchange with Sim on Built To Order flats via Facebook in December, delivered an Adjournment Motion on the recent Selective En bloc Redevelopment Scheme (SERS) in Ang Mo Kio.

Some residents were initially unhappy that they had to top-up cash to get a replacement flat of a similar size. Subsequently, a compensation package was announced in Nov. 2022 where 99 per cent of the residents could buy a replacement flat of similar type and size without a cash top-up.

Unlucky first-timers: Leong

Leong called the SERS at Ang Mo Kio Avenue 3 an "epochal" moment in Singapore's history of public housing. He said he would use his Adjournment Motion to explain to the public why they should be concerned about this SERS exercise, alleging that government and the media have been "downplaying" the implications.

Leong said this is the first time that residents selected for SERS have to pay a top-up fee in cash to get an equivalent replacement flat with a new 99-year lease.

He referred to deliberations of the Public Petitions Committee, where he asked the Ministry of National Development (MND) for examples of SERS where the residents needed to top-up cash to get an equivalent flat with the 99-year lease.

MND provided a memo about a previous SERS at West Coast Road. Residents who opted for a "more centrally located replacement site" at Clementi Avenue 1 were required to top-up cash.

However, residents who bought equivalent flats at another designated site of West Coast Crescent received a cash payment of S$51,000 for a 3-room flat and S$61,000 for a 4-room flat respectively.

This meant that Ang Mo Kio residents were the "unlucky" first-timers to be financially "burdened", Leong said.

He further accused the government of allegedly being "disingenuous" by not "admitting" that the outcome of the Ang Mo Kio SERS is different from others.

"If the outcome was not different, there would have been no need for the government to introduce the 50-year lease and Lease Buyback Scheme as a new option for the Ang Mo Kio residents," Leong said.

Ang Mo Kio SERS due to the ageing flats

Leong then referred to a response by Minister for National Development Desmond Lee to Nadia Samdin, the Member of Parliament where the Ang Mo Kio SERS was located, in July 2022.

Lee said the different outcome is due to the lease decay, as in past SERS, the flats were younger at the time of the announcement, with around 70 years of lease left. The flats in the Ang Mo Kio SERS are older, around 57 years left.

However, Leong pointed out that the residents of Marsiling who went through their own SERS, also did not need to top-up cash even though they had around 58 or 59 years left on their lease, similar to Ang Mo Kio.

Leong said:

"In my opinion, the full explanation is that lease decay has affected prices of old HDB flats in mature estates more than the ones in non-mature estates.

At the same time, the prices of new flats in mature estates have risen much faster because they enjoy the benefits of good amenities and location. Therefore, there is a larger price difference between the existing old flats and the new replacement flats in Ang Mo Kio than in Marsiling."

Leong added that the government should have explained this to the Ang Mo Kio residents up front.

Leong's theory of VERS

Leong then theorised that the reason for this is that the Voluntary Early Redevelopment Scheme, or VERS, is not a "viable solution" to the lease decay problem.

VERS differs from SERS as home owners in precincts selected for VERS can vote whether or not to let the government take back their flats before the lease runs out. The terms offered will not be as generous as those in SERS.

Leong claimed that Singaporeans are expecting SERS to be a scheme where residents are paid, but if VERS is similar to the outcome of the Ang Mo Kio SERS, then they have to pay.

He said that the market-based compensation formula that the government has used for SERS failed to enable the Ang Mo Kio residents to exchange their flats for new ones without having to top-up cash.

VERS unlikely to be viable in the future: Leong

This, Leong claimed, means VERS can't be a solution to the lease decay problem as flats selected under VERS will be even older than those in Ang Mo Kio.

"The likelihood of any VERS proposal being approved will also be nil because Singaporeans have come to associate “en bloc” with windfalls and new homes, and the redevelopment of mature estates envisioned by VERS will not materialise," Leong said.

He further accused the government of showing a lack of transparency and compassion and urged the government to improve its compensation package for the residents, announced in Nov. 2022.

"Had the Ang Mo Kio SERS residents not protested, this issue would not have been drawn into the national spotlight and we would not be able to assess its implications for VERS in future," Leong said.

SERS compensation has never been intentionally pegged to the price of a new flat of similar size in similar location: Sim Ann

In her response, Sim began by stating that compensation for SERS has never been intentionally pegged to the price of a new flat of similar size in a similar location on a fresh 99-year lease.

It has not been designed this way, although Leong sought to make it so in his speech, she said.

So, in previous SERS, how did it come about that a flat with 70 years could be worth more than a similar flat with a 99-year lease?

This is because the new flat comes with government subsidies so substantive, eligible buyers can pay less.

During previous SERS exercises, the flats acquired were generally younger, Sim said. The compensation framework was based on independent assessment, in turn based on market value.

"It was not pegged to the subsidised price of new flats, nor designed to create a windfall. It so happened during past SERS exercises, that the outcome was quite advantageous for most flat owners, because the age of their flats was not so old.

A different outcome would occur if the age of the flats involved in the SERS was older."

This, Sim said, was what happened in the Ang Mo Kio SERS, and would be the case in future SERS exercises if the flats involved are of similar age.

Govt consistent in approach and showed empathy in helping residents: Sim Ann

Sim said that unlike the picture that Leong was trying to paint that the Ang Mo Kio SERS was an "epochal moment", the government has maintained consistency in their approach.

It also listened to the residents, and once they heard their key concerns, they introduced flexibility to meet their needs such as offering more options, like 50-year leases, Lease Buyback scheme for seniors and letting them apply for flats at a site different from the designated replacement site.

"So we reject the characterisation of lack of empathy. We have been walking the ground and we have also been listening to residents while we have maintained our approach towards the valuation of flats," Sim said.

She pointed out that 99 per cent of the flat owners in Ang Mo Kio SERS did not need to top-up cash to get a similar-type flat with a full 99-year lease, or a similar size flat on a 50-year lease.

Sim said the government, in determining the compensation for SERS flats, has been consistent in applying valuation principles. In addition, SERS households have been given substantial support.

Leong trying to shape public's expectations of VERS: Sim Ann

Sim then said Leong has tried to characterise what happened in the Ang Mo Kio case as a result of the diminishing leases, and in doing so, attempted to shape the public's expectations of the VERS scheme.

The VERS scheme was announced by Prime Minister Lee Hsien Loong in his National Day Rally speech in 2018. PM Lee said that VERS is a "long term plan", and the government "will not start doing VERS for another 20 years".

This is because the government will "need time to work out how to select the precincts, how to pace the redevelopments out" and  study how to afford VERS for the long term.

Sim said that she's explained why residents who swap a 57-year-lease flat for one with 99 years may have to top-up, but just because Leong does not prefer this outcome, it does not make it unfair.

SERS is not meant to extend a decaying lease for free to 99 years, Sim said. That is not the basis on which SERS compensation is determined. Rather, it is determined by a fair, independent assessment taking reference from market value.

Nor is VERS meant to extend a diminishing lease for free for 99 years. The alternative is to stay in the flat until the 99 year lease is up, after which they have to find a new flat on a new lease.

"So I believe what Mr Leong is doing here is to shape certain ungrounded expectations of the VERS scheme, which are at odds with what we have shared so far.

While the full details of VERS have yet to be announced, the government has made it clear that the terms for VERS will not be as generous, and there will be no replacement flats."

Sim said that she believes Leong is blurring the distinction between a market expectation and a policy commitment.

She called on Leong to engage responsibly in the upcoming debate on the valuation of Build To Order flats, and not confuse issues or mislead the public.

Who's setting expectations?

In a follow-up question, Leong said that he is not the one setting expectations, as in past SERS, residents have received cash and a new flat.

He also asked if Sim agreed that the compensation under VERS will not be attractive to Singaporeans, if it is similar to the Ang Mo Kio SERS.

In her reply, Sim said that the government has said more than once that the selection of sites for SERS has to be limited, and only about 5 per cent of sites could be suitable for SERS, and many suitable sites have already gone for the exercise.

"So how have we not been shaping the expectations and putting out information in a transparent way?" Sim asked.

She said she thought Leong is trying to confuse the public, and that the information put out by the government has been transparent and consistent.

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Top image from Parliament YouTube.