How to avoid 'alumni' effect with HDB priority

Most Singaporeans surveyed support the Housing Board's plans to encourage couples to live near their parents. But how to do this without penalising other applicants too harshly is another question.

In a blog post last month, Minister for National Development Khaw Boon Wan noted that half of all couples want to live with or near their parents, but only 37 per cent are able to do so. "We must do more to help families stay close to one another," he said.

He floated several ideas, including higher grants for those buying resale HDB flats near their parents' homes, a move backed by about eight out of 10 respondents in an ongoing survey by the Ministry of National Development.

More controversial, however, was the idea of absolute priority for those seeking Build-To-Order flats near their parents' homes.

This would guarantee such applicants a flat without the need to ballot, assuming there were enough flats to go around.

Nine out of 10 survey respondents supported greater priority for those wanting to live near their parents. But absolute priority? The survey did not ask about that. Anecdotally, though, that idea does not seem popular.

In the first of three Housing Conversations which the HDB is holding this month, most of those who took part were not in favour of absolute priority.

One participant noted that couples whose parents live in mature estates would benefit from a higher resale value of their flat.

Flats in mature estates tend to fetch more than others on the resale market. Three-room flats in mature Clementi estate went for an average of $382,000 in May, compared with $336,500 in neighbouring, non-mature Jurong East.

Housing experts have similar concerns. Says OrangeTee head of research Christine Li: "It is not very fair to those whose parents do not currently reside in mature estates."

Mr Khaw himself acknowledged the danger of other couples being crowded out. He highlighted the need to avoid the "alumni" effect, which refers to how Primary 1 places in popular schools are snapped up by the children of alumni, leaving barely any spots for others.

"How do we avoid the 'alumni' effect, so that those whose parents do not live in their preferred estate still have an opportunity?" asked Mr Khaw.

What lies at the heart of this issue is the fact that some estates are more popular than others because they have more amenities, higher resale prices and central locations.

Yet this also means that couples whose parents live in such estates already have an incentive to get flats there, and arguably need no further persuasion to do so.

If anything, more incentives for them could "lead to unnecessary over-consumption by those who do not need public housing, but just get the flat due to the premium location", notes Ms Li.

Given that, perhaps the HDB should focus on increasing incentives for those whose parents live in non-mature estates.

The HDB already gives greater priority to those applying for flats in an estate where their parents live, or vice versa. They get double the ballot chances that other applicants do.

If the HDB wants to do more, it could increase the ballot chances only for those with parents in non-mature estates.

Perhaps it could go as far as to introduce absolute priority for this group, and see how the first few BTO launches play out.

There are precedents for treating new flats in mature and non-mature estates differently, in recognition of differing demand. Singles, for instance, are allowed to buy two-room flats in non-mature estates only.

But what if those with parents in mature estates feel disadvantaged because they want a flat in a non-mature estate?

They are still likely to have a shot. The chance of an alumni effect is much lower in such estates.

In the latest BTO exercise in May, for instance, three-room flats in Bukit Batok and Woodlands attracted fewer first-time applicants than there were flats available - let alone applicants with parents who lived there.

As the name suggests, non-mature estates are also younger, making them unlikely to have a high proportion of older residents whose children might flood in.

Another method that avoids the alumni effect is already in place: the Multi-Generation Priority Scheme.

This scheme sets aside up to 15 per cent of the studio apartments, and two- and three-roomers in each BTO project for couples and their parents who apply for separate new flats in the same project.

Since both the parents and their married children are moving at the same time, there are no unfair advantages for those with parents living in certain estates.

Could applicants under this scheme be given absolute priority too? After all, this is unlikely to crowd out other applicants. In last September's BTO launch, just 42 such pairs of families applied.

Ultimately, in trying to get more couples to live near their parents, we should ensure that they are doing so for the right reasons.

This means, for a start, preventing the abuse of priority schemes in order to snag attractive properties. Focusing on non-mature estates is one way to do so.

This article was first published on June 16, 2014.
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