No rental increase for two-years for those whose incomes cross the $800-a-month mark

No rental increase for two-years for those whose incomes cross the $800-a-month mark

SINGAPORE - Rental increases will now be waived for two years for those whose incomes cross a $800 a month threshold, said National Development Minister Khaw Boon Wan in a blog post on Wednesday.

Get the full story from The Straits Times.

Here is the full blog entry posted on June 19:

HDB’s rental flats are highly subsidised to help low-income families who do not have other housing options. Rentals are based on household income: those who earn less are subsidised more and hence pay less than those who earn more.

This is a fair arrangement. It will also encourage those who are able, to eventually move out of rental flats and into their own homes.

In line with the policy objective, rentals are tiered, in accordance with income level. Inevitably, there is a “cliff effect”, for those who cross the income tier. For example, rental rate may be at $30 per month for those who earn below $800 per month.

The next income tier of “$801 to $1,500” will attract a rental rate of $110 per month. If a person’s income rises from, say $750 to $810, his rental rate may go up from $30 to $110 per month.

ESM Goh Chok Tong alerted me to this “cliff effect” (of tenants seeing their pay rise largely consumed by a rental increase) two years ago. Some tenants may be inadvertently discouraged from working hard to improve their incomes. We have since fixed this “cliff effect”.

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