HDB Lease Buyback Scheme: More elderly using lease buyback, Silver Housing Bonus to top up CPF

More seniors have started monetising their Housing Board flats to supplement their retirement income and beef up their Central Provident Fund (CPF) balances.

In 2022 alone, about 2,860 seniors tapped the Lease Buyback Scheme and Silver Housing Bonus Scheme, up from 2,790 in 2021.

Take home cash and CPF

This enabled them to rake in around $429 million in total, according to the CPF Board’s latest home financing report charting data from 2020 to 2022.

Of this, the seniors got about $202 million as a cash bonus and take-home cash from net sales proceeds. The remaining $227 million or so went towards topping up their CPF Retirement Accounts.

The amount that seniors have been getting in cash and CPF by tapping the HDB housing schemes has been rising over the past few years. In 2020, they collected a total of $325 million by making use of these schemes, and $382 million in 2021.

Top up CPF LIFE

Since part of the net sales proceeds are used to top up seniors’ CPF Life plans, payouts are boosted no matter how long they live, the report said. The average increase in payout was $500.

HDB Lease Buyback Scheme

Launched in 2009, the Lease Buyback Scheme allows seniors aged 65 and older to sell part of their flat’s lease back to HDB in five-year increments, while retaining lease lengths from 15 to 35 years.

Take for example, this case study from the HDB Lease Buyback Scheme website:

Converts lease to money

The scheme, which requires retained leases to cover the flat’s youngest owner until the age of 95, provides an option for seniors to convert part of their remaining leases into retirement income while living in the same home until the end of their life.

HDB Silver Housing Bonus Scheme

The Silver Housing Bonus Scheme – launched in 2013 – gives those aged 55 and above a bonus of up to $30,000 for “right-sizing” to a three-room or smaller flat from an HDB flat or private property with an annual value not exceeding $13,000.

They will receive the maximum cash bonus of $30,000 if they top up their CPF Retirement Accounts with $60,000 of the proceeds from selling their property and join CPF Life.

Asset Rich, Cash Poor

Professor Sing Tien Foo, provost’s chair professor in the Department of Real Estate at the National University of Singapore Business School, said the two schemes have been helping to ease the “asset rich and cash poor” dilemma that many seniors face.

They also address worries about decaying leases for seniors, who may see the value of their flats depreciate further if they missed the chance to monetise them when the flats were newer, he said.

Want to leave the house for children

However, the take-up rate of both schemes has remained low over the years, as there are “uncertainties in life” that may affect seniors’ decisions to monetise their homes, he noted.

Some seniors, for example, would like to bequeath the flats to their children instead of selling back the leases.

Others may be unsure about their life expectancy or the medical expenses they may face during retirement.

“The seniors will need more financial security to persuade them to monetise their houses, and more monetary incentives, in terms of more attractive values for the tailed leases in the case of the Lease Buyback Scheme, to entice them to participate,” said Prof Sing.

Pay more for new, smaller HDB

The current hot housing market could also be deterring some seniors from tapping the Silver Housing Bonus Scheme. It means they would have to pay higher prices for the smaller units which they are exchanging their bigger flats for, said Prof Sing.

In February, HDB said about 9,700 households have taken up the Lease Buyback Scheme as at December 2022, with nearly 70 per cent of them receiving between $100,000 and $200,000.

The yearly take-up for the scheme has remained steady at around 1,500 households since 2020, said HDB.

The article was first published in The Straits Times.