Implications of the Revised HDB Occupancy Cap for Landlords

Ohmyhome

October 28, 2018

Effective from 1 May 2018, HDB has reduced the maximum occupancy cap for 4-room and larger HDB flats from 9 to 6. This means that only 6 unrelated tenants are allowed to stay in a 4-room or larger HDB flat. This is part of HDB’s effort to minimise disamenities caused by overcrowding, and also to maintain a conducive living environment in our public housing estates.

How do you define unrelated tenants?

According to the HDB, as long as there is one tenant that is not under the same family nucleus, all of the tenants are considered as unrelated.

For easier comprehension, below are a few scenarios to illustrate it.

Scenario 1

Jack has a family of seven and rented a 4-room flat to stay in, does the occupancy cap apply?

Answer:

No. All of them are under the same family nucleus so they are all related, therefore, the HDB occupancy cap does not apply.

Scenario 2

Jen has a family of four and he wishes to rent a 4-room flat to stay in, but he finds it unaffordable. Thus, he has found another four unrelated individuals to stay with him and his family so as to lessen the financial burden. Does the HDB occupancy cap apply in this scenario?

Answer:

Yes. Once there is an unrelated tenant residing the in the same home rental flat, everyone in the house is considered as unrelated. Thus, the number of unrelated tenants would be eight (4+4) even though Jen and his family are related in blood. The figure exceeds the maximum number of tenants allowed, therefore, it is illegal.

Scenario 3

John has a family of three and James has a family of four. If both of them decide to rent a 4-room flat and reside together in the same house, does the HDB occupancy cap applies?

Answer:

Yes. Under the rules of HDB, when there is more than 1 family staying under the same flat, all of them are considered as unrelated. Hence, the number of unrelated tenants staying in the home rental flat will add up to seven (4+3). This will be deemed illegal as the figure has violated the HDB occupancy cap.

How will this occupancy cap affect me?

Possible decline in demand for selective 4-room or bigger flats and a potential increase in demand for selective 3-room flats

Not all 4-room and bigger property rental flat owners may feel the impact. Locations like Woodlands, Jurong West, Bukit Panjang and Bukit Batok which are mostly situated at Outside Central Region (OCR) are likely to see a more visible impact than the rest of the locations due to the nature of the vicinity. These rental properties are situated in close proximity to the construction, manufacturing, process and service areas. Semi-skilled workers from these sectors are often housed in these HDB flats by their companies.

A 4-room flats used to be one of the favourite options to house the workers as it can accommodate up to 9 unrelated tenants and companies will often maximise this limit to reduce their costs. However, with the recent revision, we may see a change in the trend. Since the cap has become the same for both 3-room and 4-room or bigger flats, the 3-room flats can potentially serve as substitutes to the 4-room flats. Companies may switch from 4-room flats to 3-room flats due to the lower property rental charges. It would be the most cost-effective solution for the companies.

This will ramp up the demand for 3-room HDB rental flats as more companies jump on this bandwagon.

In conclusion, we are expecting to see some movements on the HDB rental prices for areas that serve the construction, manufacturing, process and service sector. There is a less likelihood to be able to observe any significant impact on the property rental market in other regions that serve families or small groups of unrelated individuals (less than 6) as their main source of targeted clients.

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