Occupancy limit for 4-room HDB flats increases to eight persons from Jan 22

This temporary increase will occur from Jan 22, next year, and continue until Dec 31, 2026.

The HDB and URA will temporarily increase the occupancy limit for four-room and larger HDB flats from six to eight unrelated persons. This includes both flat owners, occupants and tenants.

This temporary increase will occur from Jan 22, next year, and continue until Dec 31, 2026. During this period, other residential properties affected by the raised occupancy limits include the living quarters of HDB commercial properties (with living space equivalent to or larger than a four-room flat) and larger private residential properties of at least 90 sqm (968.4 sq ft).

Both agencies say that this temporary relaxation of the occupancy cap aims to meet the market demand for rental housing in Singapore and support local households that intend to rent.

Christine Sun, senior vice president of research and analytics and OrangeTee&Tie says: “These changes will enable tenants to share a unit with more people, which will help to reduce rental costs and optimize space usage. This relaxation of occupancy cap is expected to benefit lower-income groups, students, blue-collar foreign workers, some Singaporeans and big families”.

She adds that many HDB upgraders typically sell their flats first before buying a new condo, so as to avoid paying the Additional Buyer’s Stamp Duty (ABSD).

Residential property owners seeking to leverage the temporary occupancy increase must submit applications to HDB (for flats) or URA (for private residential units) to include additional occupants, allowing for up to eight unrelated persons per accommodation.

HDB owners must still seek approval before the tenancy commencement date to lease their flats. Meanwhile, private residential owners who intend to lease their units to up to eight unrelated persons must register their properties through URA’s e-services. This comprises an administrative fee of $20. Private residential owners can continue to rent their properties to up to six unrelated persons without registering with URA.

This relaxation of rules is the latest measure to address the growing rental demand and involves temporarily relaxing the occupancy cap for rental HDB flats and private residential properties. In a press release announcing the temporary increase, the government noted that there had been a “sharp” increase in residential rents from 2022, which “reflected tightness in the market due to Covid-19 disruptions, coupled with robust rental demand”.

The URA rental index for private residential properties surged 29.7% in 2022 after already increasing by 9.9% in 2021. The first three quarters of this year also saw the rental index increase 11.1%. Wong Siew Ying, head of resarch and content at PropNex Realty, says that this temporary increase in the occupation cap is the latest move by the government to cool the residential leasing market.

Close to 40,000 new public and private residential homes are expected to be completed this year, and 100,000 more homes will enter the market over the next two years. However, all these units will be ineligible to enter the rental market until their five-year minimum occupation period (MOP) is fulfilled.

The government also anticipates a gradual decline in rental demand over the next three years as more local households transition into new homes. This is expected to ease overall rental market tightness by reducing demand and expanding the available supply of rentable units.

Other measures the government has taken to cool the rental market includes the introduction of a new typology of long-stay accomodation called Serviced Apartments which have a minimum stay of three month. This has been rolled out to three government land sales (GLS) tenders so far.

"The temporary relaxation of the occupancy cap, on top of the progressive completion of private homes should help to satiate the healthy leasing demand in the near-term," says Wong. adding: "Further down the road, when the long-stay serviced apartments are ready, they will cater to renters’ needs, especially those in need of transitional housing". This might comprise younger renters who prefer to live independently before buying their own property.

Sun says that the impact of this change might see landlords increase the median rent for larger HDb units. “For example, a 5-room HDB flat in Bedok that previously charged $4200 for 6 people ($700 per person), may now charge $4800 for 8 people ($600 per person). This benefits both landlords and tenants as the tenants pay less per person while landlords earn a higher overall rent,” she says.

However, Lee Sze Teck, senior director of data analytics at Huttons Asia opines that this move is unlikely to have a significant impact on rents given the limited supply of large HDB flats on the market. But he says that the relaxation of rules may offer a short term fix to stabilise the rental market while supply catches up. He adds: "On balance, rents are likely to stabilise and possibly face downward pressure in the short term".

On the other hand, the new measure might cause an unintended consequence of pushing up resale prices of bigger sized condo units and four-room and larger HDB flats. “This is because such units can now accommodate more tenants and the higher demand may lead to better rents and higher yield, making them a more attractive option for rental income in the future,” says Sun.