Social Justice or Kingdom Righteousness? Part 3

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HDB 99 Year Lease And Social Justice

The Prime Minister of Singapore recently unveiled the government’s plan concerning the 99 year lease for HDB flats. Singaporeans don’t use the label “social justice” in our deliberation, and that is just as well. The label does not shed light. But the way the 99 year lease is handled is a typical case concerning social justice.

The Prime Minister gave two reasons why the 99 year lease must stay. The first reason is the need to redistribute land to ensure social equality. The second is the practical consideration that buildings do not last beyond 99 years.

The Second Reason

We will discuss the second reason first. It is true that buildings do not last beyond 99 years. HDB flats, like other buildings, need rejuvenation after around 30 years. Things wear out and have to be repaired, and as social needs change, utilization of ancillary land or common spaces also change. While it is true that land rejuvenation has to happen, the question is why 99 years and not a lease that matches the actual longevity of the 30 years of a building?

All land in communist China is state-owned. The leases for residential land used to be 20-30 years. With the liberalization of the command economy, the leases were revised upward, up to 70 years. This led to a boom in construction and the appreciation of property prices. Homes can now become an asset that protects against inflation, and can be passed on to the next generation.

You would ordinarily expect capital decay over the duration of the lease. Long leases, when new, have an expiration in the far horizon, and that allows the land to appreciate (if the conditions are right). The long lease allows temporary appreciation, but the decay of capital becomes more aggressive as the lease draws to the end. In all cases, the lessee (private entity) returns the land to the lessor (the state).

In Singapore, private leases from the state for 99 years can be redeveloped and the lease can be rejuvenated back to 99 years through the payment of a premium differential. But that option does not appear to be available to the owners of HDB flats, that is, until the recent announcement of a Voluntary Early Redevelopment Scheme for HDB flats. This will not happen for another 20 years. It does, however, give an option to the HDB owner hitherto not known. The HDB flat owners will have the option to sell the remaining lease back to HDB which will get the lease back to 99 years. The price may be attractive (like in private collective sale) or it may not be attractive (since there is no competitive offer for the land).

The Bible and the Year of Jubilee

Let’s look at God’s heart on the matter of land distribution and leases. This can be found in the God’s assertion to Israel that all land belongs to him and it is his to give as he chooses. He chose the twelve land parcels for the twelve tribes (Levites get none and the sons of Joseph get two allotments). The land is subsequently further divided among the tribes, and this constitutes the permanent land owners.

In the Jewish calendar, there is to be a Jubilee year every 50 years. In the year of Jubilee, the land that is sold will be returned to the original owner according to his tribe. The way it works is that if a man sells his land for whatever reason, usually because of poverty, that land is really a lease, and that lease is to end with the year of Jubilee. So if it is only one year to the Jubilee, that land is leased for 1 year. If it is 49 years to the Jubilee, the land is leased for 49 years. The basic rule is that the lease will terminate on the year of Jubilee, and the land reverts to the original owner or his heir. A type of “reversionary right” to the land. This system prevents systemic poverty as the children of debt ridden parents have a chance to start afresh when they regain their ancestral land.

The First Reason

The land reversion based on a maximum of a 49 year lease in the Bible, to prevent intergenerational poverty, is somewhat expressed in the first reason why HDB leases expire at 99 years. The Prime Minister said,

“There is one fundamental reason why HDB leases are for 99 years. And that is, we need to be fair to future generations. … After that (99 years), the flat comes back to the state, the Government redevelops the land, and builds new flats for future generations. This is the only way to recycle the land, to ensure that all our descendants can buy new BTO flats of their own.

“If instead the Government sold you the flat on freehold … , sooner or later we would run out of land to build new flats for future generations.”

“The owners would pass down the flat to some of their descendants …. Those not lucky enough to inherit a property, they would get nothing. So our society would be split into property owners and those who cannot afford a property. That would be most unequal, and socially divisive.”

He is not wrong to say that a 99 year lease is a very long time. The biblical lease is half that time. He is also right to say that if the property is handed down in perpetuity and all the land is bought up, we create two classes in society, those who own land and those who don’t. And those who don’t own land will live in perpetual poverty.

Analysis

Even though the Prime Minister did not use the term “social justice” (for which I am glad), he is right in that there must be a way of equitable distribution of a nation’s assets. Unless we do so, there will be poverty and there will be a landed and a landless class. This will lead to the oppression of the poor and perhaps eventually an uprising of the poor landless people against the rich landed people.

There is one fundamental difference between the biblical Jubilee and state owned land sold on leases. It is the question of who holds the reversionary right to the land. In the case of Singapore, it is the state. In the case of Israel, it is the ancestral holding, that is private ownership. The entity that holds the reversionary right to the land is the true owner of wealth and has the real power. In a communist / socialist system, the land is owned by the state leased out to different entities for various durations. The Singapore government identified itself as a democratic-socialist government. The state acquisition of land and the leasing of land to entities is typical of a socialist government. It can be argued that this has to be done because of the real scarcity of land in Singapore. But it is primarily done as a matter of socialist principle. At the same time, Singapore is not completely socialist in that there are properties that are “freehold” or “fee simple.” We will not have a landed versus a landless class. But we do have a freehold vs a leasehold class.

I am not suggesting that the Jubilee system can be implemented in our day and age. And if there is a way to do it, I don’t know how. The main difference is that if the land that comes to the end of its lease is taken as true state land (owned by the people), the new lease of the land ought to reflect that. That is to say, if the land is sold, the proceeds go to the people. Alternatively, the land is developed (at a cost) but the land itself is free because it belongs to the people.

The Singapore government has not been forthcoming in how the cost of HDB flats are calculated, so we don’t know if the HDB pays for the land it develops (land that belongs to the people); or that HDB gets the land free (since it is for the citizens and the land belongs to the citizens). If the land is free for public housing, then the government would be rightly treating the land as owned by the people but managed by the government. If its citizens are made to pay for land they own (via the state), then there should be a justification for it.

The reversion of land for redistribution after a term of lease is consistent with the biblical principle of the reversion of land to prevent intergenerational poverty. The Bible is silent of who owns the land outside of the land of Israel, but the Bible is clear that God is the creator of the heaven and earth, and therefore the rightful owner. There will be a great reversion of land globally. When Jesus returns to claim the world for himself, he will assert himself as the creator-owner of the world. There will be a redistribution of land to the children of the king, who are the resurrected, and who live in the resurrected body in the new heaven and the new earth.

Before the realization of the great reversion of the earth to God, we can support the principle of land reversion to prevent intergenerational poverty. However, that begs the question, “To whom should the land revert before it reverts to God the creator?” The answer is left to us to determine. Every society will have its own set of circumstances and there should be open and careful deliberation on what actions will result in generations with opportunities to prosper regardless of what previous generations had done.

 [To continue …]

Pastor Peter Eng

 

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