SINGAPORE — Controlling stall rents at cafes could reduce the incentive for cafe owners to invest in improving their facilities and services, said Desmond Lee, Minister for National Development.
Lee was responding in writing to a question from Nee Soon Group Representation Constituency MP Carrie Tan during Parliament’s sitting on Monday (July 4). Tan had asked whether there were plans to control the rents of coffee shop stalls in Housing & Development Board (HDB) estates so that the high rental costs are not passed on to customers.
Tan’s request comes after Yishun cafe KPT Kopitiam was sold for a whopping S$40 million last month, the second such sale in a week. Another cafe in Tampines, 21 Street Eating House, changed hands for a record S$41.69 million in early June, surpassing the record transaction of Yong Xing Coffee Shop in Bukit Batok for S$31 million in 2015.
Tenants at 21 Street Eating House told The Straits Times that rent had increased, prompting some to consider terminating their contracts.
Ensuring choice and competition
An important measure to ensure affordable meals and mitigate the potential impact of resale transactions is to ensure a good supply of cafes in each HDB housing estate and HDB town to ensure healthy competition, said Lee. These cafes can be run by social enterprises to keep food prices low.
“The food and beverage market is highly competitive, especially in our core areas. For example, the two cafes in Tampines and Yishun are located in urban centres where there are five and seven cafes respectively within a 400-metre radius. So local residents have a choice of affordable food options,” said Lee.
There are over 770 HDB cafes and over 100 hawker centres in Singapore. In the last four years, HDB has completed 34 new cafes, with another 30 scheduled to open in the next four years. Four new hawker centres will open this year, and another seven are in the planning or construction stages.
HDB stopped selling cafes in 1998 and has only rented them out since then. Lee did not specify how many cafes have been sold and are privately owned and how many have been rented out.
Provision of inexpensive meals
In 2018, HDB introduced value for money tenders, with 50 per cent of the points allocated to the operator’s quality. Quality takes into account the availability of reasonably priced meals, good track record and community initiatives. Operators who successfully bid for HDB cafes typically offer reasonably priced food options at each stall, costing around $3.
In addition, rents in price-performance tenders are lower and more sustainable than in pure price tenders, Lee added.
When considering rent control measures, Lee cited the need to “prevent unintended consequences.”
“For example, if we control rents, we could ultimately reduce the incentive for cafe owners to invest in improving their cafes to provide customers with better service and facilities,” he said.
“HDB regularly monitors the resale market for HDB cafes as well as the prices of food items sold in sold and leased cafes and will not hesitate to review its policies to address affordability concerns where necessary.”
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