When most people think about the high rents in Singapore, they tend to focus on how much business owners are required to pay each month.
But this outlay is only the beginning. High rents impact a host of other issues, including employment, cost-of-living, culture and the overall economic well-being of communities in which rents often seem out of control.
One fact remains clear: Rents in Singapore are too damn high. Picture a successful F&B businesses that consistently attracts long lines of customers. One day, the owners break the news that the long-cherished establishment is shutting down and vacating. Apparently the landlord found another tenant willing to pay more to secure that strategic location. So the landlord arbitrarily raises the rent by 100, 200 or even 300 percent to drive out the old tenant.Prince of Wales Boat Quay, a popular pub along the Singapore River experienced such a fate. Faced with a 35% bump in rental prices by their landlord, the owners decided that the cost of operations were no longer sustainable and issued a notice of closure, much to the dismay of customers.
Such scenes are becoming an all too familiar sight in Singapore and it’s threatening more than just our business owners.
High rents ultimately affect you, the consumer
It’s simple economics. A business owner has to consider a whole host of operational costs. This can be generally classified into fixed and variable costs. Variable costs include wages, which vary based on manpower, or utilities like gas, electricity, and water. Rents fall under fixed costs. Regardless of how well a business performs, it has to pay rent. The ultimate goal of a business is to make a profit, and how much profit it makes depends on 2 things: revenue and total costs. The higher the cost of running a business, the more it charges customers to makeup the shortfall. This is where you come in. When landlords raise the price of rent, part of the cost is passed down to you in the form of higher prices.
Moreover, the aggregate impact of individual businesses raising their prices because of rent leads to a higher cost of living. Have you ever noticed how your favourite Wanton Mee stall or usual dessert joint raised their prices by 20 or 30 cents? There’s a good chance that rent hikes were behind it.
High rents affect our business scene
Popular food critic and blogger KF Seetoh recently lamented that Singapore’s privately-run Social Enterprise Hawker Centres (SEHC) were failing because rents were too high. The SEHCs were meant to be a solution to high cost of living. The idea was to make food more affordable and available for customers while catering to the needs of the hawkers as well—addressing high rental and operating costs.
In reality, the SEHCs failed to meet its objectives. One of the major flaws as cited by Seetoh, is the rent that hawkers are currently paying. Some hawkers pay in excess of $4000 a month far higher than the $2000 or $3000 charged by the iconic Maxwell Hawker Centre. Another flaw is location. SEHCs are not located in high-density areas, like Maxwell but in out-of-the-way residential zones with lower foot traffic. In addition to exorbitant rents are a whole plethora of miscellaneous costs borne by hawkers such as tray returns, cleaning, food quality assurance, and a percentage of profits paid to the management.
This proved to be a recipe for disaster. Pasir Ris Central Hawker Center, a SEHC opened in 2017 has already seen at least 10 hawkers stalls shut down due to operating costs. This begs the question of whether providing affordable food is even sustainable, amid a ruthless business climate.
By law, all hawker centres are supposed to be run and managed by NEA. But these days, NEA is increasingly outsourcing its new hawker centres to middlemen like NTUC Foodfare to manage, all in the name of “social enterprise”. What’s problematic is that many of these so-called “social enterprises” operate the new hawker centres like a hardcore commercial Food Court management system.
What can be done?
In an open letter to Senior Minister of State Dr Amy Khor, KF Seetoh made an impassioned plea on behalf of struggling hawkers. He called on the NEA to take back control of public hawkers and return them to its original objective of providing affordable meals for Singaporeans.
“I suggest the National Environment Agency (NEA) consider taking back control of the public owned hawker centres and SEHCs as these private companies are not totally clear and mindful as how they should be managed to public satisfaction, despite their best efforts.”
Returning ownership of public hawker centers is just one possible solution. A more radical solution would entail something along the lines of a rent ceiling. Rent ceiling is the maximum price a landlord is allowed to charge for rent. Rent ceilings are usually set by law and limit how high the rent can go in a specified area.