Even in weak market, racial bias trumps profit for many Singapore landlords

In Singapore, many landlords prefer leaving their units empty to renting to certain ethnic groups.

Owners of private residential properties routinely exclude individuals from tenancy based on ethnicity, even explicitly stating in advertisements that requirements are "no Indians/ PRC" (slang for People's Republic of China) or "no Malay."

Private residential buildings, foreground, stand in the Orchard Road area of Singapore.
Sam Kang Li / Bloomberg /Getty Images

As of late February, at least 49 listings across popular housing portals PropertyGuru, Craigslist, and Gumtree clearly stated that at least one of those three ethnicities were not eligible tenants. These ads are typically placed by real estate agents, who often find themselves in the position of sieving out tenants on behalf of unit owners' ethnic preferences.

But even when housing ads don't state ethnic preferences outright, many Singapore renters told CNBC they still experience prejudice.

Such discriminatory practices — in a country where interracial harmony is a matter of law — target both foreigners and locals, and are so ingrained for some that they even flourish amid unfavorable market dynamics.

An overflow of supply and fewer well-paid foreign workers have pushed residential rents lower over the years, making Singapore a true tenant's market. In January, SRX Property's monthly rental price index for private apartments and condos contracted 5 percent from a year ago and was nearly 19 percent below its January 2013 peak.

Private home vacancies hit a 16-year high of 8.9 percent in the second-quarter of 2016 before improving to 8.4 percent in the fourth-quarter.

Still, many landlords would rather leave units unoccupied than rent to people who don't meet their requirements, said Kelly Tang Robinson, founder of Land Vista Property.

"Technically, landlords can't really be choosy in this market, but only 40 percent are conscious of profits and costs. The other 60 percent are highly sensitive to the profiles of prospective tenants and thus susceptible to racial bias," said one property agent who works with major firms and wished to remain anonymous due to the topic's sensitive nature.

Rental racism

The explicit rental biases contrasts to Singapore's melting pot image.

The island nation's unique brand of multiculturalism is often seen as a model for emerging markets across the globe. Its residential diversity —74.3 percent Chinese, 13.4 percent Malay and 9.1 percent Indian in 2016 — reflects across many aspects of society, including official languages, government leadership, street food and family law.

But minority groups still grapple with racism.

Residential buildings in Singapore
Nicky Loh/Bloomberg/Getty Images

When co-founder of property listings website 99.co Darius Cheung and his pregnant wife Roshni Mahtani, both Singaporeans, were apartment hunting in 2015, more than 20 percent of their inquiries were rejected upfront because of Mahtani's Indian origins, Cheung said. Ultimately, he said, they ended up paying a 15 percent premium in a falling rental market because of their limited negotiation power.

Upon moving to the Lion City in 2010, Indian national Alankar Lodha was regularly required to state his race during rental inquiries, he said. But despite an international education, the 29-year-old said he was often rejected because he was told the landlord did not want Indian occupants.

When contacted, state entities said they didn't have a clear mandate to cover the issue.

The Urban Redevelopment Authority, the Council for Estate Agencies (CEA) and the Presidential Council for Minority Rights told CNBC their respective regulatory frameworks didn't include discrimination conflicts between landlords and lodgers. The CEA did say, however, that it has produced guidelines on listings, investigated racist advertising complaints and urged the public not to condone discrimination.

"In advertising properties for sale, purchase or rental, salespersons should be sensitive to the diverse, multi-racial and multi-cultural nature of society and advise their clients against placing advertisements that are discriminatory, offensive or stereotyped in nature against any particular race, religion or group in society," the CEA said in a set of guidelines.

Still, those governmental calls for ethnic equality have not eradicated the practice.

Eric Foenander and his two friends are Singaporeans of Malay origin, but 33-year-old Foenander said they were treated like "second-class citizens" during an apartment hunt last year. The trio, he claimed, were rejected for an apartment owned by Far East Organization, one of Singapore's largest developers, despite agreeing to the company's high terms: Five months of advance rent that amounted to nearly S$20,000 ($14, 200) and monthly unit checks.

"Our agent hinted at the idea that the rejection might have been because our non-Chinese roots did not sit well with the elderly Chinese landlords," Foenander said.

In response, Far East told CNBC that its leasing decisions were based on commercial considerations, not discriminatory practices. When presented with Foenander's account, Far East said it could neither confirm nor deny the claims.

What's fueling stereotypes

A few cases involving troublesome tenants are often enough to turn landlords against entire ethnicities.

One key complaint against Chinese dwellers, several agents told CNBC, is their upkeep of properties.

"Many PRCs don't take care of rented units," said John Seah, a real-estate salesperson. "My clients have had several cases where PRCs were not only messy, they damaged the place and ignored laws."

Nicholas, an agent working for a leading real-estate firm who didn't wish to disclose his full name, told CNBC that one of his clients had to spend more than S$12,000 ($8,540) in repairs after a tenant from mainland China damaged the house.

Such renters, Nicholas claimed, also frequently bring extra people to stay in the unit, which goes against most landlords' preferences. He also claimed they tend to leave the front door open so owners become worried about theft.

Asia is growing older: Economist
Asia is growing older: Economist

Meanwhile, insufficient cleanup of South Asian cuisine is a frequent criticism of Indian tenants.

"One client rented a house to an Indian family, who often cooked curry and did not adequately clean up. At the end of the rental term, deep cooking stains were everywhere and he was forced to spend thousands on renovation," said Nicholas.

"If Indian inhabitants would clean up after cooking, then landlords would not need to worry about them," added Seah. "Would you want to rent a place and worry all the time that it wasn't being taken care of? In many cases, the security deposits aren't enough to cover defects."

The problem is exacerbated because landlords and tenants often do not agree on what constitutes fair wear and tear, explained Robinson. Some inhabitants don't realize how much work it takes to return a rental apartment to its original state while local landlords don't allow for any depreciation, she noted.

Fighting bias

Racial tensions in Singapore date back at least to the 1964 riots between Chinese and Malay groups. But the ruling People's Action Party, which has been in power since 1965, has created various laws to encourage interracial peace. In public housing for example, quotas are enforced to prevent any ethnic group from being over-represented. But no such legislation applies to private properties.

Article 12 of the country's constitution protects Singaporeans from certain forms of state-based discrimination, but multiple real estate agents told CNBC there are no laws for prejudiced practices in private property.

Human rights activists have suggested stronger anti-discrimination legislation, but that may not be effective, warned Eugene Tan, associate law professor at Singapore Management University.

"Even if there is such a law, enforcing it is a major challenge," he said. "Public education and bottom-up action is preferred since social attitudes and desirable norms are in play."

For now, real estate portals are working to reduce the amount of bigotry in the market.

99.co has an "all races welcome" feature on its search function and said it would give prominence to racially neutral advertisements, making it easier for tenants to connect with landlords who don't discriminate. "One of the reasons I started 99.co was to improve the extent of discrimination in the industry," said Cheung.

PropertyGuru told CNBC that it suspends, and sometimes removes, listings when made aware of objectionable content. The firm also said it educates agents on the subject through regular training sessions, seminars and workshops.

But because the problem lies with landlords, not agents, experts are advising a change in rental contracts.

Robinson of Land Vista Property recommended inserting fair wear and tear clauses, citing the case of Hong Kong, where tenants are often required to re-paint walls and re-polish floors of rental units to get back their security deposits. Cheung, meanwhile, said he encourages landlords to increase deposits if they feel the need to protect their investments.

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