Time we had real public housing

At last, we have a party that is urging a true public housing scheme for Singapore. It has long been an embarrassment that we do not have real public housing here.

The policy paper put out recently by the Singapore Democratic Party (SDP) (link) is a bold move in this direction. Leading economist Yeoh Lam Keong called it an “excellent” paper on Tuesday, 6 November, when he was giving a talk — more about this later.

Readers may wonder about my opening paragraph. What do I mean when I say we do not have real public housing in Singapore? Doesn’t the fact that some 85 percent of Singaporeans live in Housing and Development Board flats point to its enormous success?But that’s only if one equates HDB with public housing.  The government may say so, and will pull out all stops to brainwash you into thinking it is so, but that doesn’t make it so.

At the core of the definition of public housing must be its social objective. It is to provide a roof for those without the means to go to market for a home. The HDB might have started that way, but — it can be argued — it has long since evolved into a mass developer like any other. The very fact that it prices its new flats with reference to prevailing market prices and the insistence on costing in the market value of land make it no different from City Developments, Frasers Centrepoint or Wing Tai Holdings. Even the fact that HDB builds smaller flats does not distinguish it anymore from the others, in this age of ever-smaller condo units.

Where HDB may differ significantly from the private developers are (1) various income and family-unit eligibility criteria for buying; (2) minimum stay period; (3) restrictions on owning other properties; and (4) government grants to first-time buyers.

The first three conditions make sense when there is a scarcity of HDB flats relative to demand, and when the product is priced below market rates. Means-testing and restrictive conditions as quid-pro-quo for means-tested eligibility would then be a sensible way to allocate a scarce good, especially one heavily subsidised by public money. But HDB flats are no longer subsidised except in a highly contentious, notional “market subsidy” way and certainly no longer scarce goods. The political promise is that a flat is available to anyone who wants one. That 85 percent now live in one is proof of that, albeit waiting times are a source of discontent.

The reality therefore is that the first three conditions serve not an allocation function, but primarily to boost the attractiveness (and therefore market value) of flats built by City Developments, Frasers, Wing Tai et al. It does this by self-mutilating the flexibility and enjoyability of HDB flats. The government would want you to see the eligibility and use restrictions as “proof” that HDB flats serve social objectives, but frankly, they are poor arguments when set against the stark fact that they are market-costed and market-priced.

The social need arises from market failure. To insist that the need be served by a market-priced good is oxymoronic.

The fourth condition, that HDB flats can come with a government grant for first-time buyers, comes truer to social assistance, but it is actually unrelated to HDB. It’s a pure fiscal measure that can be put under the purview of a different ministry at any time and even extended to cover any kind of housing purchase. This has a laudable social objective, but it is not intrinsically related to HDB, nor define HDB as public housing. If tomorrow, we say the grant is applicable for a condo purchase so long as it is one’s first home, would that make condos public housing too?

Another argument I would make why HDB is no longer a public housing scheme is based on the very fact that 85 percent live in one. Are we saying 85 percent of Singaporeans are poor and need subsidised public housing? That would be ridiculous. On the other hand, if we recognise that, whilst most of that 85 percent are middle-class, some are less than that, then we must confront the fact that the sale and pricing mechanism is the same for all. How socially compassionate is it to make the lower-income pay for a flat by the same rules that the middle-class live by? Especially in a society with an income gap wider than many developed countries, to expect 85 percent of the population to obtain housing through the same market-based rules is to ignore the needs of the lower-income. In such an income-differentiated society, it is heartlessly crazy to have a “one-size-fits-all” housing policy.

The HDB has become a mass developer of middle-class housing, and has left in its wake lower-income sections of our society unattended to.

* * * * *

The SDP’s policy paper proposes a new class of “Non-open-market” housing, or NOM flats, for short. The key characteristics are: (1) priced closely to what it costs to build them without inserting land values; (2) sold on 99-year leases; and (3) can only be sold back to HDB. The price at which HDB buys a flat back is the price of an equivalent newly-built NOM flat less the pro-rated value of lease period consumed.

SDP’s calculations indicate that the resulting prices should cost households of the lower income deciles no more than 20 percent of gross income for 9 to 15 years. It argues, correctly, that expecting families to take 20- to 30-year mortgages, often paying over 20 percent of income, is to put families under financial stress. Too much Central Provident Fund savings are used to pay for a flat instead of being saved for retirement. Moreover, the crimp on disposable income discourages having children — surely a critical issue for Singapore today.

It is a detailed paper setting out clearly its assumptions and numbers, and is well worth a close read.

Where I have a problem with it would be the small issues. For example, I don’t see why their proposal for NOM flats extends all the way to 5-room flats. The scheme, in my view, should be restricted to the smaller sizes.

Another issue I have:  it sets out a rather complicated pricing formula for conversion of an existing open-market flat into an NOM flat. This is to cater to those who feel financially stretched servicing loans for a flat they previously bought, and want to go onto the NOM scheme.  Frankly, I would not so easily allow people to stay on in their flat while converting it to NOM. There are policy and management issues surrounding where NOM flats are to be located; I can imagine a good argument for wanting certain blocks to be NOM and other blocks not, e.g. future upgrading might bring on problems of who pays how much if there is a mix of NOM and open-market flats in the same block.

If a family is financially stretched and wishes to switch to an NOM flat, they should sell their open-market flat (on the open market) and apply for a separate NOM one.

I would also fine-tune the argument that SDP makes for building up a buffer of housing stock to reduce waiting times. I would say, build up the buffer only for NOM flats. The current Build-to-order scheme (which entails a few years’ wait) is fine for open-market flats once NOM is in place.

Why do I say this?

Because once we distinguish clearly that the public housing social objective is carried on the shoulders of NOM flats, then we shouldn’t duplicate these objectives with open-market flats. If a new family needs a home quickly (e.g. after marriage), they should opt for an NOM flat — thus the importance of having a buffer stock of ready-for-moving-in flats. When the family has a better idea of the number of children it has and more assured career and income streams, then it can sell the NOM flat and buy an open-market HDB flat (or a private condo unit). For this second home, they can plan ahead and wait.

But on the whole, the SDP has presented a good set of proposals, and I hope it opens a wider debate about what we really mean by “public housing”. What should be its social objectives?  What should be the affordability limits that must govern the type and cost of flats we build? How did we fool ourselves that we had such a great public housing scheme when there was little in it that was truly “public housing”?

31 Responses to “Time we had real public housing”


  1. 1 ricardo 8 November 2012 at 05:54

    Well said Mr. Au.

    I await with bated breathe the PAP’s eager adoption of this plan and their suggestions for further improvements and refinements that will benefit the majority of Singaporeans .. especially those less well off.

    It will be the first step in reducing Singapore’s shameful GINI index among the richest nations in the world.

    This is the type of dialogue (aka National Conversation) we expect of leaders who have the welfare of more than 60%, higher in their priorities … than multi-million Dignity.

  2. 2 Alan 8 November 2012 at 09:36

    I fully agree that SDP’s NOM proposal is quite feasible in at least it will provide a truly affordable housing for those who are in the lower income groups who do not want to be burdened with a lifetime of debt.

    How come our millionaire PAP Ministers never thought of such a scheme to help out those who really need help, not only those who needs the second cherry to benefit themselves financially?

    And for those who wants their enjoy their second cherry, fine they can continue to allow HDB to sell to them at whatever ‘subsidised’ prices they deem fit but at least the basic social responsibly of providing a truly affordable housing for those who can’t afford the present exhorbitant prices charged by HDB will be met first.

    The free rein that HDB has been allowed to price the new HDB flats just like any greedy developer really makes a mockery of the initial objectives of those past leaders like Lim Kim San. And the worst culprit has to be those PAP Ministers who thought that providing real housing subsidies is equivalent to raiding our reserves while paying themselves obscene salaries out of this world is not!

    • 3 Lye Khuen Way 9 November 2012 at 06:19

      Agree with all the comments.

      Strange that no Ministers, MOS and their Perm Sec were ever reported to have thought of the proposed NOM.

  3. 4 ho 8 November 2012 at 10:08

    SDP proposal is good. 5 room NOM flats for bigger families. Conversion needed to allow those who already bought their flats on OM switch over since the NOM scheme is currently absent.

  4. 5 convexset 8 November 2012 at 10:29

    Values wise. It would make for a more dynamic economy, and reduce the risk of Singapore becoming irrelevant, if the structure of the economy made it such that the only “common” route to becoming rich was productivity and innovation, with social transfers ensuring a basic standard of living.

  5. 6 Tan Tee Seng 8 November 2012 at 10:57

    HDB is more than just a mass developer – together with CPF, they are also the financier of house loan. The effect is squeezing out more than 1% from the CPF saving of the house buyer instead of providing 2.5% of interest. The result is a transfer of personal wealth to the government and the hollowing of retirement saving requirement of the individual.

  6. 7 Civil Serpent 8 November 2012 at 11:08

    Kudos to the SDP for the idea. It reaffirms the notion that policy innovation is not the exclusive province of the ruling party.

    While it fills a present need, the chief bugbear I have with it is that NOM flats would not appreciate in value over time. This negates it as a hedge against inflation, one of the main benefits of property ownership. If NOM flat residents neglect to invest, in 20 or 30 years, it could further widen the wealth disparity.

  7. 8 Saycheese 8 November 2012 at 13:31

    If we have the real public housing as you defined, we may end up with a racial segregation problem. Those in the lowest quintile of income distribution are not of the same racial makeup of the whole population. Whole blocks of flats may have a preponderance of a minority race that will be an embarrassment to the MIW.

  8. 9 The Pariah 8 November 2012 at 14:02

    HDB housing serves POLITICAL, not SOCIAL, objectives – viz, to institutionalise PAP rule.

    To wit:

    (i) Mah BT’s $1bn/year HDB loss-cum-subsidy over last 3 years;

    (ii) Lee YS’s $10bn over a decade for HDB’s ongoing HIP program mostly to repair “serious problems of spalling concrete” for 190k flats built in 1983-86 (not to mention the hundreds of billions of dollars for MUP, IUP, LUP, etc);

    (iii) 530k flats (about half of HDB total stock) with less than 60 years remaining lease tenure by 2015 (but SERS up to Jun 2012 is only 3% of total stock since HDB inception in 1960),

    As Blogger Alex Au rightly posed in above article: “Are we saying 85 percent of Singaporeans are poor and need subsidised public housing?” [Strictly speaking, it's 82% Residents - Singaporeans and PRs - who rent direct from HDB or own HDB flat from BTO and Resale Market.]

    • 10 The Pariah 8 November 2012 at 14:16

      Let’s compare with:

      Private flats – Youngest en bloc estate: 4 years old (Olivio in Balestier area); Latest youngest en bloc estate: 17 years old (Kemaman View). PAP Govt passed a law in 1999 that could potentially result in you collecting your keys upon TOP today and go en bloc tomorrow if 90% of your neighbours think it is a great idea.

      Public flats – As mentioned above, SERS (Selective En Bloc Scheme) is a mere 3% since 1960 HDB inception. Govt should close all loopholes before massive SERS which is funded by drawing down past national reserves!

      China – Prohibit non-resident foreigners to buy residential units in their main cities despite massive land mass. Why not Singapore with only 430 sq km out of 712 sq km land mass for total use?

      Hongkong – Impose 30-year no-sale to foreigners for 2 private residential projects in their upcoming CBD in Kowloon East. Why is Singapore’s subsidized housing pegged to 5-year MOP – who moves house every 5 years?

      Require 7 years’ consecutive stay in HK before qualifying to be PR.

      Minimum estate age of 50 years before en bloc sale can even be considered (and further subject to estate condition if well-maintained).

      South Korea – Mandate that developers give one-for-one exchange to home-owners when land value is unlocked from equivalent en bloc sale. Demolish 20-storeys and rebuild 40 storeys (top 20 floors for developer with free land) – still commercially viable. Preserve sense of place and community for Citizens, but not replace Locals with Rich Foreigners in Popular Residential Areas.

  9. 11 Max 8 November 2012 at 14:12

    If you “buy” something and can only “sell” it back to the original seller for a reduced price, then it’s called renting or leasing. The NOM scheme is just that, a low cost rental scheme (with 99 years payable in advance). Nothing wrong with that, but I find it funny how some people seem to think of this scheme as fantastic new idea.

    • 12 yawningbread 8 November 2012 at 23:28

      You are right, it is strictly speaking a long-term lease scheme. The key difference between this and typical renting is that under the NOM scheme, it is the tenant who has the option of deciding when to return the unit to the owner (HDB). In other renting, both sides can choose to terminate the lease.

      But as you said, there is nothing wrong with renting. Yeoh Lam Keong mentioned last Tuesday that in Germany (if I remember correctly) about 40% of families rent. Near-universal home ownership is not necessarily a good thing, PAP propaganda nothwithstanding.

      • 13 sputz 14 November 2012 at 02:28

        The PAP had political reasons for wanting Sporeans to own their own home.

        It was also a lot cheaper to sell them a 99-yr space in the sky than replacing the land the party took from them with an equivalent

    • 14 Anon 8k0l 9 November 2012 at 13:49

      The current system is also “renting”. It’s just that you pay 99 yrs of loan upfront with “help” provided by banks. The bank becomes your land lord. When you fall behind on loan payments, you are evicted like a leasee. If HDB decides to redevelop your area via Selective Enbloc Redeveopment Scheme, you have no say in the selection to be redeveloped. NOM is at least a more reasonably priced rental system and hands some of the initiative back to the people.

  10. 15 Reuben 8 November 2012 at 14:33

    Excellent analysis of the farce that is the HDB. They have long, long ago went from Public to Profit.

  11. 16 yuen 8 November 2012 at 14:39

    First, I give SDP credit for coming up with workable solutions for real problems.

    In essence under the proposed scheme you are leasing a flat from HDB, with a big security deposit and low rental (depreciation you pay when selling back to HDB), with HDB taking risk of price fall and getting benefit from price rise, the significant point of “ownership”.

    This issue actually goes back to the 1984 election, when opposition guys were saying “you dont really own your HDB flat” (the other big issue was delaying CPF withdrawal to cope with aging society, still simmering with pending annuity scheme). After CSJ stood in the 1992 Marine Parade by-election, he went on a STForum letter writing spree, and “not owning HDB flat” was one of his points; Mathias Yao eventually settled the issue by pointing out the profit some guys were making selling their flats in the resale market, which as pointed above, is the significant point of “ownership”..

    While the argument dies, the issue lives on: since then rising market values of real estate, private and HDB, led to higher land prices, hence higher HDB sale prices. Briefly, the end result was the government gets budget surpluses and the people get bigger mortgages.

    If the SDP scheme gets implemented, the future issue I see is: as market values rise, non open market flat owners would want to convert their flats to the open market scheme; if HDB says no, it is government highhandedness; if it charges a market premium for converting, it is government greed. So it goes on.

  12. 17 Will 8 November 2012 at 15:34

    Some years ago, Kwek Leng Beng did suggest to HDB to build ready stock flats as a short term solution for newly married couples and also for short term rental. I thought it was a good idea then but it was never considered at all. The present situation is very much the inept policies of MBT and he is still collecting his MP allowance and never made to account for his mistakes for which an entire generation of young S’poreans would have to pay dearly their whole lives.

  13. 18 K Das 8 November 2012 at 16:01

    Alex, by simple reasoning and logic, debunks the condescending claim that HDB housing is public housing. It is not and why it is not is adequately explained in his article.

    His general endorsement of SDP’ NOM housing scheme and his excellent critique on how to further tighten it to make it a true tenable public housing plan, is a welcome articulation on this specific public interest subject.

  14. 19 The 8 November 2012 at 17:02

    Unfortunately, the SDP proposal, however deserving it is, will not be even considered by the ruling party. Because it is proposed by the SDP – that will be the kiss of death.

    • 20 CP Lum 9 November 2012 at 08:05

      The mindset is that anything proposed must be adopted by the ruling party. Why should voters allow that. It will not be a kiss of death if all those who support the proposal vote for the party with the alternative like they would do in a mature democracy. I don’t think the SDP is asking the PAP to consider its proposal. I think they are putting up a choice for the people to consider. It is not putting up a petition to the emperor.

      • 21 The 9 November 2012 at 16:32

        I think you got it wrong. The mindset was, is, and will be that civil servants and the incumbent politicians always think they are smarter than the hoi polloi and nothing proposed by those outside the establishment has ever been adopted. Or seen to be adopted.

        Case in point – the “relaxation” of the death penalty.

  15. 22 george 8 November 2012 at 21:03

    Max: ” I find it funny how some people seem to think of this scheme as fantastic new idea. ”

    It is a fantastic new idea because the govt calls the current scheme ‘home ownership” when it is in fact a 99 years lease and ‘asset enhancement’ when in reality it is neither for the vast majority who are unlikely to convert it into cash.

    It is not a new idea, just an honest one. That is enough for me and I suspect for a vast majority too.

  16. 23 LinCH 8 November 2012 at 23:33

    A good proposal by the SDP. I hope it will kickstart a debate and something gets done without destroying the market.

  17. 24 Atheist 9 November 2012 at 06:47

    Yes HDB is not a housing scheme for the needy any more. It is a way for PAP to control housing for 85% of popn and therefore blackmail them into voting for PAP. Yes it is ridiculous to provide so called subsidized housing for households who are high income making $8000 a month and who own BMWs. One thing I’ve always thought ridiculous is for HDB to provide subsidized season parking. Why should taxpayers pay for that? Aren’t we supposed to be discouraging the use of cars and for everyone to take the train? Instead of subsidizing parking, charge market rate to these rich HDB dwellers and use the money to help the poor.

  18. 25 Chanel 9 November 2012 at 10:41

    I believe PAP’s hugely inflated ego will doom SDP’s new and refreshing proposal for public housing.

    The previous debate on public transport is a prime example of how PAP will not adopt any solutions or suggestions provided by alternative political parties. WP calls for public transport operators to be nationalised, but this was met with immediate and intense rebuttals by several ministers and PAP MPs. In the end, the govt decided to pump $1 billion into the operators, which in substance is just a step short of nationalising them!!

    • 26 yawningbread 9 November 2012 at 11:03

      Nobody, not even the SDP, seriously expects the PAP govt to adopt ideas that didn’t come from the ministers themselves. Thus, reiteration of this obvious fact is not really necessary; it serves only to discourage anyone else from making proposals and setting out new ideas. It would be a shame to discourage. Singapore needs a far more active conversation about alternative ideas, and therefore in the larger interest we should encourage, not discourage.

      Also, let’s avoid always adopting the mindset of a petitionary state — that is one where everything we do takes the form of petitioning the government for action. That’s not democracy at all. We shouldn’t measure the worth of ideas on the basis of whether there is any chance of the government adopting them but whether they add value to a popular debate. So let’s not view SDP’s policy paper through a petitionary lens.

      • 27 Duh 10 November 2012 at 21:27

        I agree with Chanel’s comments and do not see this as discouraging civic engagement in politics. Rather, it is a realistic portrayal of PAP’s mindset and response. PAP’s reaction to recent events are a clear indication that it is not capable of re-inventing itself (e.g., Dr Catherine Lim’s analysis) and that ultimate the opportunity to give serious consideration to alternative proposals such as the ones given by SDP will be done by a govt that is not PAP dominated.

        In other words, for Singapore to move forward in translating such proposals into actions, will require the removal of PAP dominance in parliament via the people’s vote. The failure to reinvent itself has made PAP deadwood in modern sociopolitical Singapore. There is really no point in trying to persuade someone (i.e., PAP) who has no interest to listen to anybody besides themselves and also, over decades surrounded themselves with like-minded people so that they can listen to the echoes of their own voices incessantly.

        What SDP can do, is to mobilise themselves and others instead through proposals such as this – to show everyone that the PAP, as they have often claimed, has no monopoly for political talent or feasible solutions.

      • 28 The 12 November 2012 at 09:54

        Agree/disagree with both Alex and Duh. Those outside the establishment should still plug at it and offer alternatives. The government and civil servant can only stick their heads into the sand for so long, but eventually, if the proposed alternatives/suggestion/improvements make sense, it will be implemented. However, they will still try to save face, by saying that it is their own ideas, or that the proposals have been under review for donkey years.

        Case in point – the recent changes to the death penalty. I am sure the constant and persistent lobbying by NGOs and civic groups have given cause for a rethink. However, ever the ungracious one, the government insists that they are doing it NOT because of the petitions.

        Many years ago, I proposed that our NRIC cards be made into credit card size for convenience (instead of the old bulky ones). I got the reply that it was not feasible because of the occasional need to change details like addresses or photos. And then what happened? THEY initiated the change.

        I am still waiting for the Currency Board or MAS to come up with $2 or $5 coins (knowing how little $5 can buy these days) and these have become loose changes. But there will be huge savings in cost by producing $2 and $5 in coins instead of paper dollar bills. Again, this suggestion was given many years ago – hopefully in can happen in the not too distant future.

  19. 29 Ahmad Saleh Muslimin 10 November 2012 at 17:46

    In my opinion, the one-size-fits-all policy is not logic, goverment should address the gap between the middle class and the lower-class with lower income. I am thinking that your government should revise this and apply a friendlier policy with objectivity approach.

  20. 30 skponggol 11 November 2012 at 11:26

    Actually, HDB also have NOM flats by means of Studio Apartment.

    Currently only >55 years citizens are eligible for such 30-year lease flats sold at a price of about $100k, which can only be sold back to HDB if the owners wish to stay elsewhere.

    It allows senior citizens to unlock their current flat value and cash out by selling at market value while buying a NOM Studio Apartment from HDB, a way of converting their flat to NOM flat but the market will be paying their flat instead of HDB.

    • 31 SingaporeSpring2016 3 December 2012 at 00:58

      100,000 is a rip off for a 30 year lease and it’s a studio!

      The government is taking it’s senior citizens for another ride. This amount can buy a bungalow in Florida in the US even today. An cost of construction there is higher than here as labour is paid a decent wage.


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