PSP calls for housing policy 'reset', Government stresses HDB flats remain affordable and accessible

SINGAPORE: The Progress Singapore Party (PSP) on Monday (Feb 6) called for a housing policy “reset”, with the Government stressing in a counter-motion that Housing and Development Board (HDB) flats remain affordable and accessible.

Speaking during their motion on Public Housing Policies, which was filed last month, PSP’s Non-Constituency Members of Parliament (NCMPs) Mr Leong Mun Wai and Ms Hazel Poa made two recommendations to address concerns.

The Affordable Home Scheme proposes that land costs are deferred when flat buyers buy a flat from HDB. Such costs will be paid only if the flat is sold after the minimum occupation period (MOP), said Mr Leong. 

Under the Millennial Apartments Scheme, Mr Leong proposed that the Government keep a large stock of “quality flats” to be made available for young couples and groups of Singaporeans to rent for two to five years at affordable rates. The main supply of such flats will come from prime locations near the central business district, he added.

In his opening speech for the motion he tabled on Affordable and Accessible Public Housing, Minister for National Development Desmond Lee stressed the need to balance the needs of this generation with the needs of future generations.

He also pointed out that the Government is studying changes to public housing policy to continue delivering on its commitment of keeping flats affordable and accessible for Singaporeans.

This would mean more “Shorter Waiting Time” Build-to-Order (BTO) flats from 2024, and a recalibration of the HDB's building programme so that such flats form a larger proportion of flat supply, he said.

While the motions are debated simultaneously, they will be voted on separately on Tuesday.

HOUSING POLICY "RESET"

Speaking in Parliament, Ms Poa said that current housing policy has delivered on either affordability or accessibility, but not both. 

She noted that the rising prices of new HDB flats have been kept affordable by stretching the loan repayment period over a longer period of time, as well as through the provision of subsidies and grants. 

The former worsens retirement adequacy because it means that Central Provision Fund (CPF) money is being drained for longer and the amount of interest to be paid also increases significantly with a longer loan tenure, Ms Poa said.

“The second method provides an illusion of affordability by presenting a selling price after subsidies and grants that is lower,” added Ms Poa, who said this meant that as taxpayers, Singaporeans were indirectly paying for everyone’s HDB flats.

MP Jamus Lim (WP - Sengkang) also argued that the use of CPF savings to pay housing mortgages conflated “two competing ideals” of growing retirement assets to ensure retirement adequacy while keeping public housing as affordable as possible.

Mr Leong similarly argued that the total cost of home ownership has depleted Singaporeans’ CPF savings.

“Affordability is not about whether the housing loan can be serviced on a month-to-month basis by CPF savings or not, but by looking at the effect of the total cost of home ownership on the CPF retirement account,” he said.

KEEPING FLATS AFFORDABLE, ACCESSIBLE

Mr Lee acknowledged that housing supply had become tight and resale prices higher in the past three years. But he also stressed that the Government has kept BTO prices “almost flat” despite strong demand and rising construction costs in the past two years.

The minister pointed out that in 2019, a four-room BTO flat in a non-mature estate was priced at S$341,000 on average, before grants. In 2022, the average price was S$342,000.

“We do so by setting BTO prices based on affordability outcomes rather than just pass on rising costs to buyers. For instance, construction costs shot up almost 30 per cent in this period. But we do not price BTO flats based on cost,” he added.

Mr Lee also said that there has been “some moderation” in the rate of increase in resale prices after two rounds of cooling measures last year.

HDB flat prices rose 10.3 per cent last year, slower than the 12.7 per cent increase in 2021.

He added that Singapore’s home price to income ratio – the number of years of total household income it takes to pay for a home – was generally four to five. He contrasted this with London, Los Angeles and Sydney, where the ratio ranges from eight to 15, and Hong Kong, where it is more than 20.

“So, while there are concerns over resale prices, public housing remains broadly accessible and affordable today,” said the minister.

ACCESS TO MATURE ESTATES

Mr Leong also said Singaporeans increasingly had "no choice" but to buy resale flats given the long waiting times for BTO flats.

Ms Poa added that for young couples, the waiting time for a HDB flat starts from the very first application – whether successful or not. 

With delays brought about by the COVID-19 pandemic, Mr Lee acknowledged that Singaporeans are unhappy about the longer wait times. As such, HDB is working hard to catch up, he said.

More than 20,000 homes were built last year, the highest annual number in the past five years, the minister pointed out.

Addressing concerns about access to flats in mature estates, Mr Lee said HDB has been doing its best to launch more housing projects in such estates in the last few years.

But he pointed out that the more BTO flats supplied in mature estates, the more buyers join the queue.

This is because Singaporeans can see that the subsidy in a BTO flat is “real, and realisable” and that it means that after the minimum occupation period, they can sell the flat if they need to move, and make capital gains, Mr Lee explained.

If flats in mature estates were priced lower, the gains that successful buyers enjoyed would increase, and even more would join the queue, he added. The result would be higher demand, greater competition for BTO flats in mature estates, and greater anxiety among flat buyers, he pointed out.

"At the end of the day, this will not help first-timer couples who are looking for a flat to build their families," Mr Lee said. As such, the Government is also “consciously moderating” prices in mature estates through measures like the Prime Location Public Housing model (PLH), he added.

GOVERNMENT STUDYING NEW POLICY CHANGES

Moving forward, the Government will study how it can provide more support for first-timer families looking to buy their first home and to reduce the “high rejection rate” for BTO applications, said Mr Lee. It will also consider more housing support for first-timers to buy resale flats, he said. 

But when improving housing policies, the Government must ensure that they remain sustainable, Mr Lee stressed.

“We have heard many alternative proposals, including from opposition MPs, and we give them the benefit of the doubt that the intent is to improve the lives of Singaporeans. But they are not as frank about the trade-offs,” he said.

The minister touched on Mr Leong’s suggestion that BTO flats could be cheaper if HDB did not have to pay for state land at fair market value.

“I have already explained that HDB does not price based on cost recovery. BTO flat pricing and BTO development costs are two separate and independent things,” said Mr Lee.

“More importantly, land is part of our reserves. Proceeds from land sales do not come to the current Government as revenue for spending. The proceeds go back to the reserves, in order to preserve the value of the reserves. We invest the reserves and use part of the investment returns to fund the Government’s annual budget, and support the needs of current and future Singaporeans.”

Other MPs also raised concerns over Mr Leong’s suggestions, with MP Denise Phua asking how much his proposed Affordable Homes Scheme would cost taxpayers.

MP Murali Pillai noted that Mr Leong’s motion stated “aspirations without costs” and was “naive”.

“I strongly reject the insidious premise of the first motion (from the PSP), that the review (of public housing policy) is required in order to deliver affordable, accessible housing, which is to say that this Government is not doing so now for the majority of Singaporeans,” he added.

Several MPs also pointed out that the housing prices had to be allowed to rise enough to keep the resale market buoyant, instead of allowing a situation where housing values crash.

"I think we hope to see something like a Goldilocks situation – our prices can move steadily upwards and slowly, in line with our rising income, not too hot, not too cold," said Mr Sitoh Yih Pin (PAP - Potong Pasir).

Ultimately, Mr Lee stressed that it is important to be prudent, just like the generations before who had worked hard to build public housing.

“Our predecessors worked so hard to build public housing for Singaporeans, worked so hard to pay for their own homes, and above all, worked so hard to build up our reserves so that the next generations, including our own, would have a better life than them,” he said.

“So we, the beneficiaries of their foresight and prudence, should inherit these same values and do the same for the next generation.”