Affordable and Accessible Public Housing and Public Housing Policies

Debate resumed.

Mr Speaker: Assoc Prof Jamus Lim.

6.35 pm

Assoc Prof Jamus Jerome Lim (Sengkang): Mr Speaker, I understand that this Motion will be ongoing tomorrow? With your permission, I would like to request that I be allowed to speak tomorrow so that my —

Mr Speaker: I have rescheduled two of you to tomorrow. You can proceed, please.

Assoc Prof Jamus Jerome Lim: Okay.

Mr Pritam Singh (Aljunied): Point of order, Mr Speaker.

Mr Speaker: Leader.

Mr Pritam Singh: Will there be any objection for Assoc Prof Jamus Lim and the Workers’ Party (WP) Members to speak tomorrow?

Mr Speaker: You have sent in your request, so I have made adjustments for two of them to speak tomorrow as indicated in my note to you.

Mr Pritam Singh: I understand, Speaker. The thing is, we have the Minister who has just given out nine annexes and we would like to respond more fully to the Minister's contributions and we understand that — unless of course, the debate on the Motion is going to be completed today.

Mr Speaker: No, it will not be completed today, so we have to toggle some of the speakers from tomorrow. So, I will shift two of them.

Mr Pritam Singh: My request – and I am not going to be argumentative about this, but there are 23 speakers on the speakers list. And there are four WP speakers on the Motion, my request is four —

Mr Speaker: So, we will shift two of them to tomorrow.

Mr Pritam Singh: Would it be possible for all the WP speakers to speak tomorrow? It will not be against the Standing Orders.

Mr Speaker: No, I will shift two of them to tomorrow.

Mr Pritam Singh: Noted.

Mr Speaker: Please proceed.

Assoc Prof Jamus Jerome Lim: Mr Speaker, as we do our rounds with our constituents during our house visits, we undoubtedly would have met with those who have expressed concerns about the rising cost of living. This is not a recent phenomenon. While the rising prices of groceries or gas may have dominated our more recent conversations, fears of how increasingly difficult it is to live in Singapore have been shared many times in the past. In Sengkang, I have spoken to residents, even elderly ones, who own their own homes, who worry about how expensive buying a flat in Singapore is and fear especially for their children and their grandchildren this ability to continue affording a roof over their heads.

Newspaper reports that point to a record high in property prices and rent in many housing districts reinforce this notion that housing is unaffordable.

My contribution to this debate will focus on what is driving these high house prices, but I will end with some proposals for easing a transition as we seek a reset to some degree in house pricing.

HDB remains a success in public housing globally, producing what some regard to be the most admired public housing programme worldwide. But it has been rather less successful in some of its original goals, crucially in meeting terms of affordability and access. My Workers' Party (WP) colleagues Leon Perera and Gerald Giam will in their speeches, elaborate more on these aspects.

Here, I will only point out that house prices are according to at least one respected index, "seriously unaffordable". This has knock-on effects on our cost of living and crucially, our retirement savings. The way the Government has tried to thread this needle has been to provide taxpayer subsidies, funded subsidies to young families trying to purchase their first home. Hence, Build-To-Order (BTO) and Sales of Balance Flats (SBF), and even resale purchases, enjoy a bevy of grants to help them get on the local property ladder. For many of these schemes, they may even get to enjoy two bites of the cherry. Once you are on the ladder, there is less worry that house prices might run away from you because when you sell your place, you receive the market price. And even if prices are too high, you at least have the cash from your sale to offset that hit.

But what this approach does is that it uses tax revenue to offset the hit from the costly market pricing of public housing in an effort to preserve the affordability of HDB flats and enabling the asset enhancement aspect of public housing to remain in place. It reassures those who have pumped a good part of their retirement savings into real estate that they will eventually be able to realise the investment gains from this decision.

Moreover, since most HDB homeowners use their CPF savings to pay for this mortgage, the status quo allows them to extract funds that would otherwise have been locked in their CPF. This preserves their monthly disposable income and also helps them to commit to saving for their retirement. On the surface, everybody wins.

But what this does is conflate two competing ideals: growing retirement assets as much as possible to ensure retirement adequacy while simultaneously keeping public housing as affordable as possible so Singaporeans have a roof over their heads that they may call home.

The two public policy pillars of HDB and CPF have objectives that run counter to each other and tying them together requires an alignment between them, which might not be a problem except that like the proverbial hamster that finds it has to run faster and faster just to keep up with the spinning wheel, we find that escalating house prices, in turn require the Government to keep enhancing the grants it gives out, which in turn allows prices to run away even further, in a never-ending self-reinforcing cycle.

In principle, any asset with a finite shelf-life should have a very clear path of future prices. Every year, as we gradually approach the point in time, where it will eventually expires with no value, the price would drop by just a little bit because of the technicalities of how we value time, which is that we tend to value the present more than we do the future, you tend to see a smaller decline each year at the beginning, but as we stretch out further into the future, prices will drop by ever-greater increments.

A picture tells a thousand words, so with your permission, Mr Speaker, I would like to circulate a handout to illustrate how this plays out. Members may also access this on the MP@SGPARL app.

Mr Speaker: Yes, please. [A handout was distributed to hon Members.]

Assoc Prof Jamus Jerome Lim: In Singapore, the chart above is what policy-makers have enshrined as the so-called Bala's Curve, which law attributes to a land office employee with that name who first drew up this theoretical relationship for 99-year leasehold properties. The premise behind the curve is as elegant as it looks. The price of the house should be worth what you would otherwise pay in rent. If you buy, you are essentially front-loading your payments. So, after you are done with your mortgage, you get to enjoy living rent-free in your home.

But the valuation of your home is still whatever the accumulated sum of what you would otherwise be paying for in rent for the remainder of the time that the house is still yours.

I will just ask all of you to cast your eyes to the other chart on the lower half of the page. There, you will see essentially the same curve, but with one very mild variation – we allow inflation to enter into the picture so that it will affect what you pay in rent every year into the future.

With this very simple tweak, we will see exactly what we observe in Singapore's housing market: a steadily rising house price which tops out somewhere around the two-thirds mark of the total lease. This is also incidentally what real estate agents often share about how they believe flat prices will move when leases are in the final three decades – that they are basically impossible to sell; and if they were, the prices would have to drop precipitously. This chart actually shows three lines which correspond to three different average inflation rates over the period.

First of all, observe how as inflation rises, the curve rises more but the plunge is also more significant once we pass the peak. So, inflation, such as the bout that we have experienced lately, is at least partially responsible for the spike we see in house prices.

And what do these three lines correspond to? They were not selected by chance. The first is inflation, ever since 1991, when the Government began adopting its asset enhancement approach.

The second is what happens when we add in higher inflation for the post-pandemic period. Just two years of above-average inflation was sufficient to trigger a significant increase in house prices at the peak relative to the business-as-usual scenario.

Finally, the last line is what happens when we have a house price inflation crisis, when rents are rising as they were last year and if they remain elevated for this year. At the peak, house prices would be more than double what they would be in the absence of this bubble.

That is why, even though the overwhelming majority of Singaporeans do not rent, the eye-watering 30% jump in private rental rates last year should worry all of us. Higher rents eventually make their way into higher house prices and vice versa.

Given our recent brush with high inflation, it would be unsurprising that house prices have likewise breached new heights.

This just means the need for even bigger taxpayer-funded grants from the Government if we wish to keep housing affordable. It also means that our current HDB and CPF policies may become a dangerous game of musical chairs.

If one is able to offload one's flat before its price collapses, as it must eventually, then we can retire comfortably. But then the one holding the bag is a fellow Singaporean – someone who bought your resale because they needed space for a growing family and could not afford to wait for a BTO.

Of course, some might argue that using the discounted value of rent to determine house prices is only one method and solely relying on this approach to explain high house prices could be misleading.

That is correct. There is at least one other common valuation approach and that is what some may call an adding up approach. Basically, we add in the price of land, the construction costs and the developer's profits to arrive at a price.

The unknown factor in this, of course, is what land should cost.

The Minister for National Development recently explained this further. Minister Desmond Lee told us that land sale prices for private housing developments are not used but that "relevant public housing transactions" are used instead.

If this is true, then we have not truly unshackled ourselves from the possibility that the land component, even for BTOs, may be overvalued.

If land prices are indirectly derived from the HDB resale market with transaction prices used as comparables, then any bubble in that market would become embedded into our BTO prices. What is worse – this bubble can feed on itself as the resale market cross-references the BTO one, back and forth. What is needed then is a way for us to price land not in reference to the market but in a way that we can justify via fundamentals.

One approach is to peg this at historical acquisition prices or, as Mr Leong Mun Wai has suggested today, to value it but only to realise the cost after the land is sold for profit.

Another way to do so is as a multiple of median salaries from new workers – a median the WP would prefer a multiple somewhat closer to three – but crucially, we should do this pre-emptively instead of as a target after market valuations have already been set. Doing so would ensure that it is HDB that is driving affordability, not trying to catch up to a market with subsidies, so that the tail does not end up wagging the dog.

The key is to break the tight link between land valuation that takes reference to market comparables and thereby deflate the bubble component that could build up in land pricing.

Let us first get some preliminary objections out of the way.

A common refrain by this Government is simply following well-established market principles of land valuation. Should there be any deviation from this approach, it would amount to a raiding of the reserves since our land trust belongs not just to the current but also future generations of Singaporeans.

First off, this argument is, even by the Government's own accounting conventions, fundamentally incoherent. The Singapore Land Authority (SLA) already exempts land leases of less than seven years from registration. The Ministry of Finance (MOF) currently treats income from land lasting less than 10 years in lease as recurrent income. If it is true that carving out part of the lease amounts to raiding the reserves, then this Government has also done the same for every short-term land lease that it makes where the proceeds are credited as recurrent revenue.

Furthermore, the Government already exercises differential land pricing for different classes and uses of land. Land zones for private residential purposes are valued differently from those for commercial uses and also differently from land use for infrastructure such as roads. Recognising the inherent public nature of roads and transitways, the land charge for this group is a mere $1 a metre.

While I am not suggesting that HDB flats should be priced at some unreasonably low quantum, it is fair to ask why land for public housing does not better reflect its public nature. But let us also be clear-eyed in what the trade-off we are making is about.

The Government is asking new homebuyers today to pay more for their BTO and resale flats, a significant part of which goes towards land cost, which in turn, is channelled into the reserves. So, we are, in effect, asking the present generation to pay more to support future ones.

Now, is this fair or just? There is not really a single right answer. But let us at least acknowledge that it is not necessarily selfish or greedy or even lacking in foresight to want some of the benefits of our land trust to be realised today.

After all, we all want the best for our children. Sometimes, that means leaving behind a sound inheritance. But it also means providing for them today with a roof over their heads and the comforts of a home. It also means being present for them as they grow up and not constantly pulling long hours at work just so that we can afford the home that we are living in.

More generally, we should recognise that the market does not price everything perfectly and perhaps, more crucially, it does not price everything that is important in life.

I know this sounds strange coming from an economist. In this case, when the market is able to price, even imperfectly, the value of land, it fails to price the value of the right to shelter and, in particular, the affordable shelter.

A friend once liked to quip that, "price is what you pay but value is what you get". Economists fully understand this, which is why we do not rely solely on the market to govern our lives. So, while it is probably true that it would be a step too far to price land at zero, it is also not unreasonable to say that we should value public land in a way that simultaneously reflects these intangible values.

Mr Speaker, I have explained why house prices are too high. All we need, I believe, is a reboot. But if we were to do so, the fear is that the transition can be disruptive.

We already have home owners with mortgages in public housing who have contractual obligations to their banks based on current valuations. What will happen if we reset prices downwards? Even if we only roll these out for new flats, the cheaper pool of available public housing is likely to lower the resale value of the remaining existing stock.

The effects will not be limited to public housing either. Were HDB prices to tank, private home flat prices will likely follow suit. Those who plan to extract funds to finance their retirement may suddenly find themselves with less savings than they expected and those with mortgages may find themselves underwater, where they owe the bank more than what the price of their house is worth. Banks could in turn be faced with a slew of non-performing loans and worse, if homeowners choose to forfeit their stake.

This would be a disaster scenario, not unlike the aftermath of a financial crisis. But it does not mean that we allow a bubble to grow inexorably. What is needed is a gentle path to this new normal so that economic growth and especially incomes can eventually catch up and make high prices justifiable.

Let us start by recognising that this will not generally affect the vast majority of homeowners, either because they plan to stay put in their homes or pass it down to their children. They will face certain paper loses but this will likely be temporary. Their day-to-day will remain unchanged.

It will affect those who are currently over-invested in housing and wish to cash out for various reasons. In this case, the Government may need to step in to buy up excess leases, perhaps up to 30 years, to provide a cushion.

There is already a scheme in place for this – the Selective En bloc Redevelopment Scheme (SERS) or the Voluntary Early Redevelopment Scheme (VERS), although the details on each have yet to be ironed out in full by the Government for each case. The Workers' Party, on its part, has proposed a universal sale and lease buyback scheme, which differs in that we do not require a return of lease buyback balance into CPF.

But what do we do with those who have sold their flats? There are, of course, the existing short-lease 2-room flexi flats, which are rationally priced according to Bala's Curve because they are always resold to HDB. Alternatively, we can introduce limited duration public rental flats available for rent for a maximum of 10 years.

My Sengkang colleague, Mr Louis Chua, has previously shared details on a more comprehensive public housing scheme which would expand rentals to include larger format units and relax the eligibility criteria. Add to this a time limit which will further minimise potential abuse, this scheme will ensure a roof over the heads of those families who wish to eventually own but allow them to wait out until the market reset is complete.

While we do need to alleviate backlogs, in the near future, this strategy will prevent overbuilding —

Mr Speaker: Assoc Prof Jamus Lim, you have about a minute left.

Assoc Prof Jamus Jerome Lim: Yes – since more resale flats will eventually enter the market down the road.

In a response to Mr Louis Chua's speech, Senior Minister of State Sim Ann pushed back against the notion of expanded public rentals, suggesting that it could weaken our communities. Hopefully, I have made it clear that there is no magic between lease and rent. Rental is essentially choosing to rent month-to-month or year-to-year whereas leasing is to pay upfront.

For the last decade of my life, I was also a renter. I did not feel less connected to the communities where I lived nor do I feel less pride in customising the interior of my home to reflect who I was. I saw it as a stage of my life and once I was ready for ownership, I made the transition.

The bottom line is that we need to afford a wider range of housing options for Singaporeans who may be at different stages of their lives and careers to allow them to sever what is clearly becoming an ever more untenable link between affordable housing and retirement adequacy.

Mr Speaker: Mr Cheng Hsing Yao.

6.57 pm

Mr Cheng Hsing Yao (Nominated Member): Mr Speaker, Sir, I would like to declare that I work for a private real estate company that develops residential projects in Singapore and several other cities in Asia. We also invest in residential projects in the UK and Australia.

Previously, I was working as an urban planner with the Public Service and I studied architecture and urban studies in Singapore, the UK and the US.

A shortage of housing and especially affordable housing is a serious problem for many cities. Most countries and cities have some form of public, social or affordable housing programme. Around the world, there are plenty of rousing expositions by housing authorities on their ambition to address the housing shortage and how they are going to do it. Few actually are able to follow through and realise their plans.

What we have achieved in Singapore is unique, special and precious. It comes from generations of people who set enlightened policies, develop practical solutions and programmes and execute them systematically.

When we critique our public housing programme and suggest changes, we should be careful we do not inadvertently undermine a system that works.

I would like to touch on a few specific issues.

First, I would like to discuss whether land price should be factored into the cost of public housing.

Land is not free just because it is state land. In Singapore, we do not have much natural resources but our 700-square kilometres of land is one of the rare natural resources we do have. This is why it makes sense to safeguard our land as a reserve.

The present Government is only a custodian and not the owner of the land.

A piece of land has no inherent value. Compare a piece of land in, say, Queenstown versus a similar piece of land in the middle of a huge desert. Unless there is oil underneath, the land in the desert is not worth much. So, why is this piece of land in Queenstown worth so much more? Because it is in Singapore.

We have a vibrant economy, functioning tripartism, harmonious society, many talented and hardworking people and Singapore is one of the most liveable cities in Asia.

The public, private and people sectors work hard to make Singapore successful. Thus, our land becomes valuable.

There are also direct investments made from taxpayers' money to make the land useful and more valuable. For example, the investment put into building an operating Changi Airport and the various maritime ports connects us to international travel and trade routes.

There are also investments into laying the roads, MRT lines, sewers, water pipelines, power supply, optic fibre, tree planting and recreational parks.

To omit or defer the value of land when computing the cost of our public housing means we are writing off generations of investment into our economy, society and environment, writing off the direct investments in planning, infrastructure and maintenance, writing off the value on behalf of past, present and future generations of Singaporeans.

When our investment creates value, we need to be able to capture it and channel back to the state or our reserves so they can be reinvested to create more value. If we do not factor the value of land into the cost of public housing, we are creating an open loop for the land value to be given away for free. Some part of the society will enjoy a significant windfall from the free land while another part of society will be paying for the windfall. Factoring in land value into the costs of public housing closes the loop of value creation and value capture. It also prevents undue windfall for certain people only.

Next, I would like to talk about public housing prices in mature estates. Calling an HDB estate mature has come to mean better location and more desirability. Many have implied that their higher prices are somehow the failure of HDB or the Government. When we buy a product that is of better quality, has more special features or it is a well-recognised status symbol, we do not question why it is more expensive. This is because we know we are paying for the additional utilitarian and experiential value. Someone explained to me that this logic does not apply to HDB flats because public housing is a public good. It is for those in need. Because it is a necessity, prices should not differ too much between mature and non-mature estates.

To consider public housing as a public good catering to those who are needy is perhaps true in many other countries or cities. Because they are unable to scale up their public or affordable housing programme, they are only able to cater to a small proportion of the population, perhaps 20% or significantly less. In Singapore, roughly 80% of Singaporeans live in public housing. We can academically assume that up to the 80th percentile income earners live in public housing, although I suspect many Singaporeans who belong to even higher income brackets also live in HDB flats. Therefore, we cannot look at people living in public housing in Singapore as a homogenous group. We have low-income earners, middle-income earners and a good proportion of rather affluent Singaporeans living in HDB flats.

Mature estates command higher prices because they tend to be closer to town, have more established amenities, been renewed and upgraded. Their prices are higher because they offer more of what people desire. Their prices are higher because people are prepared to pay more to live there.

If we artificially suppress their prices through some form of price controls, additional subsidies or grants to buyers, we will be distorting the real prices. Mature estates will be severely over-subscribed, which will lead to some form of balloting in order to allocate. The winners of the ballots would enjoy disproportionate benefit compared to those who did not.

Singapore's public housing programme has gone way beyond providing just for necessity. It has been providing for wants and aspirations for some time now. Needs can be better defined but wants are much more difficult. Housing needs can refer to shelter function, basic amenities and transportation access. Housing wants can refer to location, views, size, lifestyle, special amenities, such as being near certain branded schools. The call to either bring down the prices inmature estates or provide more grants to make them more accessible will ultimately lead to the same things – more subsidies in the form of taxpayers' money or tapping into the reserves.

In Singapore, we are not facing a severe housing shortage. Non-mature estates are well-planned, well-built, well-served by necessary amenities and public transport. Therefore, is living in the mature estate a necessity or a non-essential? To what extent should we use taxpayers' money or our reserves to fulfil non-essential demands of a specific group of people? I believe the Government's responsibility should not be extended indefinitely and it has to stop somewhere. Let us not forget the so-called mature estates were once new towns. So, buying into a non-mature estate and paying lower prices can be a good option because they will be tomorrow's mature estates.

I would now like to talk about the Selective En bloc Redevelopment Scheme (SERS) programme. Many of us think of SERS as a means to intensify land use. Many older HDB estates are built to lower densities and specifications. In land-scarce Singapore, SERS help to optimise the use of land. SERS also has another very important function, that is, urban renewal. Many cities around the world face the problem of urban degeneration in their older city core or ageing estates. Buildings, infrastructure and local community degenerates through time if they are not regularly renewed. Older buildings are built to lower specifications and are less able to meet new expectations. For example, many older HDB flats are not designed for universal access.

Without urban renewal, estates go from degeneration into decay. People will move out and property values will fall drastically. For many city authorities, they are unable to effectively carry out urban renewal because it is very costly. It is challenging to acquire existing properties or relocate people living there. As a result, many city authorities put substantial resources into developing new districts on unencumbered land while leaving older neighbourhoods to fend for themselves.

When a precinct goes through SERS, there is an uplifting effect on the surrounding neighbourhood as well. New amenities are introduced, more young people move in, some infrastructure also get upgraded, the vitality and attractiveness of the surrounding older neighbourhoods are also improved as a result.

Urban renewal is not a one-time affair but a continuous effort. Each SERS project requires a lot of capital. To have a sustainable renewal programme, there has to be a sustainable way to fund it. The Government cannot run huge losses for each SERS project. Furthermore, as so much public funds are involved, a strict discipline must be maintained in its execution. The methodology of valuing and pricing old as well as new flats in a SERS programme must follow a consistent and established professional practice and public policy. This allows the Government to properly assess the feasibility of each SERS project and carry it out according to plans. It also maintains impartiality as the Government moves from one SERS project to another. We should not allow the methodology to be modified at will because it is equivalent to having the Government dictate values arbitrarily. This will open the doorway for manipulation and other dire consequences.

Valuation and pricing must be rational and untainted by emotions. This is not to say we ignore the plight of the individuals who may have extenuating circumstances. Assistance can be offered through separate designed schemes based on a different set of policies.

Lastly, I would like to talk about trade-offs in public policy making. Public policies and programmes have a multitude of imperatives to fulfil. These different imperatives converge and contradict at the same time. They also have to cater to a multitude of stakeholders with very different needs and wants.

An enlightened public leader will carefully weigh the pros and cons of each policy option, never downplay the trade-offs and never sacrifice the long-term benefits for short-term gratification. The enlightened leader will choose the most optimal pathway that best meets the policy objective. Whichever path is taken, some will be more adversely affected than others. This does not mean the policy has failed. As I said earlier, a separate support measure can be introduced for those who are seriously affected.

We should upkeep such an enlightened way of discussing and making public policies. In recent past, we can see many examples around the world of how countries would get charmed by appealing rhetoric that understates the trade-offs and real costs. They ended up making very poor choices for themselves. Eventually, it is still the people and the man-in-the-street that suffered the most.

What worries me is our sense of Singapore's vulnerability seems to be eroding. This is perhaps because we have been doing so well for such a long time. Sometimes, I think people do not believe the trade-offs we are grappling with are real. It seems they believe we can just tap into our reserves to pay the trade-offs away.

In business, every promise for a reward is usually accompanied by a corresponding risk. When we look at business deals, the ones that are too good to be true usually are. Public policies are the same. [Applause.]

Mr Speaker: Mr Louis Chua.

7.09 pm

Mr Chua Kheng Wee Louis (Sengkang): Mr Speaker, I would like to first declare my interest as an equity research analyst in a financial institution covering the real estate industry.

Mr Speaker, "Insanity is doing the same thing over and over but expecting different results." This saying is usually attributed to Albert Einstein, but one might argue it also appears to be the current approach to the multitude of housing-related issues we are seeing in Singapore today.

HDB is prepared to launch up to 100,000 flats in total from 2021 to 2025, if needed. HDB will continue to monitor housing demand and make adjustments, where necessary.

These statements were first made known in December 2021, after a broad suite of property cooling measures were introduced. We had another round of cooling measures in September 2022, with a particular focus on the HDB market. Yet, following multiple Parliamentary Questions (PQs) and speeches by myself and other fellow Members of Parliament, iterations of statements quoting the "up to 100,000 flats" from 2021 to 2025 figure remain.

I say that there is a clear need today for not just 100,000 flats in total from 2021 to 2025 but certainly more, and it is clearly necessary to make adjustments urgently. The objective of my speech today is thus a very simple one: for the Government to urgently execute on the policy to boost the supply of housing to address the shortfall in the market today.

It is not difficult to see manifestations of the severe demand-supply imbalance in our housing market today.

In the latest fourth quarter 2022 housing data release, HDB resale prices continue to remain firm, rising 2.3% from the last quarter, with the increase higher than the 2.1% quarter-on-quarter increase initially estimated for the quarter. This was in spite of the cooling measures introduced in September 2022. For the full year 2022, HDB resale prices saw another year of double-digit price increases at 10.4% compared to a year ago. In the last three years, HDB resale prices rose by a whopping 31%.

Private residential prices, similarly, rose in spite of rising interest rates, though the extent of increase is ironically nowhere near that of the public housing market, with 2022 price increases of 8.6%, while in the last three years, prices were up by 22.8%. To put it simply, resale HDB prices are rising far more rapidly compared to private residential prices. Importantly, there appears to be some signs of moderation in the private residential market, with prices up just 0.4% quarter-on-quarter versus 3.8% a quarter ago.

The residential rental market is, for lack of a better word, in an even scarier situation. Private residential rents rose by 7.4% in the most recent quarter alone, with rents up 30% in one year and 42% over the last three years. While HDB does not publish a rental index, a comparison of median rentals across HDB towns paints a similar uncomfortable picture. And just a few days ago, Shin Min Daily News reported that a 74-year-old HDB unit at Seng Poh Road was rented out at $6,200 a month. For 4-room HDB flats, median rents have risen by 22% to 50% in the last one year alone, with median rents up 29% to 68% in the last three years. And these are just a comparison of median rents, and to paraphrase what one of my residents at an earlier Meet-the-People Session (MPS) shared with me when I quoted median rents in the market, he asked me to try and go on PropertyGuru to see whether you can find such low rents.

It is not hard to imagine how the rental market got so out-of-hand. Private residential vacancy rates are hovering near historical lows, at 5.5% as of the fourth quarter of 2022. For the HDB market, in response to my Parliamentary Question in October last year, MND shared that over the past five years, the annual average number of unoccupied HDB units ranged from about 1,400 to 3,900. These units make up a mere 0.1% to 0.4% of completed flats.

While multiple rounds of cooling measures in the past have typically focused on the demand side of the home purchasing equation, fundamentally, I believe the shortage in supply is a key contributing factor causing the imbalances we see in the market today.

I acknowledge that compared to 2021, housing supply is set to increase by about 35% over 2022 and 2023, with about 23,000 BTO flats to be launched per year. Moreover, the HDB stated that it is prepared to launch up to 100,000 flats in total from 2021 to 2025, if needed, subject to prevailing demand. These numbers, however, need to be put in context.

Even if HDB decides to launch the whole 100,000 flats in total from 2021 to 2025, this implies that BTO supply falls 20% to about 18,400 flats in 2024 and 2025.

Moreover, while the average of 20,000 BTO flats between 2021 and 2025 is an increase compared to an average of 17,000 flats between 2016 and 2020, this is still 13% below the average of 23,000 flats in 2011 to 2015, during the time when Mr Khaw Boon Wan was Minister for National Development and sought to address the backlog in HDB flats.

We have already seen BTO application rates climb steadily over the past decade to new highs. For 3-room and larger flats, this increased from 2.8 times in 2012 to 6.1 times in 2021 and 5.5 times in 2022. Including 2-room flexi flats and on an overall basis, BTO application rates have climbed from about 2.8 times in 2012 to 5.6 times in 2021 and 5.1 times in 2022.

What is of greater concern is that despite the ramp-up in supply with 35% more units last year, overall application rates have remained stubbornly high at 5.1 times in 2022, compared to an average of just over three times in the past decade – suggesting that the level of demand-supply imbalance remains a critical concern.

The issue of supply shortages is not unique to just the public residential sector but, similarly, applies to the private residential market as well, given the similar approach taken by the Government.

Again, I note that in percentage terms, the Government has increased the supply of private housing, including Executive Condominiums (ECs) on the confirmed list of the Government Land Sales (GLS) programme by 75%, from about 3,600 units in 2021 to around 6,300 units in 2022. In the first half of the 2023 GLS programme, the number of units has also increased by about 17% half-on-half to about 4,100 units.

We must, however, put these numbers into context. Last year saw the lowest annual primary sales volumes across private housing and EC units in the last 14 years. But there were about 8,600 units being sold. More than 36% of the number of units made available in new supply in 2022, if we consider the last 10-year average primary sales volumes of about 12,000 units, then essentially, last year's supply is just about half of the average annual sales volume.

It is no wonder that the level of unsold inventory in the private residential market is hovering near historical low levels today. And as I have shared earlier, private residential vacancy rates are hovering near historical lows. So, it is not as if we are looking at "ghost towns" being built. If, and even if, there truly are excesses, whether in the short run or medium run, these can be repurposed into public rental flats which my hon friend Assoc Prof Jamus Lim has elaborated on.

Fortunately, or unfortunately, the private sector has its way of adding to residential supply through en bloc and redevelopment schemes, which partially mitigates the supply situation. A cursory look at the new launches for 2023 would suggest that a significant number of them are derived not from GLS, but also from en bloc and redevelopments concluded over the last few years.

What, then, has been the key drivers of residential demand? In response to my Parliamentary Question in October, MND shared that demand for housing has been broad-based. On this point, I fully agree with the Government's assessment of demand.

More households are forming as the echo-boomer generation are getting married, especially with the easing of COVID-19 measures. We also see societal trends shifting to smaller households, as young couples, singles, as well as adult children, choose to buy their own homes instead of living with their parents.

Indeed, I have observed that the growth in resident households has, over the past decade, consistently outpaced that of the resident population. To put into context once again, the number of BTO flats launched, the number of citizen marriages was cumulatively about 230,000 over the last 10 years up to 2021. However, the number of HDB BTO flats launched was only about 192,000 units or so in the same period. Yes, there could be a minority of citizens who can purchase private residential housing as their first home, but even ignoring demand from other groups of Singaporeans, the number of flats appears to be insufficient to meet even the demands of our newly-weds.

The shrinking of overall average household sizes also does not appear to be letting up, at 3.15 as of 2021, the lowest recorded figure since 1990 when it was over 4.2. MND, too, noted in a Parliamentary Question response in November 2022, that over the past 20 years, the average household size among resident households living in HDB flats shrank from 3.57 to 3.09. For the near future, MND expects housing demand to be robust due to strong household formation and societal trends towards smaller households.

My question, then, is if it is already a known fact to the Government that the demand for housing is broad-based and it is unlikely that societal trends are going to go into reverse anytime soon, should we not take more proactive steps to address demand from Singaporeans, rather than try to curb demand?

Moreover, I believe net immigration into Singapore could add further strain on local housing demand. In the latest labour market report for the third quarter of 2022, MOM noted that the labour market maintained its growth momentum in the quarter, as total employment continued to expand robustly, led by non-residents at 71,100, compared to residents at 4,800.

We are seeing high occupancy rates at dormitories as the number of Work Permit holders in the Construction, Marine and Process (CMP) sectors is currently at more than 10% higher than pre-COVID-19 levels. Two weeks ago, The Straits Times reported that record-high HDB rents and difficulties in securing accommodation are driving Malaysians working in Singapore to live in Johor Bahru and commute to Singapore daily for work instead. Should the non-resident labour force continue to grow, this could continue to add further strain on our already strained housing market situation. Can more be done? I certainly think so.

In October last year, I asked if additional sites can be activated to increase the number of HDB BTO flat launches beyond the current plan to launch up to 100,000 flats in total, from 2021 to 2025, should demand exceed current projections and if not, what are the constraints for not being able to do so.

Apart from reiterating existing plans to launch up to 100,000 flats between 2021 and 2025, I do not think I got a response to my question. However, if we look at the HDB BTO launches over the last 10 years, approximately half of the sites used for public housing developments over the past 10 years were greenfield. In comparison to brownfield sites, and certainly so for sites which are already located within existing housing estates, there need not be as much land preparation works that need to be done.

Just last month, the hon Mr Gan Thiam Poh even asked whether the open land between TPE and Fernvale Street will be used to build HDB BTO flats to meet the increased demand for public housing and if so, when will HDB flats be built there. I note that based on the URA's gazetted Master Plan 2019, plot ratios for certain sites have even been determined at 2.1 and 3.5, with the road name Fernvale Crescent also decided. So, like Mr Gan, I too hope MND will launch HDB flats at Fernvale Crescent soon.

I am comforted by Prime Minister Lee's comments during the National Day Rally late last year, where he shared that and I quote, "We have done our studies and planning. We will have enough space for future generations. Our problem is not finding the space to build enough flats, nor keeping homes affordable for Singaporeans. We know how to do that."

I, thus, sincerely hope the Government can take urgent and decisive steps to increase the availability of public housing and ensure that the housing needs of all Singaporeans are met. Allow me to conclude in Mandarin, Mr Speaker.

(In Mandarin): [Please refer to Vernacular Speech.] The Government often stresses that home ownership has been, and will always be Singapore's key housing strategy. Since this is the Government's position, it is only natural for us to believe that the Government can effectively implement this strategy.

I acknowledge that compared to 2021, housing supply is set to increase by about 35% over 2022 and 2023, with about 23,000 BTO flats to be launched per year. Moreover, HDB stated that it is prepared to launch up to 100,000 flats in total from 2021 to 2025, if needed, subject to prevailing demand. These numbers, however, need to be put in context.

Even if the HDB decides to launch the whole 100,000 flats in total from 2021 to 2025, this implies that BTO supply falls 20% to about 18,400 flats in 2024 and 2025. Moreover, while the average of 20,000 BTO flats between 2021 to 2025 is an increase compared to average of 17,000 flats between 2016 and 2020, this is still 13% below the average of 23,000 flats in 2011 to 2015, during the time when Mr Khaw Boon Wan was Minister for National Development and sought to address the backlog in HDB flats.

We have already seen BTO application rates climbing steadily over the past decade to new highs. What is of greater concern is that despite the supposed ramp-up in supply in the past two years, overall application rates have remained stubbornly high at 5.1 times in 2022, suggesting that the level of demand-supply imbalance remains a critical concern.

Last September, I tabled an Adjournment Motion in Parliament to call on the Government to take decisive steps to increase the availability of public housing and solve the imbalance between supply and demand. Prime Minister Lee Hsien Loong said during the National Day Rally 2022 that “our problem is not finding the space to build enough flats, nor keeping homes affordable for Singaporeans”. Today, I sincerely hope the Government can seriously consider our request and the people's request by ensuring an adequate supply of public housing to help Singaporeans realise their home ownership dream.

Mr Speaker: Ms Denise Phua.

7.25 pm

Ms Denise Phua Lay Peng (Jalan Besar): Sir, the success of Singapore's public housing programme is world-renowned. About 80% of citizens own their own homes today, one of the highest home ownerships in the world, and 80% of Singapore's resident population live in HDB public housing.

The original public housing policy intent: the late Mr Lee Kuan Yew, founding Prime Minister of Singapore, has placed public housing as a key pillar of the People's Action Party (PAP) mandate to improve the living standards for its people. Ensuring that citizens have a roof over their heads, and later, promoting home ownership, is the paramount priority of the PAP Government.

Over the years, as Singapore progresses, HDB flats also evolved to meet the changing needs and expectations of residents. We see the building of beautiful housing landmarks, such as The Pinnacle@Duxton and Punggol 21. Some of them are comparable to, and even look better than private leasehold developments, and at less than half the prices.

Our CPF relaxation also means that many times, there is no cash outlay and one can tap on CPF to pay one's mortgage. Such is the success and appeal of Singapore's national housing programme.

But is Singapore a victim of its own successful public housing policy, some asked. Many Singaporeans now see owning an HDB flat as a rite of passage and even an entitlement. The initial goal of HDB to provide a home for every Singaporean has long been surpassed. In an effort to accommodate the changing needs and aspirations of residents, HDB has now given owners the flexibility to both own HDB and private properties, and even renting out their HDB flats while living in private properties.

It is, thus, not a surprise that a number of Singaporeans see an HDB flat as an investment vehicle to make a windfall profit upon sale. Some purchase private properties after their Minimum Occupation Period (MOP) and rent out their HDB flats as a source of passive rental income. We have even heard of instances when HDB homes were sold in the market immediately after MOP and advertised to be "hardly lived in" or "as good as new".

The popularity of mature estates: Sir, I believe that the popularity of mature estates is the elephant in the room. The returns appear to be even higher for those who are lucky enough to procure an HDB flat in or closer to the city or mature estates, the more popular places. The popularity of mature estates has led to excessive demand, longer wait times and a reluctance to consider other locations.

It has also led to some uniquely Singaporean behaviours of courting couples in Singapore. Whilst applying for an HDB flat used to mean a serious intent to settle down for marriage, it is not always so now. I know of couples who apply for an HDB flat within a few months of courtship, citing the long waiting times for a matrimonial home. Yet, others who are more serious in their relationships decide that they would delay marriage and having children until they procure their permanent housing.

I commend the Government for having the political will and courage to implement the latest Prime Location Public Housing (PLH) programme, with features, such as the longer MOP, tighter rental restrictions and recovering of additional subsidies. This is helpful to those, especially my residents in the Central District, who want to buy with the interest to stay, especially in the prime locations and mature estates.

Alas, it may be too late for HDB to turn back the clock entirely and revert to the policy of only insisting that one must live in one's HDB flat, disallow one to purchase a private property whilst owning an HDB flat. Times have changed. Needs and aspirations of home owners have changed over time and some flexibility is to be expected. However, the fundamental purpose and priority of public housing has to remain to provide for affordable housing for each Singaporean household to live in.

The key, now, Sir, is then to balance between home owner-occupation and investment, and second, to manage the demand for HDB flats in popular mature estates versus non-mature estates.

First, on balancing between home owner-occupation and investment. I suggest the following.

One, continue to apply the principles of the PLH scheme to the popular and mature HDB estates, to further strengthen the owner-occupation intent of public housing and to weaken the investment intent. Where need be, the Government must have the moral courage to apply the same principles to all HDB estates with stricter applications to the popular locales.

Two, continue with the additional buyer stamp duty (ABSD) introduced by the Government to tax the purchase of second and subsequent residential properties. Industries, professionals and potential buyers I spoke to have found that this ABSD measure is effective. It is an effective cooling measure. My suggestion is to make a bigger distinction between the ABSD that Singaporeans have to pay versus Permanent Residents (PRs) and foreigners, to ensure that Singapore properties will be less costly to Singaporeans and will remain mostly in Singaporeans' hands. If non-Singaporeans wish to purchase more Singapore properties, they should pay a higher price.

Next, on balancing the appeal of mature versus non-mature estates. We need to engineer demand away from popular mature estates. Like what Nominated Member of Parliament Cheng Hsing Yao mentioned, is it "a must-have" or "a nice-to-have", to stay in a popular estate? HDB should engineer a change to shift demand away from the mature estates.

Let me propose some ways. One, build even more appealing satellite towns away from the popular estates through better residential concepts, better education facilities, business hubs and transport amenities. HDB has done it before and can do it again. Bishan, once unpopular because it was a former graveyard is now one of the most sought-after, due to good schools and excellent public transport connections. The new town of Punggol with its waterway, parks and jetty, and a proposed Punggol District Park is another.

Two, provide more substantive financial and non-financial incentives especially for first-time BTO applicants to move to non-mature estates. It is not uncommon to hear of governments in other countries providing very attractive incentives to entice people, citizens to relocate to targeted residential zones.

Three, do more for couples embarking on marriage and parenthood, especially first-timer applicants. Take a calculated risk at least in the short term to Build-Then-Order, to advance build for this group, building in advance, instead of just Build-To-Order.

I am really glad that the Minister is considering shorter waiting time flats and I would urge him to consider an even shorter or no waiting time flat for these genuine first-timers.

Finally, I just want to say a few words about Mr Leong Mun Wai's latest proposals, the Affordable Homes Scheme, which introduces a deferred land cost to a newly purchased flat. I hope I have heard the proposal correctly because Mr Leong has moved from his former position of excluding land cost totally from BTO flats to now, a deferred land cost.

According to this proposal, from what I heard, a buyer will need to pay only: one, a construction cost; and two, a notional location cost, when he buys a flat. HDB will then record the historical cost of this flat which will then be clawed back when a buyer decides to sell. This way, according to Mr Leong, a Tengah flat, which is quoted at $350,000 would go for $140,000. And I guess it will just take one to two years of one's annual pay to pay up this flat. And, if the owner decides to stay, then he will get to keep the flat at $140,000. A flat indeed without land cost.

Mr Leong is indeed proposing a very big Valentine's Day gift of a double subsidy to every Singaporean BTO buyer. I wonder how this will be financed or traded-off against other national needs, such as healthcare, education, not to mention the current housing deficits.

I also have a question. How does Mr Leong's proposal address the elephant in the room that I have mentioned, that mature estates in prime locations are still highly sought after? A Bishan BTO today costs about $500 to $600 per square foot, while a private property just across the road at Skyview costs $1,700 per square foot – more than double the BTO price. How does Mr Leong's proposal address this elephant in the room that there are still mature estates that are still very popular and how do you meet the needs of first-time owners who want to live in these prime locations?

Is this solving a housing affordability issue or just confusing the issues? So, I seek Mr Leong's clarification on his proposed Affordable Homes Scheme. How much would the Affordable Homes Scheme cost in total to taxpayers, especially to Singaporeans who do not get to enjoy it? And how does the high demand for prime location, mature estate housing be addressed, versus my earlier suggestions? I look forward to Mr Leong's clarification.

Sir, in conclusion, Singapore's public housing programme is world-class. It is now so appealing that most young Singaporeans want to have a piece of it, want to be part of this. I do not think it is broken, but it can further evolve to ensure that priority is indeed given to fundamentally housing our citizens. Housing policies and pricing decisions everywhere in the world are complex and involve decisions that affect economic, social and political stability. We cannot just reboot or reset at will. So, I urge Singaporeans not to be taken in by populist suggestions to undermine our precious national public housing programme. I support the Motion by the Minister for National Development.

Mr Speaker: Mr Sitoh Yih Pin.

7.36 pm

Mr Sitoh Yih Pin (Potong Pasir): Mr Speaker, Sir, thank you for allowing me to participate in this debate. I would like to spend the next few minutes to provide my thoughts after listening to the comments by Mr Leong Mun Wai and some of the Progress Singapore Party (PSP) and Workers’ Party (WP) Members of Parliament.

Firstly, there is talk about the pricing of land, whether you should price it below market price, whether you should transfer it at historical price and so forth.

As an accountant, I can tell you there is a fundamental basic principle in accounting, which is that everything must be done at arm's length. It is called an arm's length transaction, that is, goods and services must be provided, sold or transferred at arm's length prevailing market prices. This is basic accounting. This is basic corporate governance.

And that is why you cannot transfer land at historical cost, at $1 or whatever. Because you must make the HDB management and the board accountable for all its operations. When you do it at less than market price, they are going to have a field day with what they want to do. This just does not make sense.

The second point that was raised was whether this amounted to a raid on our reserves. To be very, very honest, my brain is not very big and it is not very fast. It took me a while to figure out why Minister Desmond Lee said it amounted to a raid on reserves – and it is. Let me again try to explain it in my very simplistic manner. I have not discussed this with Minister Desmond Lee, but I hope I get it correct.

Let us say there is a piece of land here. The authority – whether it is the Singapore Land Authority (SLA) or the Urban Redevelopment Authority (URA) – can decide to give this piece of land to HDB to develop. But on the other hand, it can also decide to sell this same piece of land to the private sector. If he sells it to the private sector, we all know there is a Government Land Sale, the proceeds would then go into reserves and then it is invested and that is where we get our Net Investment Returns Contribution (NIRC).

So, if you just give it to HDB at $1 or less than the market price, you are in effect depleting the reserves. It is an economic cost forgone. Mr Leong Mun Wai will know this because he is an Economics graduate from Japan, I think.

Are there instances where land is transferred at less than market price? I think there are; I have not checked this. I think there are. And let me give some examples. Gardens by the Bay is in a prime location. If it is not transferred at a nominal price, it cannot be built. It is a project by NParks.

Second, Government hospitals. Government hospitals, I think, should be transferred at nominal value because we need to build hospitals for our elderly and for our fellow Singaporeans.

SAF training camps and training grounds must have been transferred to the Ministry of Defence (MINDEF) at a very low cost because that is for national defence.

Gardens by the Bay and public hospitals are public amenities for the public to use, for the public to enjoy. And that is why it justifies transferring the land at below market price. But your HDB flats are public housing, but it is not a public home for the public to walk in and out. It is a home that Singaporeans own and they live in and have their own privacy. So, because of that, there must be a price to the land cost. And the price must therefore be the prevailing market price as assessed by the Chief Valuer.

Sir, there is a song called “Be Careful What You Wish For”. Because some of the arguments put up by Mr Leong, I think, whilst I am no property expert and neither is he, I think it is going to lead to a decrease in BTO prices, it is going to lead to a decrease in resale prices. And not that it has not happened. I think if my memory serves me right – in 2003 and 2004, after the 1997 Financial Crisis, there were unsold HDB flats; tens of thousands of them. There was walk-in selection, where people walked in and they bought the walk-in flats at prices lower than those for the people who have queued for their flats.

So, be careful what you wish for, because if I go by Mr Leong's methodology, we can be in a lot of trouble.

Over the Chinese New Year, I came across an article by a BBC correspondent. It is an article written in January, last month. It says, "Japan was the future, but it is stuck in the past." Singapore was the future, is the future and, as an aspirational country, we definitely want to be the future too.

Let me read to Members a paragraph, very interesting to me, in this article. I quote, "Then in 1991, the bubble burst. The Tokyo stock market collapsed. Property prices fell off a cliff. They are yet to recover."

A friend was recently negotiating to buy several hectares of forest. The owner wanted $20 per square metre. My friend told him forest land is only worth $2 per square metre. But he insisted he needed $20 a square metre because that was what he paid for in the 1970s. Never mind that this is forest land. You go to Tokyo, you go to Osaka. It is the same. The property prices have never recovered in the last few decades. Is that what we want?

So, the song goes again – be careful what you wish for. I wish I could sing it to you, but the Standing Orders do not allow me to sing in Chamber.

Mr Speaker: Please do not. [Laughter.]

Mr Sitoh Yih Pin: So, I was reading just last night as I was trying to research for what I want to say today. But after hearing, I decided to put aside my speech and maybe I should respond. I think there is a quote by Lenin from Soviet Russia. He said something along the lines like, there are decades where nothing happens, but there are weeks where decades happen. If I go according to Mr Leong's or the PSP's methodology, those few weeks and those few months can see our property prices crumbling. Is that what we want?

I am 60 years old this year. I have seen episodes in my life. What I have learnt is that when you come down it is very steep, it is very slippery, it is very fast. But when you try your way to recover and to climb back up, I can tell you the slope is very, very gradual. It is going to take you a long time.

So, again, be careful what you wish for, especially in Singapore where 89% of our population are home owners. It is unlike other places. In Hong Kong, for example, it is 51%.

So, if we do what Mr Leong suggested we do, are we able to stomach it? And another lesson I learnt in life is that when you do something, you ask yourself whether you can stomach it, because if you cannot, do not do it. Do not think about the upside because the upside is only a measurement of your happiness. That is something you can fully enjoy and fully be able to take in.

So, what do we hope to see? I think we hope to see something like a Goldilocks situation. Our prices can move steadily upwards and slowly, in line with our rise in income, not too hot, not too cold.

Mr Leong Mun Wai gave an example about Tengah. Actually, I was hoping that he would bring up Bidadari as an example, because Bidadari is in Potong Pasir constituency. By the end of 2025, there will be 9,000 new dwelling units in Bidadari.

I have visited the flats there. Overwhelming demand for the flats. They are all almost completely sold. Based on my estimation, I think the flats are sold at not mean household income, but the family household income, about maybe six times, maximum seven. It is more like six, of their annual income. And I think that is fully affordable, right?

Well, is there a problem? Yes, I think there is a problem. I will concede. The problem is the long waiting time, as residents at Meet-the-People Sessions have told me and emailed me. But the key reason for the long waiting time is because of COVID-19 and as Minister Desmond Lee has said, we are looking for ways to solve this as soon as possible.

Mr Speaker, Sir, I would like to conclude by saying that our housing programme is definitely not broken. In fact, I think it is very good. It has delivered many benefits to Singaporeans and will continue to do so. Can we improve? Sure. Of course, we can improve. And that is why there are public policy adjustments from time to time.

Again, I want to say, be careful what you wish for, because we are having a good run. It has taken us 60 years, almost 60 years, to reach where we are today, because we have got hardworking people, we have got good jobs, we have got good economic growth and the nation has progressed. But there is one more thing, one more key important reason that I feel we do not talk about enough. And it is because the PAP Government has earned its place amongst our people. We have built upon the strength of this nation. One people, one heart, "one semangat" or one spirit. [Applause.]

Mr Speaker: Mr Murali Pillai.

7.48 pm

Mr Murali Pillai (Bukit Batok): Mr Speaker, Sir, I have the invidious task of going after Mr Sitoh Yih Pin, I do not think I can match his energy, even though he is 60 years old and I am born five years later. Please allow me to first deal with the Motion in the name of the hon Non-Constituency Member of Parliament Mr Leong Mun Wai and to contrast it with that standing in the name of the Minister for National Development.

On the first Motion, I have no quarrel with the need for this House to review public housing per se, to ensure that public housing is kept affordable, accessible and inclusive for every Singaporean of each generation. The hon Member Mr Leong Mun Wai suggested that the second Motion precludes this review notion. I do not think that is the intent. In fact, Prime Minister Lee Hsien Loong himself committed in this House that all public policies will be reviewed. But he also said that the values that the PAP Government stands for, that remains firm. And the values embedded in this Motion, about providing our Singaporeans with affordable and accessible housing, taking care of the interest of the current and future generations of Singaporeans – those values, as far as I am concerned, are immutable.

I strongly reject the insidious premise of the first Motion; that the review is required “in order” to deliver affordable and accessible housing, which is to say that this Government is not doing so now for the majority of Singaporeans.

Respectfully, there is no basis for this allegation. I will show why this first Motion rings hollow and sounds naive. Today, as hon Members before me have said, Singapore has a very high rate of home ownership of 90%. This makes Singapore as having the highest rate of homeownership in the world. In comparison, close to 70% of European Union residents own their homes. In Switzerland, it is about 39%, in the UK and US, it is about 65%.

The United Nations (UN)-Habitat issues publications to provide reliable and independent documentation of housing programmes across the world. In its 2020 report on Singapore, the authors made the following points: (a) more than 80% of Singapore residents own and live in public housing provided by HDB; and (b) this addressed the housing unaffordability and accessibility problem that we encountered in the 1960s.

Not only that, the quality of public housing in Singapore is high. The hon Nominated Member of Parliament Mr Cheng Hsing Yao spoke eloquently about this and the factors that have contributed to this. It is embedded with various upgrading programmes, at a cost that is borne largely by public funds. There is supportive infrastructure and amenities too like MRT stations, schools, shopping centres, swimming pools, sporting stadia and other facilities.

How does this compare with other countries? We need only ask the well-travelled Singaporeans amongst us. The fair-minded will say that we compare very favourably and I fully agree with the hon Nominated Member of Parliament Mr Cheng that Singapore is one of the most liveable countries in the world.

The UN-Habitat report is from a reputable international organisation that does not have to humour Singapore. What the hon Non-Constituency Members of Parliament have suggested in their Motion is at variance with the report.

Now let me outline the difference between the first Motion and the second Motion. The first states aspirations without cost – hence, it is naive. The second requires pain and choice. The first speaks as if everyone is entitled; the second requires us to respect the differences in society.

Let me put this more plainly – the second Motion bears the signature of two key components of the PAP Government – socialism and long-term planning. First, it requires that the Government balances the different interests within the current generation, showing us that there are contestations among different groups even today. In this, the Government's philosophy has been socialist – that the least among us must have the most.

Second, the Motion requires us to make a difficult political choice – to be fair, not just to the citizens of today, but to those of tomorrow. This is difficult because we must resist the political temptation to pander to the voters of today who decide based on the tangible benefits which they can see and experience, rather than any notions of fairness to people to whom they owe nothing – the citizens of tomorrow.

And yet, this PAP Government is a strange creature that feels this debt and in housing, as in so many other policies, including most recently, climate change adaptation, it has committed itself to the long-term.

On housing affordability, it may be useful to bear in mind how Singapore compares with the Organisation for Economic Co-operation and Development (OECD) countries. An average household in the lowest quintile of an OECD country spends 37% of the household income on housing. For the middle-income households, this translates to 31%. In fact, they spend most of their money on housing as compared to other essentials such as food and clothing, education and health.

Let us compare this to Singapore. The hon Minister had recently explained that the Government provides subsidies and grants to allow the vast majority of Singaporeans to purchase homes which are about five times their annual incomes and he also mentions that this compares very favourably to cities like London, Los Angeles, Sydney and of course, Hong Kong too.

The Progress Singapore Party (PSP) Members of Parliament dispute this. They feel that the servicing of the mortgages through the CPF presents a cost, even though it may not be accompanied by cash payment for most Singaporeans. Now, I want to highlight that you can only use the Ordinary Account of the CPF to fund housing instalments. The Special Account is preserved, the Retirement Account is preserved. At the end of the day, what is the PSP referring to as cost? This is really our retirement. So, when the people, the residents pay through CPF and when they sell their house, they get a refund, it is really to secure their retirement. Now, if this is not a good idea, then what is PSP's proposal to take care of the retirement needs of such people?

Indeed, in the 2022 Urban Land Institute Asia Pacific Home Attainability Index, Singapore’s public housing was ranked as the most affordable. This speaks volumes.

I do recognise that there are fellow Singaporeans who feel that housing has become very expensive and out of their reach. For example, one third of the cases in my Meet-the People Sessions now relate to housing matters – and quite a few of them are young people who are in the queue for flats, just like what Mr Sitoh Yih Pin had said.

Here, I want to acknowledge that they are anxious because the wait has been longer than expected for their flats and with rents being so expensive, the pain of the wait is very real. It is difficult, but useful, for us to distinguish the problem of a delay in getting a flat with the problem of affordability. The comparison I gave just now, as well as the fact that many Singaporeans can service their mortgages through CPF alone speaks volumes.

On the problem of delay, as may be recalled, buildings across the world was affected by the pandemic and Singapore is no exception. HDB, as we heard from the hon Minister, is dealing with the problem decisively by building 100,000 units between 2021 and 2025, and that, I understand, is the forecast of the demand. The hon Member Ms Hazel Poa has suggested ramping it up to the numbers we saw in the 1980s, but is that a wise idea?

I cannot put it better than what Mr Sitoh had said. Be careful of what you wish for, because if you were to do it wrongly, then the sellers will get upset. Then we will get back to Parliament and somebody will be making arguments on behalf of the sellers. So, it has to be a very calibrated approach to make sure that you build in accordance with what the market can absorb, at the same time, deal with the aspirations of Singaporeans. It is a balancing act.

Let me give Members a comparison. In Hong Kong, it was announced that they are building 30,000 temporary public housing units over a five-year period. This is a temporary solution and it seems to me that they have a more difficult housing problem. The current waiting time in Hong Kong was reported to be 5.6 years. With this temporary solution, the government intends to cut it down to 4.5 years. In Singapore, the median waiting time is between four and 4.5 years and is expected to come down to below three years by 2024.

The hon Member Ms Poa had suggested the waiting time should also include time of an unsuccessful applicant, but as what the hon Minister had said, there are many, many ways for one to acquire, or several ways for one to acquire a BTO flat. You can apply for an SBF flat, you can apply for a BTO flat in a mature estate and you can apply for a BTO flat in a non-mature estate. So, these are different pathways. To just blanketly measure waiting time for all these cases together does not make sense, but qualitatively, we are already measuring it, because for those in a non-mature estate, they get priority and the Minister already said they will get their flat within three tries.

The Singapore ownership figures I highlighted does not, however, speak for the 3% in our population of Singapore residents who cannot afford to own their homes. For them, they are provided with public rental housing. This compares favourably with a number of other countries. In Hong Kong, it is 29% for social housing units; for Netherlands, it is 32%.

Monthly rents payable by Singaporeans depend on their household income. At the lowest range, for those who earn $800 or less and have not owned subsidised housing before, it is between $26 and $33 per month. Although global comparisons are available, it makes the most sense to compare such rents against the next available option in Singapore – the private market. Hon Members will not be surprised to hear that such rooms go for 10 to 20 times more in the private market, even on a shared basis.

Not only that, I should also mention that our Government has specific policies to support households in rental flats to own homes. In the past decade alone, 7,800 rental households have progressed to home ownership. That is heartwarming and laudable.

I hope I have shown the underlying socialist bent in our public housing policy. During the chaos of the 1960s, many Singaporeans lived in squalor and only 9% of our population was in public housing. Then-Prime Minister Lee Kuan Yew envisioned a Singapore where all Singaporeans will own their own flats so that they will have tangible stakes in our nation.

This is the thing about public housing. Housing is not just for housing's sake. Housing can drive progress in connected areas such as better education outcomes from our children who live in better conditions, higher productivity and economic growth. With economic growth and generations of surpluses, we can then invest more in public housing. That was the virtuous circle that Mr Lee and his team built.

That may have sounded like a pipedream then. But, almost 60 years later, it is clear we have made substantial progress in achieving this vision. Singapore has been transformed and Singaporeans' fortunes have changed for the better. The hon Member Mr Leong Mun Wai said that historically, units were sold without HDB accounting for land cost. I dispute that, because when I looked at the financial statements of HDB, they have calculated that since 1960, about $40-plus billion was owed by HDB in relation to the land cost of the land upon which public housing was provided. It is monitored and it is certainly in the books.

Our Government continues to invest heavily in public housing programmes, building affordable and high-quality public housing estates. At the same time, the investments and policies are carefully calibrated to ensure that the interests of future generations of Singaporeans are protected too. Much credit for this belongs to the past and present officers of HDB who were encouraged to think boldly and creatively to deliver on its mission of providing affordable and high-quality public housing units to generations of Singaporeans who have ever higher expectations and aspirations. We owe them a huge debt of thanks.

These officers and those in the Ministry of Finance (MOF) too, think of Singapore as an immortal being playing an infinite game. This means planning for the very long term and, as an economist said, "We will all be dead but our children and grandchildren and everyone we care for still live on."

With respect, having regard to what has happened over the past six decades, for the hon Non-Constituency Members of Parliament to insinuate through this Motion that public housing in Singapore is neither affordable nor accessible is rather rich.

This may be an opportune time for me to deal with the point that hon Member Leong Mun Wai made in his speech in this House about the Voluntary Early Redevelopment Scheme (VERS).

He said VERS is not a viable solution to the lease decay problem. This was because Singaporeans are expecting VERS to be like the Selective En bloc Redevelopment Scheme (SERS) for all, meaning there is an expectation for residents to be paid.

With respect, I question the hon Non-Constituency Member of Parliament's assumption that Singaporeans are expecting VERS to be like SERS for all. He is, respectfully, playing a dangerous game.

It may be useful to understand the factual context clearly. A person buying a BTO flat, say, in his early 30s, will get a 99-year lease. In such a case, there will be a more than sufficient remainder of the lease at the point of his retirement in his 60s or 70s.

This asset can be monetised through programmes such as the Silver Housing Bonus scheme or Lease Buyback Scheme. All these can provide them with decent financial support.

The hon Member Leong Mun Wai appears to be averse to such monetisation. What then would be the implications? How then would you support some people in these situations who want to enhance their retirement expenditure? What is PSP's proposal to that?

For those who have purchased resale flats, they would know the remaining length of the leaseholds beforehand. This would allow them to make informed choices before purchasing the resale flats.

For example, they may decide to purchase resale flats that may have substantial remainders that will allow them to monetise the assets like owners of BTO flats or they can decide to buy leaseholds which are long enough for them to stay in their homes until the end of their lives, which will naturally mean that the opportunity to monetise their assets will not be as good.

Whatever the reasons, they know when the leaseholds apart will expire.

Against this context, it seems to me unreasonable for a person who purchase a resale flat, knowing full well when the leasehold expires, to then expect to get compensation that is substantially more than the value of the tail end of the leasehold under VERS.

It may be useful to remember what the Prime Minister said in his 2018 National Day Rally speech. He specifically made the point that there was not much financial upside to VERS as compared to SERS.

Given what the Prime Minister had said, I struggle to understand why the hon Non-Constituency Member of Parliament Leong Mun Wai contends that Singaporeans are expecting VERS to be like SERS for all. What he is in fact asking Singaporeans is to dream an impossible dream and then ask the Government to make it true.

If we were kind, we would say he is being naive. But if we were honest, we would say something else.

I seek Mr Leong Mun Wai's permission to engage in a thought experiment to better understand the proposal that PSP made in its manifesto for General Elections 2020 – compulsory SERS for all old flats. That was the alternative to the PAP's VERS.

If we were to go back to what the Prime Minister has suggested or rather dealt with in his 2018 speech, he referred to three estates – Bedok, Ang Mo Kio and Marine Parade. He mentioned that all of them were built around the same time, between the 1970s and the early-1980s. I did a calculation. They probably have about at least 117,000 units.

If all these flats were to be SERS-ed, what would be the compensation that PSP proposes to pay, given the position that Mr Leong Mun Wai took in his Adjournment Motion?

He would very well know the compensation that Ang Mo Kio SERS units get. As a median, it is about $411,000 per unit. If you were to just multiply the units, I get a figure of at least $40 billion. As I understand, that is the market rate. What is being suggested is a higher rate so that there is some cash from VERS – just like SERS.

So, what would then be the amount? Just to give you some comparison, our spend for our annual budget is about $100 billion. This is coming in at $40-plus billion just at market rate. I would be grateful for Mr Leong Mun Wai's elucidation of the PSP's proposal that there should be compulsory SERS for all flats.

I now turn to the Motion standing in the name of the Minister for National Development.

I support the Motion for its underlying philosophy of socialism and its long-term policy orientation. I would like to contribute several suggestions to ensure that the less fortunate amongst us will continue to be well looked after.

First, as I alluded to earlier, the importance of ensuring that our public housing scheme provides all Singaporeans with access to affordable homes extends to well beyond the specific purpose of providing roofs over our heads.

One area that I am concerned about is how our housing policy is connected with the development of human capital.

Singapore has done quite well in this area. In the most recent World Bank Human Capital Index, Singapore ranks as the best country in the world in human capital development. A child born today in Singapore will be 88% as productive when she grows up. I have no doubt that this percentage is contributed in part because of our successful housing policy. This is an encouraging statistic but more can be done to develop our children in stable and conducive housing environments that will allow them to be the best they can be.

From time to time, I come across cases involving single mothers, with their children in tow, asking for urgent housing assistance because they have consented to the division of matrimonial properties in divorce proceedings, which in my respectful view, does not adequately take care of the needs of their children —

Mr Speaker: Mr Murali, you have slightly over a minute left.

Mr Murali Pillai: Alright, Sir. I will just make this suggestion and I will go to my conclusion.

This presents a problem for HDB because as a matter of policy, it does not directly allocate homes to persons to be fair to all Singaporeans in the circumstances.

So, what I am suggesting, Sir, is for a system to be implemented, which allows HDB to provide inputs upstream during the divorce proceedings so that this can be taken into consideration by the Court to make a just and equitable decision with regard to the needs of the child.

I will now conclude, Sir.

I chose the second Motion over the first not because of any partisan politics but because I prefer the hard truths over soft lies. There is no point in making vainglorious promises without a way to deliver. There is no courage in forsaking the future for the present. These are the two fatal flaws of the first Motion.

The second Motion commits us to providing affordable housing to Singaporeans today in a way that bends the laws of the market to give the most to those who have the least. This is socialism in action. It also commits us to an ideal beyond the political – that all of us in this House owe a duty as much to the Singaporeans of tomorrow as those of today.

The second Motion asks a lot of us. It is by no means an easier choice but I believe it is the right one.

Mr Speaker: Mr Pritam Singh.

8.08 pm

Mr Pritam Singh: Thank you, Mr Speaker. Just a quick clarification for the hon Member Mr Murali Pillai on a point he made about legacy land costs in the 1960s.

Mr Murali Pillai shared a figure of $40 billion, which he said he got from the HDB annual report. Can I just confirm which annual report is he referring to? Because at page 50 of the latest annual report, there is a reference to accumulated Government grants provided to HDB since its establishment in 1960 and that is $42 billion. Is he referring to that figure? But that does not refer to land costs. I just want to understand from Mr Murali Pillai – is that the figure he is referring to? Because my understanding is, it is not referring to land costs.

Mr Murali Pillai: I thank the hon Leader of the Opposition for the question. That was indeed what I was referring to. It was in relation to what the HDB had paid or committed to pay to the Government for the land that was used to build the HDB flats.

Mr Speaker: Mr Pritam Singh.

Mr Pritam Singh: Just to confirm the statement in the annual report. It refers to the annual deficit in HDB. HDB's annual deficit is fully covered by a Government grant. In addition, HDB receives a Government grant to preserve the capital gains attributable to past governments on disposal of the protected assets in accordance with the Constitution. The cumulative Government grants to HDB since its establishment in 1960 amounted to $42 billion.

So, I am not sure whether the land cost is specifically $40 billion, as stated by the Member.

Mr Speaker: Mr Murali Pillai.

Mr Murali Pillai: Much obliged, Sir. Let me just say this. I took it as the grants being the equivalent to the land cost. I am happy to check this and if indeed my learned friend's point is correct, which is that there should not be a correlation, I will make the necessary clarification. I thank him for drawing the matter to my attention.

Mr Speaker: Ms Hazel Poa.

Ms Hazel Poa (Non-Constituency Member): I would like to make a clarification because there were two Members – apart from Mr Murali Pillai, I believe Miss Cheryl Chan, earlier, also had the same misunderstanding.

In my speech, I mentioned the building rates in the 1980s. I am not suggesting that we build the same number of flats as we did in the 1980s. What I did is to use that as an illustration of what is possible, not that we should build exactly the same number.

As to how many should be built, I think that will require a lot more information than I have available on what is the current backlog. But I do want to make the point that considering that the number of resident marriages every year is 24,000 to 26,000 and new citizen numbers are about 20,000 a year, the supply of 20,000 units a year averaged over 2021 to 2025 does appear inadequate.

Secondly —

Mr Speaker: Ms Hazel Poa, this is not an opportunity for another speech, just for quick clarifications.

Ms Hazel Poa: I am responding to what other Members have said.

Mr Speaker: Keep it concise. Thank you.

Ms Hazel Poa: Okay. Just now, Miss Cheryl Chan also made the point that if we increased the supply of flats, how that will impact the resale prices and whether people will still be able to sell their resale flats to fund their retirement needs. Can I clarify in effect what she is saying is that we are controlling the supply of new flats in order to keep up the prices in the resale market? Can I confirm whether that is the Government's approach?

Mr Speaker: Miss Cheryl Chan.

Miss Cheryl Chan Wei Ling: Thank you, Mr Speaker. Let me clarify the context of my question just now.

I think I was quite specific in that I said given the fact that we have an ageing population and also a lower total fertility rate, if we were to continue building the supply in the same volume which Ms Hazel Poa referred to 40 years ago – I cannot remember the exact number, but it was like building 189,000 flats – if we continue in those large volumes, my question was how would we actually be able to ensure that the resale flat prices can continue to keep up if you indefinitely build this kind of volume? Because the fact is that when you have a shrinking population, we may or may not even have buyers for these future owners of such BTO flats. That was my comment.

Mr Speaker: Mr Xie Yao Quan.

8.13 pm

Mr Xie Yao Quan (Jurong): Mr Speaker, Sir, many Members like me would have received multiple appeals on housing in the past months. The residents appealing are likely couples about to get married or couples already married and looking to start a family or, indeed, couples with a child.

Their appeals are likely along these lines. They are already in their 30s. By the time they move into a BTO flat four to five years later, they would be in their mid- or late-30s. Yet, resale is not an option because prices have shot up.

Therefore, their appeal is either to please help them get a good number in the upcoming BTO exercise because they simply cannot afford to lose more time in trying again in a subsequent exercise or, more starkly, the second type of appeal, please help them get a Sale of Balance Flat (SBF) because they need a unit available immediately.

I have also had parents reaching out to me on behalf of their children. So, it is not only young couples who are concerned, but also their parents who have themselves gone through their housing journey with the nation, raised their children in HDB homes and are now watching to see if their children will also benefit from our housing policies the same way that they have.

Top of mind for these Singaporeans, I think, is housing accessibility – as in whether I can get a flat and get it fast, in time for my life plans. Then, there is the issue of affordability – whether I can pay for the flat.

Accessibility and affordability – two operative words in the Motions before this House. The two issues are linked. They feed into each other and I will speak on both. But let me speak first on accessibility as it is more top of mind for Singaporeans.

Sir, there are Singaporeans struggling to get a balance flat, essentially flats with zero wait time, immediately available. And there does not seem to be enough of these. And then, there are Singaporeans who are getting BTOs, but rueing the four- to five-year wait time to collect keys.

Taken together, they point to a general conclusion, that perhaps, we should have many more BTO units with much shorter wait times in our system.

To be fair, the Government had already rolled out BTO flats with shorter wait times before COVID-19 and even after COVID-19 made construction delays the dominant issue, never mind building ahead of demand. By the BTO exercise in November 2021, HDB was able to resume the launch of flats with shorter wait times. Indeed, in the November 2021 exercise alone, there were more than 2,000 4- and 5-room BTO units, or almost 20% of all 4- and 5-room units launched across 2021, with shorter wait times of around three-and-a-half years.

Then, last year, in 2022, HDB launched almost 5,000 4- and 5-room BTO units, more than double the number in 2021, with shorter wait times of 3.8 years or less. These units made up almost 30% of all 4- and 5-room BTO units launched in 2022. And the shortest wait time amongst these was two-and-a-half years, with 1,300 units available.

So, a sharp ramp-up in BTO units with Shorter Wait Times, and I would add, quite a remarkable ramp-up too, a decisive ramp-up, straight out of the gates of COVID-19 disruption.

I would note too, that a number of these projects drew first-timer application rates of only 1.5, 1.9, two times, for 4- and 5-room units – quite low, despite the wait times. And so, the market is telling us something about the latent demand for shorter wait times.

Nonetheless, I strongly believe that we can and should do more, in terms of providing many more flats with much shorter wait times, partly because our experience today is pointing to a real need for this solution, and partly because I believe that this is a case where demand for shorter wait times can be induced by the right amount of supply.

Flats with shorter wait times should become an anchor product, a staple, in our future BTO launch inventory. They should make up a larger portion of our annual supply. This would certainly be useful for first-timer couples who are marrying later in life, or those who are already married but looking to settle in their own "nest" before starting a family and certainly for those already with a child.

Building more flats ahead of demand would increase the risk of over-supply. Yet, this risk, I think, is well manageable.

To be clear, my suggestion will not solve the current supply crunch because it will take three or more years for the higher supply of shorter wait times to enter the market. And so, this is a suggestion for the longer term, given our experience today, in order to reduce the likelihood and the effects of a repeat experience in future.

For the current supply crunch, we simply have to launch more, which the Government is already doing, and to build fast, while maintaining standards and give home owners their keys as soon as possible.

Besides wait time, there is one more aspect to accessibility, which is the success rate at BTO exercises. Success rate – getting a number to choose a flat. On this, there are anecdotal accounts of difficulties with the ballot, but let us look at the overall system objectively.

In 2022, more than 9,000, or almost 60% of all 4- and 5-room BTO units launched had first-timer application rates of three times or lower across nine different projects. The average first-timer application rate across these units was 1.85, under two. So, very good chances really for first-timers to secure one of these 4- or 5-room BTO units.

Yet, these units drew only 28% of all first-timer applications for 4- or 5-room units. Where did the rest of the applications go? Let us look at the most popular flat types in 2022 – 4-room in Geylang, first-timer application rate of 20.5%; 5-room in Tampines, in August, 18.5%; and 4-room in Tampines, the same project, 17.2%. Together, these account for only 3% of 4- and 5-room BTO units launched, but they attracted 16% of all first-timer applications for the whole of 2022. So, 3% of units drawing 16% of applications on one hand versus 60% of units, drawing only 28% of applications.

And so, the perception of low chances in BTO exercises is really driven by the concentration of applications in a small number of projects. Whereas for the many other projects available, applicants do stand good chances, on average.

Indeed, as the Minister and HDB have said, virtually, all first-timer families who apply for BTO flats in non-mature estates succeed within three tries.

So, on the count of balloting for BTO flats, our overall system is, in fact, doing well, producing outcomes and we should give recognition when it is due.

Sir, I have spoken at length about BTO accessibility. And the Motion standing in the names of Mr Leong Mun Wai and Ms Hazel Poa clearly states that "This House calls upon the Government to review its public housing policies in order to deliver affordable and accessible HDB flats to all Singaporeans" – affordable and accessible flats to all Singaporeans.

I heard Mr Leong Mun Wai's suggestion about the Affordable Homes Scheme. Never mind the mechanism. Basically, deferring of a major cost component, vastly cheaper flats. And going by the language in his Motion, I assume that he means for these affordable homes to be accessible to all Singaporeans.

I would like to ask Mr Leong if this is indeed the case – supply of these vastly cheaper flats to all Singaporeans. What does he think will happen to the resale market? And does he not agree that he seriously risks crashing the resale market instead of keeping it buoyant, as he has claimed? How can he expect to keep the resale market buoyant with such a shock?

On the other hand, for those first-timers who, for whatever reason, have to buy a resale flat, they will have to pay full market value by his proposal because the seller has to pay back the deferred price component to HDB. And so, what happens to equitable access for all first-timers? Can Mr Leong Mun Wai shed some light on this?

To the Workers’ Party, I think in their Facebook post, they had highlighted anxieties over one's chances in BTO applications, especially for mature estates. I think we can recognise these anxieties. But what would be the Workers' Party's position on addressing this issue of one's chances for a mature estate BTO? Because the reality is that there is no easy solution. And so, would the Workers' Party be prepared or be minded to acknowledge this reality to Singaporeans?

Sir, let me move on to affordability. And I will start with this premise. Over the last two years, the Workers' Party has put forth in this House the proposition that Singaporeans' housing needs are becoming more diverse and hence, we should have more diverse housing options. For instance, more rental, less ownership – more options for more diverse housing needs.

I have a somewhat different outlook. I say that home ownership remains the dominant housing need of Singaporeans, an aspiration of Singaporeans. However, I think our needs, other than housing, have become more diverse. And so, our housing strategy should keep up with that. Housing affordability must keep up with that.

How do we keep flats affordable, such that Singaporeans, while owning their homes, also have enough to build and live the good life in other diverse areas and fulfil increasingly diverse needs? This is the nub of the affordability issue, in my view. What is an affordable home in this context?

And I think it starts with a cap on BTO prices. In the August 2022 BTO exercise, there was much public interest in Ang Mo Kio Central Weave, where 4-room units started at $535,000 and 5-room units at $720,000, before grants. Compare these with prices under the Prime Location Public Housing (PLH) model. In the same BTO exercise, the PLH project in Kallang Whampoa has 4-room units starting at $509,000. So, the PLH model lowered prices with higher subsidies to the extent that these prices were lower than the prices at the non-PLH Ang Mo Kio Central Weave.

I believe we should keep any 4-room BTO flat within reach of a Singaporean family at median income. In my mind, this means keeping the price of a 4-room BTO to five times of median income, or just under $500,000, before grants. A 4-room unit at Ang Mo Kio Central Weave, in my view, should have been capped at $500,000, and not starting from $530,000.

Similarly, I believe we should keep any 5-room BTO flat within reach of the 60th income percentile. Again, at a home price to income ratio of five, this works out to $650,000. And so, my suggestion is to cap the price of a 5-room BTO to $650,000, before grants.

The Government’s approach has been to supply the same flat type in different locations at different price points for different budgets. This is a sound approach, but what I am suggesting is to further calibrate this and to cap the upper end, based on five times current income benchmarks.

This would serve as a strong psychological marker, but there is also a very important philosophical point here.

A price cap would ensure that any project, in any location, will still be within reach of a broad segment of Singaporeans and ensure that any project, in any location, will have an inclusive mix of Singaporeans living there.

How might we do this? In the first instance, I suggest we expand the PLH model. Apply higher subsidies to more projects like Ang Mo Kio Central Weave, push down the BTO launch prices to be within reach of most Singaporeans, but attach the longer Minimum Occupation Period (MOP) of 10 years, and the subsidy recovery of 6% at point of resale. So, one option, expand the PLH model to more projects.

But we should go even further. I say, let us extend the PLH model into a more flexible, more finely tiered system of MOPs and subsidy recovery rates. Let me explain.

Basically, the "basic" level of subsidies, five-year MOP, zero subsidy recovery on one end; and PLH-level subsidies, 10-year MOP, 6% subsidy recovery on the other end. But in between, we could have a subsidy tier, with six-year MOP and 2% recovery, another higher subsidy tier, seven-year MOP, 3% recovery and so on.

This tiered system would allow the Government to flex the amount of additional subsidies to apply to various projects. We need that flexibility in our system of public housing subsidies, going forward.

It is a bit like we now have S-size and XL-size subsidies. It is time to add the M- and L-sizes in between so that, ultimately, we keep all BTO projects within reach of target segments and, at the same time, effectively mitigate the windfall effects for different projects to varying degrees.

Sir, on affordability. Just two points. I note that in the Workers' Party manifesto in 2020, they said, and I quote, "HDB BTO selling prices in non-mature estates should be pegged to household incomes and prices should be based on a 20-year mortgage, 10% downpayment and monthly repayments of a maximum of 25% of the median monthly household income."

I did a back-of-the-envelope calculation. If my calculations are right, it comes up to about $380,000 at current income levels. And the Minister has already given statistics just now, showing that our non-mature estate BTO average price currently at $340,000. So, it seems like our non-mature estate BTOs are affordable by the Workers' Party's own definition of affordability.

And yet, I think in one of the Workers' Party Member's speech just now, it was premised entirely on the notion that HDB prices are high. So, can I ask for some clarifications? Are HDB prices high or are they affordable, going by what the Workers' Party themselves have said?

And to Ms Hazel Poa, she mentioned that everybody is paying for their HDB flats in some way. I absolutely agree and the Minister himself has said so.

The point is, if HDB does not pay for the land cost, according to their proposal and put back this land cost into the reserves, then what is really happening is that future generations are paying for our current generation's flats. It is as simple as that. And as Ms Hazel Poa, herself said, "羊毛毕竟出在羊身上". Sir, in Mandarin, please.

(In Mandarin): [Please refer to Vernacular Speech.] Over the past two years, many residents have shared with me their concerns about housing and buying an HDB flat. Not only young residents but also their parents have worries. Rising resale prices and tight supply of BTOs are the personal experience of many residents. I can understand their concerns.

Are the BTO flats still affordable and accessible? Looking at the figures for first-timers in 2022, 60% or 9,000 units of the 4-room and 5-room flats launched last year did not exceed the application rate of three, which means that first-timers stand a good chance of success in applying for a 4-room or 5-room flat. However, many first-timers still choose popular projects, adding to the crunch.

But objectively speaking, BTO flats have not become out of reach. They are still accessible. Of course, the accessibility of HDB flats also involves waiting time. In this respect, due to the delay caused by the pandemic, waiting time is indeed quite long with the current median of 4.3 years. The Government has introduced a shorter waiting time of 2.5 to 3.8 years in November 2021. I think we can do better.

I would like to suggest that the Government provide more BTO flats with a shorter waiting time to prevent the history of tight supplies from repeating itself.

(In English): Sir, let me conclude. No system is perfect and no system should stay static. We must continue to evolve our public housing system and evolve our social compact with Singaporeans on housing.

But as it is, we have had in Singapore a heck of a public housing system and a heck of a social compact with Singaporeans on housing, that have produced a heck of a set of outcomes to date.

It started with an audacious goal to move citizens of a new nation into flats, and since then, the system has added new pillars. Every evolution henceforth will only become more complex, to an already complex system. There is no easy solution.

But we have today a great system as a strong basis for further action.

Minister Desmond Lee has said, that public housing in Singapore is social policy. I fully agree. It is not just about buildings. A flat is a home, an anchor in our lives, a stake in Singapore. And so, beyond the ballot, I believe still, that a BTO home remains a promise by Singapore, to Singaporeans, a bedrock in our social compact.

So, HDB – the Housing and Development Board – might as well also be the "Hopes and Dreams Board" – HDB. Because HDB's purpose is to build Homes, build Dreams, build a Nation, not just brick-and-mortar flats. Have we lost our way in this regard? Have we lost the plot? I do not think so.

And so, I stand in full support of the Motion, standing in the name of the Minister for National Development and affirm the long-standing and continued commitment of the Government to our public housing objectives.

Mr Speaker: Mr Murali Pillai.

8.33 pm

Mr Murali Pillai: Mr Speaker, Sir, thank you for allowing me to clarify a point raised by the hon Leader of the Opposition. I have checked and I just want to clarify that the land cost together with construction costs, make up total development cost of BTO projects. HDB's proceeds from BTO sales cannot fully recover this development cost, MOF grants are being given to HDB to make up for this deficit. The $40 billion which I referred to is a cumulative deficit since HDB's formation in 1960 and that would comprise some payments for land, but not entirely. I thank the Leader of the Opposition for pointing this out.

Mr Speaker: Mr Vikram Nair.

8.34 pm

Mr Vikram Nair (Sembawang): Mr Speaker, I support the Motion in the name of Minister Desmond Lee. The last few years, particularly with COVID-19, have presented HDB with some unprecedented challenges. One of the main issues faced by my residents in recent times, is not so much the affordability, but rather, the availability of BTO flats. People who want BTO flats are unable to get them and there is a long list of people applying for one, including new couples, first-timers, divorced couples looking for new homes, singles and older couples looking to downsize. Each has their own unique needs and stories and I have appealed for many of these residents.

Most people I have appealed for pointed out that the big differences in prices between HDB BTOs and resale flats are the prime reason they wanted BTOs rather than going to the resale market. Against this backdrop, I have some serious concerns with the proposal put forward by Mr Leong Mun Wai and the Progress Singapore Party (PSP). Mr Leong proposes pricing flats based on two components. First, construction costs and a notional premium based on location. Second, at the time anyone chooses to sell, they will pay the full cost of the land. He acknowledges the cost of the land will be the higher component, so the price they pay for land will be more than the price of the flat. The breakdown he used was for a $350,000 flat, $140,000 would be the price for the flat at the time of purchase and $210,000 may be the payment made for the land at the time of sale. The Workers' Party's Mr Jamus Lim, also seems to agree with this proposal to separate the land charges from the building costs and to pass on the land charges at the time of sale.

There are some important implications from the PSP's proposals. Currently, BTO flats are not priced according to their cost. They are instead priced based on a variety of factors linked to affordability, including ratio of income to price, mortgage serviceability and location, as the Minister had explained. The median household, according to the Minister, would be able to afford 80% of available flats. Land cost is not currently passed on to buyers, but rather it is taken into account in HDB's books when HDB uses land from our land reserves. So, HDB is paying for the land cost, not the buyers of flats. So, the cost is currently not being passed on to the buyers directly and the current subsidy that buyers get is actually the difference between the actual cost of building the flat, which is the building cost and the land cost, against the price they actually pay.

Under Mr Leong's proposal, the upshot is that for everyone who chooses to sell their flats, they will now be required to pay land cost, something they were not previously required to, which will be a huge lump sum payment at the time of sale. I think it is common ground, then, that most people will end up paying more for their flat at the time they sell than they currently do.

So, for everyone who sells their flats, which is the majority of Singaporeans, they will pay more under Mr Leong's proposal than under the current scheme. Additionally, the way in which the flat is priced may create severe market distortions at different points in time. At the time they are launched, the flats will appear very cheap because they are launched only at the cost of construction. So, if prime area flats are not priced significantly more than other areas, then the lottery effect there would be even greater because everybody wants a prime area flat and those who get the windfall, those who succeed in getting the prime area flat will feel very happy and those who lose out will be resentful.

I believe this would simply exacerbate the current BTO problems. Already, at current BTO prices, even non-mature estate flats are severely oversubscribed. With an initial sticker price that is even lower than the current price, the queue is probably going to explode. I mean, who would not want a flat at that price?

For those people who win the lottery to buy the flats, however, if for some reason they decide to sell their flats, they will then realise there is a huge bill to pay in terms of land costs. People may need to sell their flats for any number of reasons, including changing family or financial circumstances. However, it is, at that point, they will be stabbed with a huge sticker price which will be more than the price they actually paid for the flat. If families do not have several hundred thousand dollars in cash readily available, they will not be able to sell their flats. Thus, even if a couple is divorcing or the family size gets smaller, say with children moving out, or bigger, or say, with children arriving or parents moving in, families will not be able to sell if they cannot stump up a large amount of cash.

Ms Hazel Poa talked about the ills of Government subsidies for public housing. This was a criticism of the current scheme where HDB provides a house below the price of building it and has to make up for this deficit from the current Budget every year. She is correct that all of us, all Singaporeans are subsidising the buyers of new HDB flats and this is one of the many matters discussed in our Budget debate. The current deficits are fully budgeted and paid for each year.

Under PSP's proposal, though, the initial Government subsidy will be even higher. The cost of building the flat and the cost of land do not change. The cost of land and cost of building will still be the same. The only difference is the initial income from selling the flats would be less. So, this means the initial Government deficit will be very significant when the scheme is launched, which means we will need more taxes to fund it.

Subsequently, if and when people sell flats, the Government may get money in fits and starts, but this will be more difficult to properly budget for because we do not know how many people will sell and how much will be earned from this and it will be difficult to predict and plan spending on the basis of income at the time people sell flats. So, while Mr Leong talks about the importance of affordable and available housing, at the same time, he talks about wanting an exuberant or vibrant resale market for those who want to sell their flats.

Clearly, if you are being honest, there is a tension between affordability and an exuberant resale market. If the resale market is very exuberant, prices would be high. And this is what people who want to sell would want, but this is not what buyers would want. In fact, many of the buyers at those prices would be unhappy if they see others getting windfalls based on the lottery at the BTO, which will only be exaggerated if we follow Mr Leong's proposal of the low initial sticker price. The truth is that the effect of PSP's proposal on the resale market is uncertain.

I believe, the real reason for the spike in resale prices now is the limited supply relative to demand. If people who buy flats become unable to sell because of the imprisoning effect of a land cost upon sale, then resale prices are likely to spike as the only supply will be those who own older flats not subject to the scheme. The new flats will have more difficulty coming into the resale market to bring prices down. This will exaggerate the already divergent market between resale flats and BTOs.

Ultimately, I believe this proposal proposed by the PSP and supported by Assoc Prof Jamus Lim, would have even more distorting effects on the market, adding to the long queues at BTO launches and saddling all of them with a massive fee when they want to sell, which means they actually pay more than current flat owners. This would also restrict the additional supply and the resale market leaving prices to spike further in the short-term, which is where we face problems.

The PSP also proposes a rental housing scheme with rental houses in prime areas for people who want them. He appears to be targeting the millennials. While I have no objections to the expansion of a rental scheme, ultimately, this has to be compared to other priorities. HDB has a limited supply of flats every year and with expanded supplies, the demand at these prices is much higher than the available supply. I therefore believe HDB should continue to prioritise building flats for those who need BTOs first. And in the event we reach a stage where the demand for BTO flats is adequately abated, we can then consider other priorities such as public housing. I think the priority for rental housing should still be families in financial difficulty who cannot afford to buy flats.

Related to this, Assoc Prof Jamus Lim also made the argument that the Government should encourage more people to rent rather than own flats, and that this too should be provided by the public sector. I respectfully disagree. Flat ownership gives every Singaporean a stake in Singapore and its success. If Singapore enjoys economic growth over a long period of time, homeowners will see home prices rise. By allowing every Singaporean easy access to buy at least one subsidised flat in their life, every Singaporean is assured of some upside in the course of their life, as long as they own a flat and Singapore continues to do well.

If one bought a BTO flat and lived in it for five to 10 years and later decided they wanted to move to a different place later, they would at least have enjoyed some upside and have some additional cash when they sell, if they want to move to a new place, assuming Singapore has done well and the resale prices have gone up. On the other hand, if they rented for 10 years, in those 10 years, they would have paid their landlord, perhaps helping their landlord pay their mortgage, while at the same time losing their own opportunity to enjoy the upside from property appreciation at that time.

Currently, the fact that Singaporeans are able to get onto the property ownership ladder allows all of them to enjoy and benefit from Singapore's economic growth. I believe home ownership is a worthwhile aspiration for our Government to support and making us a nation of home renters is not a good substitute.

Against this backdrop, the flat price Bala's Curve that Assoc Prof Jamus Lim distributed is not an accurate description of how flat prices actually behave in the secondary market. The reality is that because of Singapore's economic growth over the decades, even flats bought in the 1970s, 1980s and 1990s are selling at well above the prices they were bought for. They did not fall in a straight line based on their lease. Also, because HDB flats are sold at a subsidised price, most homeowners will continue to enjoy an upside if they sell their BTO flats in their lifetime. Alternatively, if they do not wish to sell it, they can pass it on to their children.

Does this mean prices will rise forever? Probably not. It is likely that towards the end of a flat's lease, likely the last 30 years or so, prices will trend downwards. Is it unfair that prices do not rise forever and eventually come down? I believe not. By the time flats get to this stage, it is likely the original owners and several others would have bought and sold it over the years. For those who have not sold their flats but rather lived in the flats, they would have enjoyed living there for more than 60 years or around two generations. This is a long time to enjoy your home.

Those who buy closer to the end of the lease will be able to negotiate a lower price for it. We can see this in the private property market where several private properties are reaching the end of their lives. While we talk about $1 million public housing, there are also landed properties available for less than $1 million. There are landed houses in Jalan Chempaka Kuning selling for less than $1 million at the moment. The reason is that they have a remaining lease of less than 12 years, yet even these houses have a ready market and transactions are taking place. There are people who would like a larger house and are prepared to accept a shorter lease in exchange for a lower price.

In the long term, as HDB flats cross the 60-year mark, for example, some would have values drop. But in my view, this would create more options for the secondary housing in the resale market. Currently, if people want shorter-lease flats, the only options are 2-room flats for seniors. In the coming years, we may have a resale market with cheaper flats on shorter leases for those who prefer larger houses for a shorter period of time.

I see many examples of this at my Meet-the-People Sessions (MPS). There are families with teenage children who want a larger flat while their children are teens or who have parents moving in. They need it for immediate purposes, but in the longer term, say when seniors pass on or when children grow up, they may want the flexibility to change their housing arrangements.

I believe a housing market that has flats of all sizes at different price points will, ultimately, give all people more options to find a flat that suits their needs in the secondary market. This will reduce the crunch on the BTO market. The HDB market is, currently, an anomalous situation because of the slowdown in building that occurred over the last two years. I also believe that the spike in demand has been contributed to by the big difference between the HDB resale market and the BTO market. Every buyer would like to buy on the BTO market, and so, they try their luck in the ballot as long as they qualify. The only ones to buy in the resale market are those who have the means and who need a flat urgently.

This brings me to a suggestion I had previously made. I think we should take off at least one of the property cooling measures for the resale market that I believe may be driving prices up instead, namely, the Minimum Occupation Period (MOP) for resale flats.

The MOP is a fair measure for those who obtained subsidised BTO flats or obtained subsidies for purchasing resale flats. I do not think it is necessary for those who bought resale flats at fair market value. I believe the unintended consequence of this measure is that the supply of resale flats is restricted, because every transaction results in a resale flat being taken off the market for five years.

I think it is still fair to retain the Seller's Stamp Duties to prevent pure speculation, but without the MOP, which prevents the sale altogether. I believe that if resale prices moderate such that buying a flat in the resale market is comparable to the price of a BTO flat once resale subsidies are priced in, the long queue for BTO flats would ameliorate.

Notwithstanding my suggestions though, I support Minister Desmond Lee's Motion wholeheartedly. I think HDB has done a wonderful job of providing affordable housing for Singaporeans for many generations.

The last three years of COVID-19 slowed down flat construction and skewed the queue and waiting time for BTOs. I support the plans to expand and catch up on the building of flats and hope that this will help to ameliorate the real pain point at the moment, which is the supply crunch of BTO flats. I do not think we can, or should, break the system as suggested by the Progress Singapore Party and the Workers' Party.

Mr Speaker: Deputy Leader.