Affordable and Accessible Public Housing, and Public Housing Policies

6.04 pm

Mr Speaker: In accordance with the decision of this House to have a simultaneous debate on both Motions, I will now call on Members to make their speeches. Members are allowed to consider both Motions in a single speech. If you do have any clarifications for either mover of the Motion, you can weave it into your speech.

As the intent of the Business Motion resolved on 6 February 2023, which is earlier today, is for the House to follow the procedures of previous simultaneous debates, I will put the questions on both Motions at the end of the debate, so that the House can express its views on each Motion.

In addition, I will also disallow any amendment to either Motion that has the effect of negativing the other Motion. By "negativing", the term is to mean the effect of qualifying, transposing, contradicting and nullifying the other Motion. Any Member who wishes to vote against either Motion can do so directly.

Ms Hazel Poa.

6.05 pm

Ms Hazel Poa (Non-Constituency Member): Mr Speaker, we are all familiar with the low total fertility rate (TFR) in Singapore. As Minister Indranee shared with us on 4 October 2022 in response to my Parliamentary Question (PQ), many couples continue to aspire to have their own home before they start a family. The affordability and accessibility of HDB flats therefore play a very important role in our TFR.

The Progress Singapore Party (PSP) contends that our current housing policies has delivered on either affordability or accessibility, but not both. New flats are affordable after grants and subsidies, but not accessible due to the long waiting time. Resale flats are accessible but not affordable due to high resale prices. This is the reality and predicament faced by young Singaporeans when they are looking at getting married and starting a family.

Let us look at these issues one by one.

First, the waiting time. The Ministry of National Development (MND) tracks waiting time by measuring time from the point of successful Build-To-Order (BTO) booking to the point of key collection. This waiting time does not include time spent on unsuccessful applications. But for young couples, the waiting time for HDB flats starts from their very first application, whether successful or not. There is some disparity in the concept of waiting time between the two groups.

As MND does not track the time from first application to key collection, it makes it difficult to grasp how long couples have to wait from the time they decide to get married to each other to the time they get the keys to their first flat. All we have are anecdotes here and there, which build up the impression that our young people mostly feel that the waiting times for BTOs are too long.

It has been evident for a while that the BTO approach is not meeting the needs of young Singaporeans. The Government's launch of a small number of flats with a Shorter Waiting Time (SWT) is recognition of this. From 2018 to 2022, between 1,000 and 2,900 units of such flats were supplied each year. This is a small proportion of the total supply of new flats.

Under SWT, flats are constructed in advance before they are launched for booking. This is already a departure from the BTO approach. It is time to face up to the fact that the BTO approach is not satisfactory and to start to build for projected demand based on factors like marriage rate and new citizens growth rate.

The Government has the means to forecast and project. This should not be a major challenge. There was a lesson in the past for over-building but that should not stop us from exploring options to be proactive.

Former Minister Mah Bow Tan changed from the Registration for Flats system to a BTO system because the registration queue fluctuated widely in the wake of the 1997 Financial Crisis. We agree that a registration queue that required no commitment is an unreliable indicator. However, annual marriage and new citizen numbers are relatively stable. In the 10 years from 2012 to 2021, the number of resident marriages each year ranged from 24,000 to 26,000, except in 2020, the year that COVID-19 struck, when it dropped to 21,000. The number of new citizens each year is about 20,000. In addition, there is always a demand for rental flats to provide the buffer for any excess flats built.

In the meantime, efforts need to be made to accelerate building to clear the current backlog and shorten the waiting times for current and future cohorts.

The Minister has said that they have ramped up the BTO supply to launch 23,000 flats each year in 2022 and 2023, and are prepared to launch up to 100,000 units in total over the five-year period, from 2021 to 2025 if needed. That is an average of 20,000 units per year from 2021 to 2025.

This supply of flats pales in comparison to the past. Forty years ago, over the five-year period, from 1981 to 1985, HDB completed 189,000 units. That is an average of 37,900 units per year. Can the Minister explain why HDB is not supplying more flats when it is possible to do so?

The Prime Minister said in his National Day Rally speech that "our problem is not finding the space to build enough flats". So, if land is not the constraint, what is causing us to be unable to build as fast as 40 years ago, despite technological advancements?

As the saying goes, when there is a will, there is a way. Does the Government lack the political will to tackle the low TFR problem we are facing? Our low TFR has resulted in our over-reliance on foreign manpower, which has brought along a whole suite of other issues, like job competition, social friction and national identity. But I will not go into these issues today.

Increasing the supply of new flats would not only shorten the waiting time for future applicants, enable them to get married and start a family earlier, it would also spur economic growth at a time when global growth is slowing.

PSP therefore urges the Government to increase the supply of new flats in the immediate term.

Next, let us look at affordability. MND has placed a full-page advertisement in The Straits Times with examples of different couples at different income levels paying for flats of different sizes to illustrate the affordability of new flats after Government subsidies and grants. These examples illustrate how different couples are able to pay for their flats using only their CPF, with no cash payment. What is not illustrated is what happens to retirement adequacy after paying for the flats using CPF.

In response to a Parliamentary Question (PQ) from Assoc Prof Jamus Lim, the Minister for Manpower replied that HDB flat buyers used 64% to 100% of their Ordinary Account contributions to pay for their HDB flats. This is especially serious for those in the lowest 20% in terms of income levels, where 96% to 100% of their CPF contributions into the Ordinary Account are used up to pay for the HDB flat. For the other income groups, close to two-thirds or more are used up. This adversely affects the adequacy of their retirement savings.

According to the Minister for Manpower, in 2021, 67% of our CPF members met the Basic Retirement Sum, which pays out about $850 per month. This payout is not enough to meet expenses. Researchers at LKYSPP and NTU conducted a study in 2017 to 2018 and estimated that the amount required is about $1,379 per month. With inflation, this amount must now be higher. And what about the one-third who cannot even meet the Basic Retirement Sum?

In conclusion, the affordability of the new flats, after subsidies and grants, comes at the expense of retirement savings. At worst, retirees are unable to meet basic expenses. At best, retirees suffer a lower standard of living after retirement.

New HDB flats used to be even more affordable, under the previous generation of PAP leaders. But the prices of new HDB flats have been rising over the years. How is it still kept affordable?

There are two ways to achieve this: one, stretch the loan repayment over a longer period of time so that each instalment is lower and hence affordable; two, by giving Government subsidies and grants.

The first method worsens retirement adequacy because it means that CPF money is being drained for a longer period of time and the amount of interest to be paid also increases significantly with a longer loan tenure.

The second method provides an illusion of affordability by presenting a selling price after subsidies and grants that is lower. But where do the Government subsidies and grants come from? From taxpayers, from the GST that we pay, from incomes taxes, from duties on liquor and tobacco, taxes on petrol and vehicles. So, while the Government subsidies and grants are not paid directly by the flat buyers, we are all indirectly paying for everybody's HDB flats.

Furthermore, the Government grants can create a price spiral.

As grants are also provided for resale flats, this increases the purchasing power of the buyers, hence increasing demand and therefore, resale prices. When resale prices increase, to help first timers afford resale flats, grants will have to be increased, thus leading to a price spiral.

Meanwhile, when resale prices increase, the Chief Valuer looks at recent transactions and revises land prices upwards. This means HDB needs to pay more to the Singapore Land Authority (SLA) to be put into the reserves and the price of new flats before subsidies increases. When the price of new flats before subsidy increases, either more tax revenue is needed to provide more subsidies and grants or flat buyers must pay more.

Either way, the amount paid into the reserves continues to grow larger and larger as resale prices increase, paid for by flat buyers and taxpayers.

In summary, the affordability comes at the expense of retirement savings and taxpayers who have to fund the Government subsidies and grants for HDB flats.

PSP is therefore proposing a different pricing model for affordable housing as mentioned by my colleague, Mr Leong Mun Wai, earlier. In this model, new flats are sold to Singaporeans without collecting the land price upfront. However, if the flat is subsequently sold by the original buyers, the land cost will then be recovered from the resale price.

The objectives of this model are two-fold.

Firstly, to offer young Singaporeans new flats at a lower upfront cost. About 60% of the total cost of a HDB flat is land cost and the remaining 40% is construction cost. If the land cost is taken out, the upfront payment will be significantly lower.

Secondly, to preserve the value of existing flats. One of the biggest problems in any attempts to offer new flats at lower prices is the uncertainty over the effect on resale prices. However, under this proposal, since land cost must be paid at the point of resale, this puts the new flats on par with the other flats sold earlier with land cost. This will serve to preserve the value of existing flats.

Another problem we are currently facing is the lease decay issue.

As the remaining lease of an HDB flat gets shorter, the value of the flat drops. At the end of 99 years, the flat returns to the Government and the value thus goes to zero. The worry is that flat buyers who used most of their CPF funds to buy the flat will be left with little retirement funds as the value of their flats goes to zero.

Under this proposal, with the land cost deferred, the amount of CPF withdrawn to pay for the flat will be much lower, leaving Singaporeans with more funds in their CPF. This will make the lease decay less of a problem.

Lastly, I wish to touch on HDB flats for singles.

PSP supports Workers' Party's (WP) proposal to lower the eligibility age for singles to buy HDB flats to 28.

In addition, we propose that singles be allowed to buy 3-room flats or smaller. Singles who own a 3-room flat will be able to get married immediately upon finding a suitable partner and even have children whilst applying for a bigger flat. Let HDB flats not be the reason for any delays in marriage and having children.

In conclusion, if we are serious about tackling the low TFR problem, we need to pull out all the stops. Our low TFR is not only affecting our economy, it is also affecting the make-up of our social fabric, the social support for the elderly and our national defence. This has been such a long-standing problem and with the feedback that our young want their own homes before starting a family, why are we not taking decisive steps to address this?

The supply target of up to 100,000 over five years from 2021 to 2025 is too modest. We should be increasing supply more decisively in the immediate term and change to a model of building for projected demand based on factors like marriage and immigration numbers instead of the BTO approach.

Secondly, using Government subsidies and grants to achieve affordability is not a silver bullet. As the Chinese saying goes, 羊毛出在羊身上, this means that what appears to be a benefit has actually been paid for in other ways.

We urge the Government to seriously consider the alternative deferred land cost model we are proposing.

I would like to take this opportunity to seek a few clarifications from the Minister about his speech earlier.

The Minister mentioned that if we do not charge land at market prices, that will lead to a reduction in the value of the reserves. Given that the first-generation PAP leaders actually sold HDB flats without land cost, in the Minister's opinion, did Mr Lee Kuan Yew and the first-generation PAP leaders raid our reserves?

Secondly, in his Annex 9, where he compared affordability in terms of the ratio of income versus the price of houses, can I seek his confirmation whether he is comparing like-for-like? Does the Minister agree that it would be unfair if we are comparing public housing with private properties and leasehold properties with freehold properties?

Lastly, in Annex 7, where he showed the trend of the median household income versus the cost of a 4-room BTO flat, does the Minister agree that using the median household income may not be a good indicator because median household income can change purely based on demographic changes without any change in an individual's wage level?

Mr Speaker: Miss Cheryl Chan.

6.22 pm

Miss Cheryl Chan Wei Ling (East Coast): Mr Speaker, a home is a basic need that every person requires and many also aspire to own as they gain independence or set up a family of their own at different life stages. The topic of housing is thus not new and one that is close to many people's hearts as it touches their daily lives and is one that they cannot do without.

It is also a complex topic as it ranges from ownership, subsidies, land value needs, flat types, location, people's lifestyles to the norms within a society and across generations.

In contrast to the Member Mr Leong Mun Wai's comment about the 11th consecutive quarter of the resale price of flats, I wish to put some context on the state of the HDB resale market a few years ago.

In 2018, I spoke at length in this House about public housing as it was a top concern for a majority of Singaporeans who were concerned about housing affordability and choice as well as capital and retirement value. Back then, a key concern was on homeowners of older HDB flats who were worried about the value of their homes as their leases shortened, compounded by a lacklustre resale market that had persisted for six consecutive quarters.

Five years hence – not even a decade, just five years – we have the converse of this issue with a resale market that had been exceedingly robust for 11 consecutive quarters and an imbalance between housing supply and demand heightened by the pandemic and a confluence of other factors.

Today, my Ministry of National Development (MND) colleagues and I will be touching on various aspects of housing that concerns Singaporeans and making suggestions for the Ministry's consideration.

I will focus on the notion of home accessibility and affordability.

To look at affordability and accessibility of homes in Singapore, let us begin from the fundamental of public housing.

When public housing was first introduced in Singapore, it was with the intent of providing homes to every citizen and enabling those living in the kampungs who had to make way for land development to have a place to live in.

The flats built in the late-1970s to early-1980s housed many of those in the generations before us. Today, we still have more than 70% of local residents living in public flats and the flat supply continues every year both in public and private housing.

So, what has really changed since then?

In my view, what has changed most is the demand pattern and the lifestyles of the subsequent generations. All these have an impact on the affordability and the accessibility of homes currently and into the future.

Let me share a few perspectives on changes in the demand pattern and lifestyles.

First, people over time do not live in their first public flat for more than two to three decades, unlike those of my grandparents' generation.

When the younger generation gains independence, be they single or married, they would like to have a place of their own and live separately from their parents. However, amongst this group, there are still many whom we know who wish to live near their parents or extended family in order to have support for the caregiving of their children or for them to take care of their parents conveniently.

I see this in my own Fengshan constituency as it is a mature estate. Many families have three generations living near one other, within walking distance.

The challenge with the ease of finding a home in the same estate is difficult as there is limited or no new land, in fact, for new flats to be built within the vicinity of the existing flats.

What this means is that their children will naturally have to purchase the nearest BTO flats around Bedok Town, failing which are other new public housing projects in the East or settling for resale flats in the same vicinity or for some even purchasing from private housing nearby.

This impacts affordability.

In mature estates where there are ready amenities and access to public transportation, actually quite contrary to what PSP has said, I think that we have seen that the housing located in such places have inevitably risen in prices over time even when the lease diminishes.

The question is – can first-timers afford the price of a resale flat in mature estates when they are unable to take a loan for a longer period because of the remaining flat lease or take a larger loan given the lower subsidy for resale flats?

Second, let us look at the price of a public flat versus a condominium for the mass market in a mature estate with a 99-year lease.

The affordability of a flat is more than just the final price of the purchased flat. It also includes the value of maintaining the flat and the value of the flat when it is ready for resale in the market.

All these years, HDB has continued to maintain and upkeep the public flats through Town Council works. It also provides subventions for the upkeeping of major infrastructures like lifts, common amenities like linkways, community gardens, playgrounds, exercise corners and much more. HDB also continues to provide schemes like lift upgrading, home improvement programmes, neighbourhood renewal programmes – I know this more because in Fengshan, we have had all these programmes, except, the Voluntary Early Redevelopment Scheme (VERS) in future, to ensure the flats remain liveable and safe.

All these help in the general capital appreciation of the flats, having residents to pay very little of their own money for operations of these facilities and any new additions.

In sharp contrast, unlike public housing, in private housing like condominiums, all these infrastructure maintenance, upgrades and new builds have to be paid through the sinking fund collections from every household within that condominium. If the condominium does not have sufficient sinking funds, they will be unable to carry out any additional or amendment works.

While most people understand the concept and the differences between having a public flat and a private condominium, the feeling of ownership of a 99-year lease property of a HDB versus a private apartment is not quite the same.

On a comparable basis, one can conclude that the relative cost of a similar size and the same leasehold public flat versus that of a private apartment already significantly differs starting from the purchase price, its maintenance over time, the continual upgrading and the rate of capital value appreciation at resale – unless the private condominium has an en-bloc opportunity.

Third, I believe that no single approach for a complex topic like housing will be effective on its own.

Any artificial intervention on the price of today's HDB flats based on a free-market model will have significant repercussions on our social fabric and the wealth of different generations.

Take some of my residents and those whom I know who purchased their HDB flats in the 1980s. Some of my residents, when they relocated from the kampungs, told me that they only purchased their flats at about $50,000 or so and those were actually brand-new flats at that point when they were purchased. Today, many of them still live in the flats and they are still first-time owners.

Having lived in the flat for a few decades and looking at the resale market today, these flats would sell – at least, in the mature estate – for a decent price of $400,000 to $500,000. Yet, many of them told me they wish to continue living in it. They do not want to monetise even though they can get good monies for it at this point and it is attractive. They do not want to sell the flat and downgrade to a shorter lease flat.

So, I really wanted to ask the Member, Mr Leong Mun Wai, on his position when he said that there is a need to review our public housing policy. I do not think HDB stands still on this and does not review our public housing policy. But it is interesting when he said that we need to make a reset to it.

Because my question would be related to, if in the short term, we need to make up for this delta of shortage of BTO flats, but to what Ms Hazel Poa actually said, that we have to continue building it in large volumes, like about 40 years ago. What would really happen to all these flats, because we would have such a large number of them? And knowing that we have a shrinking population and ageing population with low total fertility rate, can these owners in future still rely on their flat for retirement? Will they be able to sell to anyone in the long run or would there even be buyers in the future?

I think we need to look at the supply of flats from a few angles. First, our supply of flats come from our BTO flats, our resale flats and also rental flats. If we want the Government to intervene and also to make resale flats more affordable for the younger generation, this simply means we may have to do a few bold things.

And these, in my opinion, are bold things: one, to convince our parents and ourselves to settle for less profits when we sell our subsidised flats; two, be willing to live in the same property for a much longer time and not inflate the demand on a cyclical basis; three, to accept a new definition of living proximity to our parents or their extended family in estates that are non-mature and at distances beyond 15 kilometres of one another; four – and I think this is quite important – to not constantly ask for more subsidies in different forms because, if we are honest about it, we know this must be paid through taxes or other means.

While the above that I have mentioned will not completely resolve the concern of affordability, it will at least be a start to shifting the whole balance on housing supply and demand in a more calibrated manner.

Finally, Sir, I wish to suggest this for the Ministry to consider. After the supply shortage has been better addressed post-pandemic, what can be done for those buyers with genuine requirements for flats and first-timers particularly, who are purchasing flats after four attempts of BTO and/or Sale of Balance Flats (SBF). Can the Ministry also review the Minimum Occupation Period (MOP) for new BTO flats in mature estates to be lengthened and if it cannot and must remain at five years, when the BTO flat is sold within a 10-year timeframe, an additional levy to be placed on those purchasing their next subsidised flat at a percentage of their profit from the sale proceeds?

Further, to review if the downsizing options for owners from private housing should be limited to some flat sizes unless they are above a particular age group.

Speaker, Singapore is one of the few countries in the world where home ownership is extremely high, with more than 90% of citizens owning homes, of which more than 70% actually live in public housing.

Such high home ownership brings with it different challenges, especially when individuals or families are unable to obtain their first public flat after several attempts. It not only upsets people but also makes one think why others are always luckier than themselves when it comes to securing a flat.

To make matters worse, nobody actually feels good when they see others making a windfall from the sale of a subsidised HDB flat. But at the end of the day, let us focus on the fundamental of why public housing was first established since this country’s Independence. It was really to provide housing access and making it affordable for every citizen. This Government and our forefathers have tried to ensure this basic objective is met. I wish this to continues to be so, particularly for our low-income individuals and families and those who are actually vulnerable in society.

This, in my view, is one of our key challenges as a country and as a people – how best to balance the demand for affordable and accessible housing by Singaporeans against all other competing needs for land use as Singapore continues to modernise. Sir, I rise in support of Minister Desmond Lee's Motion.

Mr Speaker: Deputy Leader.