Affordable And Accessible Public Housing, and Public Housing Policies

Debate resumed.

Mr Speaker: Mr Gan Thiam Poh.

6.53 pm

Mr Gan Thiam Poh (Ang Mo Kio): Mr Speaker, Sir, a resident once asked me to ensure that the Government kept the prices of HDB BTO flats low, like what she paid in the past, so that her children could afford them. She, however, also requested that she could sell her existing flat high in the resale market so that she could make more profit for her retirement. It is quite ideal to her.

However, if you think further, someone will have to pick up the bill, the question is: who is going to pay for and bear the burden of the difference? Ultimately, it is the taxpayers – our children, our grandchildren.

HDB flats have evolved to provide not only roofs over our heads but also to support retirement as part of our social safety net.

I am very much in support of the measures for retirees to support their retirement needs through the Lease Buyback Scheme and renting out of rooms as an option. These are workable as there is a market premium. There are serious concerns if nobody will want to pay the market premiums for Singapore’s properties and HDB flats.

Despite the availability of cheaper options even in other countries around Singapore, investors are willing to pay premiums for our properties as they have included other intrinsic values, such as social and home security, environmental friendliness, infrastructural convenience, supporting amenities and so on and so forth.

There are many factors that affect the prices of properties, but the main one is demand and supply. Land on our small island is limited. However, in tandem with our dynamic economic growth and generally optimistic outlook for our future development, the demand is strong. Hence, the value of our land and properties has risen correspondingly.

For today’s debate, the focus is on HDB flats, which house about 80% of our resident population. The land which HDB flats stand upon have increased in value. HDB building quality and maintenance also help to hold their values vis-à-vis private properties.

The current policy that all land sale proceeds will have to return to our national reserves is a wise approach. It is fair that the premium and costs of the land sales are to be shared by all Singaporeans. This would prevent the Government of the day from finding an easy way to finance the national expenditure. In addition, there is a risk that the Government would have less incentive to cool a rising property market if it relies on land sales to fund expenditures.

Mr Speaker, if we were to consider the proposal by hon Members, Mr Leong and Ms Hazel Poa, that we exclude the land value in the pricing, may the hon Members then share their views on how we would then address and ensure the fair allocation of flats among Singaporeans? There will be other questions arising from there for the public and for the residents. Will there be allocation based on family size, based on standard sizes of flats and so on. In their Members' proposal, the result will be likely that there will not be any more resale market.

How would the Members propose to look after Singaporeans who want to age in place and also need cash for retirement as they are left with residual values of the construction cost? Members have to address what will be a fair residual value and if it is a straight-line depreciation, or heavy front-load and light-back?

What about residents who want to right-size to smaller flats to monetise the value for retirement, and also to have smaller flats to maintain?

I heard the clarification by the hon Member that the residual value is required to pay back the land cost plus interest even when the person has departed. I think it is quite sad that even when the person has departed, payment is still required. I think it is good to avoid that.

The proposal to only consider the locations for the price differences in itself has clearly indicated that one has accepted that there is indeed a premium for land value, notwithstanding that there are premiums for other factors too.

In fact, the current policy not to peg the BTO prices to the market price but at around 25% mortgage servicing ratio (MSR) of the applicant's income is better, with additional grants to first-timers to ensure that the flats are within their reach and the price of BTO is based on income and not market price. We will be better able to address Singaporeans' concern and fear. The 25% MSR is lower than the international affordability guideline of 30% to 35% MSR.

Furthermore, Singaporeans can use their CPF to service their mortgage without the need to pay, using cash or only using minimum cash outlay.

In addition, residents are grateful that HDB has been working with CPF to keep the HDB housing loan rates unchanged despite that the market interest rate has been rising for the past one year. It has provided great support for most Singaporeans in the face of the challenging market currently.

On the other hand, we need to guard against the price-gap between HDB prices and private property prices widening, and the Government continues to ensure that flats remain affordable for Singaporeans.

The Ministry must be careful not to leave the prices of private housing unchecked. This will require the Government to continually look into further regulation and cooling measures.

I would suggest that the Government may need to review the tax on profits made by the sellers of property and HDB flats and increase the grants to first-timers in additional to increase in supply to achieve both objectives to check on runaway prices without fundamentals while supporting our first-timer Singaporeans to own their home.

It is certainly unhealthy and worrying if HDB resale prices and private property prices are rising without fundamentals. However, I understand there are also negative sales in the market. Would the Minister share what are the negative sales for each of the last five years, if data is available?

There is no doubt of the need for us to continue our efforts to ensure affordable homes for Singaporeans and remain committed to our mission of homes for everyone “居者有其屋”. We are not just building housing but also endearing homes for all Singaporeans. With that, I support the Motion by Minister Desmond Lee.

Mr Speaker: Ms Mariam Jaafar.

7.01 pm

Ms Mariam Jaafar (Sembawang): Mr Speaker, I thank the Member Mr Leong Mun Wai for bringing this debate to Parliament and the Minister for National Development for filing a Motion in response to be debated together.

When it comes to a topic like housing, something that has such a disproportionate impact on our lived experience and which holds so much of Singaporeans’ wealth, it is important to get the facts on the table and to flesh out the arguments rigorously, responsibly and grounded in reality.

We have had a broad subject before us and it has been a long debate. I am going to focus on getting first-time buyers on the home ownership ladder. It is where everything starts. I will start by reaffirming the importance of home ownership, before sharing my views on the present situation and some proposals for consideration.

Mr Speaker, I have lived and worked in many big cities, from Jakarta to New York City. And the idea that a city-state such as ours could achieve over 90% home ownership has been a great source of pride as a Singaporean abroad.

Home ownership allows people to settle down, to start families, to grow old, without the fear of having to move from place to place when the landlord wants to raise the rent. Home ownership gives people something to be proud of, something they can make as an expression of their selves. And home ownership provides ordinary Singaporeans, regardless of income or family background, the opportunity to build an asset and to build themselves up. For HDB homes, home ownership provides the ultimate security, something to fall back on, the one thing that cannot be taken away even if you go bankrupt. Finally, home ownership anchors people to Singapore, gives them a stake in our nation’s continued development and a reason to defend Singapore.

For all the above reasons, home ownership must remain not just the Singaporean dream, but the Singaporean reality.

But that reality appears to be challenged today. Rising resale prices and rents have sparked debate about whether public housing is still affordable. Housing related appeals make up a third of our weekly Meet-the People Sessions (MPS) case volume for me, and for many of my parliamentary colleagues.

There is genuine concern among young Singaporeans and their parents whether they will be able to afford a flat. I hope that the Minister’s explanation of how HDB keeps BTOs affordable has reassured them. Because, and this is why I am rather bemused by the more far-reaching proposals to bring BTO prices down, the core problem today is not overall BTO affordability.

The real issues to solve today are: (a) BTO shortage and long waiting times, driven by, as we have said, COVID-19 disruptions and construction delays; (b) a shifting BTO mix with a higher proportion of BTOs in mature estates against expectations of home buyers; and (c) high resale prices partly driven by the supply-demand imbalance which is itself partially real, partially induced, partly by nearly a decade of low interest rates. Taken together, these three issues mean some people find they cannot get the flat they want, BTO or otherwise.

Allow me to say a little more about the BTO mix issue. We are reaching the development limits in many areas, even in some non-mature estates, including in my own constituency, Woodlands. We also have more BTO configurations to cater for, to more diverse needs, for example, the needs of seniors and singles.

While 20,000 new BTO flats used to mean pretty close to 20,000 less expensive flats in non-mature estates, in the August 2022 launch, more than 60% of the 3- to 5-room flats on offer were in more expensive mature estates, including the PLH. This creates the perception that BTOs are getting more expensive overall, when in fact BTO prices in non-mature estates have not gone up so much. As the hon Member Mr Cheng Hsing Yao has eloquently explained, there is good reason why flats in mature estates cost more and to suppress BTO prices in these mature estates would create unfair windfall gains for a small group – a situation that HDB rightfully guards against, in setting BTO prices.

This shifting BTO mix has different implications for buyers who want to buy in a mature estate and those who want to buy in a non-mature estate.

For the first-time buyer who wants to buy a BTO in mature estates, they now have more choices, if they are prepared to pay the higher price. The innovations in the PLH model provide a useful reference to explore more ways to make them more affordable.

For first-time buyers who want to buy a BTO in a non-mature estate, the supply is sometimes not as high as it used to be. Many of my residents, first-time buyers but also second- or third-time buyers who come to see me at my Meet-the People Sessions want to stay in or near Woodlands. It is cheaper, closer to their parents and support networks, and, dare I say, we have done a pretty good job of making Woodlands a nice place to live, with noticeable improvements in connectivity and amenities.

In the last BTO launch in Woodlands in August 2022, Woodlands South Plains, the application rate was 8.1 and 11.7 applicants per unit for 3- and 4-room flats respectively versus 2.7 and 6.1 for the Bukit Merah PLH BTOs. Some of my residents try again and again for BTO and Sales of Balance Flats. One couple told me they had applied 11 times, because they want to stay in or near Woodlands – that is their expectation. But resale has become too expensive for them, especially with the recent sharp rise in interest rates and lower loan values.

And even if they can afford it, when resale prices get so far away from BTO prices, it creates another issue. Those who get BTOs can make huge profits when they sell, those who do not get BTOs have much less upside, even with all the grants. Plus, because BTOs are such a good deal, everyone wants to jump in. So, it is not just a housing affordability issue; it becomes a fairness issue and an incentives issue.

Mr Speaker, I will move now to solutions. In a debate on housing though, it can be difficult to distinguish between fact and opinion. We have heard a lot of opinions and I will add my opinions to this. But first allow me to lay down one fact. There are currently approximately 1.1 million HDB flats; and that means 1.1 million HDB households for which their flat represents a significant part of their wealth. And so, any proposal that ignores this fact or is cavalier about the trade-offs that ensue are really non-starters – lacking in rigour, responsibility and realism.

I listened carefully to the proposals presented by PSP and WP for significantly cheaper BTO prices. I cannot help but feel a sense of disquiet at how they gloss over the potential disruption to the wealth of 1.1 million Singaporean families, families that comprise low-income, middle-income and affluent families. I hope the PSP in particular, will clarify how they imagine the resale market will remain “buoyant” and address the need for people to upgrade or downgrade as their life circumstances changes, under their proposed affordable housing model.

But lest anyone think that I am somehow afraid to touch the resale market, quite the contrary. I believe the resale market is part of the problem and has to be part of the solution. And I also believe that the problems faced by the first-time buyers is not the problem of the first-time buyers alone. There is a huge social benefit of housing and a huge social cost of housing delays – on fertility rates, on how well kids can focus and do in school, on productivity and mental well-being. In the kinder, gentler, more inclusive Singapore that so many of us have talked about in this House, these social costs will only result in more Government expenditure down the road.

Thus, in my vision for a new social compact, everyone in the housing market should be willing to play their part.

Home owners should not necessarily expect that the value of their flats will increase inexorably year after year because housing goes in cycles. Landlords should not push to maximise their rents or prices at all costs. Buyers should not be jumping into the BTO market when they do not really need a flat, just because they can. And HDB should revisit the balance of financial costs and benefits of housing policies with the social and environmental costs and benefits.

So, the resale market has to be part of the solution. But if the market is a bubble, the more responsible way is to take some of the air out, bit by bit, through carefully calibrated measures acting in concert, in both the BTO and the resale market.

First, my suggestions for the BTO market. The BTO model was created to prevent the supply overhang in the 1990s from being repeated. And it has served us pretty well until recent times. The current waiting times are an anomaly. Prior to COVID-19, it was three to four years. Yes, a three- to four-year wait was less than ideal for some, but the model largely was passable for most. HDB has also shown itself to be responsive to the needs of first-time buyers by introducing Short Waiting Time (SWT) flats, announced as early as 2017, albeit in small numbers.

So, I do not believe the BTO model is fundamentally flawed, though I hope the waiting time can go down. I have confidence that the building programme will bring the BTO market to pre-COVID-19 norms in the next couple of years. I am also comforted to hear the Minister speak about building more SWT flats and over time, recalibrating its building programme so that SWT flats form a larger proportion of new flats.

But the problems we see today would still be there if another COVID-19 happens even if we had a lot more SQT flats. And contrary to the Member Ms Hazel Poa, I actually do not think it is quite so easy to predict demand, given the number and dynamism of the factors at play. Further, as supply chains in other industries have learnt following the pandemic, there is a need to strengthen resilience against potential black swan events going forward.

There is a financial cost to building what is effectively surplus flats to the demand forecasted. But if we really take into account the social benefit of housing and the cost of housing delays, there is potential merit in maintaining a safety stock of readily-available or some might say, Zero Waiting Time flats, while maintaining a baseload of BTO and SWT flats. These Zero Waiting Time flats would increase the responsiveness of housing supply, which will help achieve better outcomes, including helping moderate housing prices, provide for population growth and improve choice.

A further suggestion for the BTO market that seems worthy of further consideration is building shorter tenure flats, say 50 years as in the case of the Ang Mo Kio SERS replacement flats. This will allow cheaper flats while shifting the market a little further away from speculation, while helping to set price levels for flats of different tenures.

Next, unlocking the resale market, because the solution cannot and should not lie in building new flats alone. You cannot build flats fast enough to meet the demand in the short term, nor is it sustainable or an optimal use of resources for the long term. After all, our country is small, with many competing demands for our reserves, including land, and our population is ageing. There will be more people dying every year, leaving behind empty flats.

The key to giving Singaporeans a chance to own homes that allow them to start a family today, not in five years' time, to live close to their parents and their support networks, not on the other side of the island, lies in unlocking the resale market, making it more affordable and accessible for Singaporeans not lucky enough to secure a suitable BTO flat for themselves.

There are a number of measures that could provide some immediate relief and I would like to share a couple today.

First, to increase the Proximity Grant for first-time buyers in areas with high BTO application rates. Today, HDB offers a number of grants to make resale housing affordable. There is research though in other cities in the world that shows that subsidies tend to be capitalised in housing prices.

Hence, the benefit is captured by the owners, especially if housing demand is driven up by the subsidy scheme while housing supply is rather inelastic. Personally, I have grappled with the merits of the subsidy and whether increasing them further would just drive higher prices and create more economic rent for owners. But, Mr Speaker, if we look in our hearts, I think the need to get the first-time buyers a home should trump this. Applied with the right limits, only for first-time buyers, only in areas with high BTO application rates and in concert with other levers to loosen supply, the price effect of subsidies could be more controlled.

Secondly, require HDB owners to sell their flats if they buy private property. As mentioned before, the Government has said that it is soliciting views on this as part of the Forward Singapore conversation. Given the state we are in, I urge the Government, to put in crudely, to hurry up. Doing this would signal that public housing is primarily a place to live in.

In fact, if a stronger signal needs to be sent, the Government could consider additionally requiring HDB owners who own private property today to sell their flats. Three percent of HDB owners, slightly over 30,000 HDB owners own at least one private property. Of which, 45% rent out the whole flat and another 4% rent out one or more bedrooms. It is not a large number that would disrupt the market, but not insignificant relative to the number of first-time buyers.

Given the social benefit, this exercise could be sweetened by offering breaks on stamp duty for selling their HDB flat. Another perhaps more palatable option, is to ban such owners from renting their flats, which would likely induce many of them to sell their flats at more reasonable prices.

Together with the cooling measures and the dissipation of induced demand as BTO projects are delivered, the suggestions above could increase resale supply and moderate resale prices, providing more opportunity for more first-time homebuyers to get the flat they want in the locations they want.

Mr Speaker, I am confident that the Government and HDB will get us past the current situation and continue to evolve our housing policies. I have focused on first-time buyers in my speech because they are, rightly so, the first priority. But I urge HDB to not declare victory when the first-time buyers are "settled". Look out for the other groups that face frictions in getting on, off and sometimes back on the housing ladder today – the non-traditional families, transnational or reconstituted families, the ex-offenders, the singles.

HDB will also has to address the concerns of seniors in our ageing population, though here I think the range of options available including the Lease Buyback Scheme are quite comprehensive and should be further promoted.

It is not easy to meet the needs and aspirations of all, but I have full faith in the HDB that has the vision, the focus and the heart to do this.

I would like to end by quoting our Founding Prime Minister, Mr Lee Kuan Yew:

"Soon after separation, I resolved to enable every household to own its own home. If we were going to get the people to take National Service seriously, I could not ask their sons to fight and die for the properties of the wealthy. We worked out a personal savings scheme that allowed them to own an apartment painlessly through instalments over 20 years. We sold the apartments to them at below cost to enhance their assets. Today, 95% of Singaporean households are home owners. It has immeasurably increased their wealth and our social stability."

It is uncanny how it remains true today.

Let us renew, therefore, our vision, our focus, and our hearts, so that current and future generations of Singaporeans will have the opportunity to own a home that enhances the dignity, well-being and wealth. I support the Motion moved by the Minister for National Development. [Applause.]

Mr Speaker: Mr Abdul Samad.

7.19 pm

Mr Abdul Samad (Nominated Member): Mr Speaker, on a personal note, I have never experienced a BTO flat before in my four times of shifting but I can affirm resale prices were affordable during my 20 years of shifting houses.

Hence, I rise in support and agree that public housing in Singapore is indeed affordable and accessible. It is also an asset for many young Singaporeans, who either wish to live there for the foreseeable future until their lifestyle needs have shifted; or live there for the long term.

Accessibility to and ownership of a HDB flat is a key factor in determining whether young couples wish to settle down and start families in Singapore.

The negative public sentiment against the rising cost of public housing is not new and has been there for some time and also the recent hike in resale prices. This we know is mainly due to supply and demand for houses especially within the mature estates which are usually more popular. However, it is unfair to say that public housing is unaffordable as prices are determined through a negotiation process between sellers and buyers. In fact, a valuation process is required by HDB for every sale to take place.

The sentiments on public housing varies based on the engagements that I have had with my fellow union leaders, members and workers. Their two main concerns are the waiting time for BTO flats and the price of resale flats. Another concern to note is the quality of workmanship of the new BTO flats.

From my exchange with them, we acknowledge that new BTO flats are affordable as long as buyers choose locations that they can afford, with or without opting to utilise the available grants. This accords with the principle that we should live and spend within our means. Practically, this also includes their choice of flat ranging between 2-room and 5-room flats, depending on the couple’s financial ability. Government grants of up to $80,000 for new flats while generous amount of up to $160,000 for resale flats are also available where applicable.

If an individual’s choice of home in terms of size and location does not match their financial capability, it does not automatically mean that public housing is not affordable. Take myself as an example.

My wife and I were hoping to stay near my in-laws in Toa Payoh when we married and wanted to settle down in 1999. However, prices in Toa Payoh were high considering it being a central location and popular estate. We considered purchasing a new flat but the long waiting time deterred us from doing so. As such, we discussed and identified possible areas with 5-room flats within our financial means. We finally set our roots in Yishun, which was just a 15-minue walk to near Northpoint. In short, we got our 5-room within our means, accessible to many amenities and best of all, many primary and secondary schools, all within 10 minutes of walking distance. We are also thankful for the grant extended to us, which was at that time was a mere $35,000.

We stayed in our matrimonial home for five years and have since moved a couple of times before settling down at our current jumbo-sized home in Woodlands. This may or may not be my final residence as our needs change as we age and we may not need a large space in the future.

Over the course of the years, we had on certain occasions lost monies in particular transactions and profited at a later stage. However, on balance, we have earned some monies through the sale and purchase of our homes which will be used for our retirement.

This example is not just unique to me. I am sure there are many Singaporeans out there shared the same experience. In fact, I have heard of many, including my fellow Members, who have upgraded from public housing to staying in private apartments or even some landed homes. For the record, these are not necessarily high earners. Some are even normal working people like myself with stable job and progressive income over the years.

I appreciate Mr Leong Mun Wai's efforts in providing a big breakdown of the amount required to own a new home yesterday. However, it will be more useful for Mr Leong and his team to, likewise, provide examples of fellow Singaporeans who have profited from the sale of their HDB for the purchase of private properties so that a more balanced view is canvassed.

Sir, we need to be truthful on the real challenges and help to find solutions by helping to create more awareness, rather than planting doubts in our fellow Singaporeans in owning a home. Let us not take away the efforts of our fellow Singaporean policy makers in MND and HDB who monitor and review housing policies regularly with a view to making public housing affordable and accessible since our Independence till now and even in the future. Allow me to speak in Malay.

(In Malay): [Please refer to Vernacular Speech.] I support the Motion on the affordability of public housing for Singaporeans. Lately, we have heard many people expressing their concern over housing prices that keep increasing. However, we should acknowledge that there are housing grants being made available to the people. This will alleviate the burden of debt, and the price of the flat is discounted after deducting the grant amount.

Public housing should be made a priority for our people who can afford it and are eligible for ownership. We should make use of the support provided by the various Government grants. We must believe that the Government will always strive to make public housing affordable for all levels of society.

Individuals, couples and families must make their own financial calculations and assessments before opting to buy a house. If the location of our dreams is beyond our means, we should be open to searching and buying a house that we can afford.

The journey towards public housing ownership requires time and planning. Let us not take the easy way out and blame the policies without finding out what has been provided by the Government. Be fair to those who have been working hard in MND and HDB, who are constantly monitoring and making changes to ensure that Singaporeans can afford their own homes.

(In English): Sir, our home is a place to stay and also an asset for our golden years. We have to acknowledge that public housing policies have helped thousands of families to own a house of their own as long as they choose a size and location that is within their financial means. This, in my view, is the correct approach to take as it strikes a nice balance between ensuring the public housing is affordable from the Government's end while encouraging Singaporeans to save and spend prudently within their means as responsible citizens.

On this note, I hereby strongly support this Motion by Minister Desmond Lee to affirm that public housing is affordable and accessible for our Singaporeans. [Applause.]

Mr Speaker: Minister Indranee Rajah.

7.28 pm

The Second Minister for National Development (Ms Indranee Rajah): Mr Speaker, Sir, we have before the House two Motions which at first glance may look similar, but which are fundamentally very different, both in underlying values and approach and, ultimately, in terms of impact on Singaporeans.

The Motion standing in the name of the Minister for National Development affirms the PAP Government's commitment to keep public housing affordable and accessible for Singaporeans while safeguarding the interests of current and future generations.

In his opening speech yesterday, Minister Desmond Lee explained how we have done this and how we intend to continue doing so.

The PSP's Motion, on the other hand, implies that our system does not deliver affordable or accessible housing and that it is somehow fundamentally flawed despite the fact that 90% of Singaporeans living in HDB flats own their own homes.

PSP's Motion rests upon – and its merits must therefore be judged by – their alternative policy proposal which, in essence, is to change the HDB's existing homeownership programme into a national prepaid rental scheme with an option to buy. More importantly, the PSP proposal most certainly does not safeguard the interests of current or future generations. Instead, it will erode our shared Reserves.

PSP's proposal or, as Mr Leong Mun Wai calls it, the Affordable Homes Scheme, is in substance a prepaid rental scheme where the user pays rental upfront and has the option to own the flat by paying a deferred land cost.

It works like this. Allow an individual to buy a new flat at a user price that is set based on construction costs and a notional location premium.

What is this notional location premium? We have no idea because Mr Leong Mun Wai has not told us how this notional location premium will be calculated.

If the individual stays in the same flat for his entire life, he only needs to pay this user price. However, if the individual were to sell his flat in the resale market after the Minimum Occupation Period (MOP), he would have to pay the land cost that HDB had recorded at the point of purchase along with some accrued interest.

Essentially, it is a prepaid rental scheme with an option to buy. That is why Mr Leong Mun Wai uses the phrase "user price" and not "purchase price" because he knows it is not ownership. It is prepaid rental.

The PSP portrays it as cheap housing with no downsides. This sounds too good to be true – and if something sounds too good to be true, then it is because it probably is; too good to be true, that is. That is to say, there is a catch that you have not been told about. That is the case here.

No matter which way you look at it, PSP's proposal involves selling state land cheaply. Under their scheme, when the flats are disposed by HDB to the user in the first instance, no one pays for the land cost. So, the user gets to stay in a nice BTO in a nice location with nice amenities at a low price without paying for any land cost.

If he chooses to sell, then and only then, he has to pay for the land cost with some accrued interest. The land cost is a cost recorded with HDB at the time he gets the flat, not the current value of the land at the point when he sells.

We all know that land has value. If you give it away cheaply or at zero cost, someone still has to bear the cost of that land. Under Mr Leong Mun Wai's proposal, the BTO user does not have to pay for land value or bear any cost of the land until he chooses to sell it. So, who is paying for the land for the duration that the user stays there?

What Mr Leong Mun Wai has not told you is – you all are paying for it. The cost is borne by all other Singaporeans – each of us, in this generation as well as our children and grandchildren.

And what is the price that you will pay? You, your children and your grandchildren will pay for it in three ways: (a) financially, through the erosion of our shared reserves; (b) in inequity, where some benefit at the expense of others; and (c) in poor policy, with implications for the broader housing market. Let me explain.

State land forms part of our reserves. Everyone knows that, everyone accepts that. This land belongs to all of us, Singaporeans. As the Government, our approach, in line with our values, as a people and as a nation, is that we must be good stewards of this land for all Singaporeans.

Think of a family that has several parcels of land inherited from their grandparents. One of the family members, the steward, is put in charge to manage the land on behalf of the family. Would you expect the steward to give away any one of those parcels to a developer for free and to recover only part of the land cost later? No. You would not. Because that land has value.

If he gives it away for free or sells it at a partial recovery price, then he is shortchanging the rest of the family. They would be deprived of the value of the land.

However, if the steward sells the land for a fair market value and invests the sale proceeds, the family will have the benefit of the original sale proceeds as well as the income from those proceeds. This income can then be used partially for expenditure and partially reinvested to help sustain both present and future members of the family for years to come.

Everybody understands this in the context of family. This is exactly how we do it as the Singapore family.

State land and our reserves belong to all Singaporeans, present and future. It is a precious shared resource we must protect. The Government is the steward of state land for the whole Singapore family. The Government cannot give away state land for free or sell it at an under-value. If we do, we would be shortchanging Singaporeans.

If the land remains in Government hands, the Government has to use it for the public good and we do not have to charge land cost. However, when we sell the land, we charge for it because the Government loses the use of it.

On this point, I would like to provide a clarification to what Mr Sitoh Yih Pin said in his speech yesterday. The principle Mr Sitoh Yih Pin articulated is correct. We have to account for the value of land when the state disposes of it. However, if the land is used for public infrastructure like hospitals and public schools, it remains in the possession of the state and no payment arises. That is because it remains in the possession of the state. This is the case for Gardens by the Bay. The land was not sold for a nominal fee.

Hence, when we sell land, we do so at a fair market value. When that happens, the physical asset – the land – is converted into sale proceeds or a financial asset.

To preserve the value of the reserves, the land sales proceeds go back into our shared reserves and are reinvested by our investment entities to benefit both current and future generations.

Fifty percent of the investment returns supplement our national budget annually through the Net Investment Return Contribution (NIRC) and the other 50% is reinvested for the benefit of ourselves and future generations in a virtuous cycle. Today, the NIRC contributes $0.20 for every dollar of expenditure.

If we do not account for the fair value of land or give it away free or at an under-value, our reserves will shrink each time land is used for public housing. This means that over time, we will have less funds available for crises. Over time, the NIRC will get smaller and over time, in order to make up for the smaller NIRC, we will need to raise more taxes more quickly to get more revenue.

Despite Mr Leong Mun Wai's claims that he is not raiding the reserves, his proposal does exactly that.

First, land has a value. Mr Leong Mun Wai's proposal implicitly acknowledges this because he concedes that you must pay for the land when you sell it and it must go back to the past reserves. Under his scheme, the BTO users get to enjoy the land without paying for it. So long as they are occupying the flat without paying for the land, that is a draw on our reserves.

If they choose not to sell, our reserves will be reduced for the entire duration of that occupation, presumably 99 years, although Mr Leong Mun Wai has not said what the tenure will be. As a result, we would forgo the monies that we would have invested and the investment returns under our current system. That means less NIRC for the budget every year.

When Mr Leong Mun Wai says his scheme is better than using Government subsidies, he is actually taking from the Reserves and to make up for what the NIRC cannot now fund, we would have to either raise taxes or cut spending.

Second, is PSP's proposal fair to Singaporeans? It is not.

Under the PSP model, those who choose not to sell their flats will enjoy a large subsidy at everyone else's expense. Those who choose to sell their flats will have to pay recorded land cost and accrued interest but with no subsidies or grants. Some may have to sell their flats not for capital gains but for other reasons such as to cater to new needs and changes to lifestyle. If the property market is down, they may have to sell at a price lower than the recorded land cost and would lose out.

For the one million existing homeowners, you should consider what PSP's proposal means for you. If you are a HDB owner today, you should think what PSP's proposal means for you.

Essentially, there will be a new precinct right next to you with flats of similar attributes but much cheaper. Please consider what this might mean to your property value. Also consider is it fair that by policy design, somebody else gets the same flat as you but at a much cheaper price.

Ultimately, the net effect of PSP's proposal is that the new users will benefit from the low-cost flats but it would lead to the erosion of reserves and the reduction in NIRC to the budget. In short, PSP's proposal will benefit the user but everyone else will be paying for it.

Third, is the PSP's proposal good policy? The PSP's model of differing land cost upon resale kicks the can down the road for home buyers who may well be worse off for this.

Under PSP's model, there are no grants and subsidies. When the user sells his flat, he would have to pay for the recorded land cost without the benefit of grants or subsidies and this could affect his net proceeds. And the question is whether this would be sufficient to finance another home. This is unlike the current HDB home ownership model, which enables Singaporeans to own their flat at an affordable price and benefit from our overall economic growth when they subsequently monetise it.

BTO applicants should consider what PSP's proposal means for them. With much cheaper flats paid for by everybody else, many people will join the queue. It will drive up demand. Competition for housing will increase. The chances of a successful ballot will be lower. There will be longer waiting times and greater uncertainty. Some will not be able to get a flat at all. Then, what do you do about those who cannot get onto the affordable housing scheme and have to turn to the resale market?

Under PSP's proposal, there will be no Government grants. How will they feel paying vastly more? They will definitely ask for much larger grants and where will that be funded from?

There is also a real risk of destabilising the resale and property market.

PSP has also been very unclear as to the legal nature of this scheme. The overall scheme is rental with an option to buy, but he has not clarified what the user gets at the point of disposition. At the point of disposition, meaning when the user gets it from HDB, does the user get legal title or just a right to occupy?

If it is just the right to occupy, then the person is not the owner. You only become an owner when you pay for the land and that only happens when you sell the land. In short, you only own when you sell. Whereas under our current scheme, you are the owner from the time that you buy the flat.

On the other hand, if the individual gets legal title at the point of disposition, then it means that they are enjoying ownership without paying for it – at least until they sell.

While on this topic, I also want to highlight one other thing. There is a narrative going about that you do not own your HDB flats and that you are only a tenant and paying rental. This is a narrative that has been perpetuated by both PSP and WP.

Mr Leong asked in a social media post in December 2021, and I quote, "is the land used by HDB truly disposed of by the Government if the HDB flat owners only own the rights to their flat and not the common areas and amenities?"

And he also said that "flat owners arguably paying a fixed monthly rent for 99 years in today's dollar upfront when they purchase their flat."

In a social media post in July 2020, Mr Louis Chua said that "signing an agreement for lease makes one a lessee, not an owner". This scheme of PSP shows that that is not true. It shows that they fully understand that there is a distinction between rental and ownership. Otherwise, why do you have to pay for the land when you sell? Obviously, because you are getting something more. And you have the ability, once you get the title, to transfer that title; which you do not, if you are a mere tenant.

Mr Leong said yesterday, "Singaporeans should be treated like citizens, not consumers." We believe Singaporeans should be treated like home owners, not users.

The PSP's position is riddled with inconsistencies. Mr Leong had said that land cost should be taken out of the pricing of HDB flats. Mr Raj Joshua Thomas, earlier today, pointed out that this scheme puts land costs squarely in the midst of the pricing of HDB flats. Of course, Mr Leong did stand up to clarify and said that as part of his "brilliant military strategy", he did not say earlier that this was related to owner-occupation.

But then, what about the person who is buying from the erstwhile user? Land cost is right smack in the middle of the price that he is paying, and certainly, on all the social media posts, the impression that was created, not just to Mr Raj, but to all Singaporeans was that there was this wonderful scheme that would allow you to own without having to pay land cost.

Well, Mr Leong has now clarified it, but it would be good to tell people that what you are really selling them is a scheme to rent, not to own, and they will only own it as soon as they sell it and dispose of it.

Secondly, Mr Leong cited resale prices as a concern, but he reassures us that this proposal will not bring resale prices down, but he has also said that PSP will aim to maintain, I quote, "a buoyant resale market". PSP criticises the waiting times for BTO flats, yet, as I have explained, their proposal will add to the queues. He has said that his proposal will not raid the reserves, but it is clear that it will.

He also said yesterday, that under his scheme, Singaporeans can look forward to a future when, I quote, "owner-occupied public housing is truly affordable, as land cost is waived." The irony is that for so long as you are occupying it, you are not the owner. You only become the owner for just a short while before you sell it.

Sir, Mr Leong wants to turn our nation of home owners into a nation of renters, and to become a home owner, you have to sell your property with no assurance of being able to afford a new one after that.

For these reasons, I cannot support the PSP's Motion standing in the name of Mr Leong Mun Wai and Ms Hazel Poa, but I do support the Motion standing in the name of the Minister for National Development for all the reasons that have been outlined by the Minister. [Applause.]

Mr Speaker: Mr Louis Chua.

7.49 pm

Mr Chua Kheng Wee Louis (Sengkang): Thank you, Mr Speaker. Just a quick clarification for Senior Minister of State Sim Ann on VERS, as I took some time to relook at what has been shared so far in the public space. I think Senior Minister of State spoke about how the Government under VERS would be the buyer of last resort. And I think this is actually a key plank of what the Workers' Party (WP) has said in the Universal Sale and Lease Back Scheme which we put out, that the HDB is the buyer of last resort for all lessees, at the option of the lessee.

But can I confirm that VERS is subject to voting on a precinct level and that it is far less generous than SERS? This is what we know so far. So, for a young family that buy, say, a Marine Parade flat today which has about 50 years left, the original owner would be able to monetise. But for this young family, should the precincts not actually vote for VERS, then, what recourse would he or she has, and does it mean that their home, or rather, their household net worth would be declining as a result of this.

Ms Sim Ann: Mr Speaker, we have shared what we can about VERS at the moment, but it is still a work-in-progress and more details will be forthcoming when ready.

Mr Speaker: Ms Janet Ang.

7.50 pm

Ms Janet Ang (Nominated Member): Mr Speaker, I appreciate the opportunity to participate in this debate on the subject of affordability of public housing in Singapore.

Do Singaporeans have access to affordable public housing? Has Singapore's public housing policies enabled Singapore Citizens, especially in the lower middle-income group, to own their own homes?

Let us start with the facts. So, I must thank the hon Member Mr Leong Mun Wai for putting up the Motion because it then gave me the motivation to go find out the outcomes. So, what are Singapore's public housing outcomes?

Outcome number one: 78.3% of Singapore resident households live in HDB flats, and today, HDB has supplied more than 1.09 million flats in Singapore, nine in 10 of which are owner-occupied, resulting in Singapore having one of the highest home ownership rates in the world. And even more heartwarming to know is that 85% of low-income households in Singapore own and live in their own HDB flats.

Outcome number two: housing is usually the highest expenditure for any household. Mortgage service rate, or MSR, refers to the proportion of a borrower's gross monthly income that goes towards mortgage repayments for the HDB flat, and is a good benchmark for affordability.

In the first half of 2022, almost 90% of all buyers who collected keys for their new HDB flats has a MSR of 25% or lower. By global comparison, Singapore's MSR of 25% or lower is below the international benchmark of 30% to 35%, which indicates that public housing in Singapore is more affordable than elsewhere.

Outcome number three: moreover, given that for employees aged 55 years and below, employee and employer CPF contributions amount to 20% and 17% of employee income respectively, totaling 37% of income. So, for the buyers with MSR of 25% or lower, they can service their HDB loans using their monthly CPF contributions, with little or no cash outlay.

Outcome number four: in 2021, the median price-to-income ratio for HDB flats in Singapore was 4.5, which means that the median HDB flat price is about four and a half times the median annual household income in Singapore. This is remarkably lower than the median price-to-income ratios in cities, like Hong Kong at 30.8, Beijing at 26.8, Shanghai at 24.5, Seoul at 18.6 and Tokyo at 16.6.

Outcome number five: in most parts of the world, affordable housing usually refers to low-income housing. But for us in Singapore, our affordable housing wins international accolades and awards for providing well-designed flats and high-quality living environments that is green, liveable and sustainable, and have the greatest effect on the people who use them each day.

Outcome number six: a study on International Housing Affordability Survey 2020 recognised the Singapore Government for heavily investing in the upgrading and renewal of HDB neighbourhoods. This helps to forestall urban decay, they wrote, in older areas and allows homeowners of all income levels a quality living environment comparable to newer neighbourhoods.

Outcome number seven: HDB housing is referred to locally as public housing. Yet, unlike other public housing programmes, HDB flats are owned under 99-year leases by purchasers who are able to sell their units after a Minimum Occupancy Period (MOP) of five years, or 10 years for the Prime Location Public Housing (PLH) model, resale of HDB flats help to unlock the value of the HDB flats for many Singaporeans over the years, facilitating social mobility for HDB dwellers to upgrade to larger units, or to private housing even.

Outcome number eight: as Singaporeans move into the retirement phase, they are supported by the HDB Lease Buyback Scheme (LBS) and the Silver Housing Bonus (SHB) scheme, which allows the seniors to monetise their HDB flat while still living in it, or to monetise their HDB flat in the resale market and move into a smaller unit, with a shorter lease. In their golden days, they continue to have a home to age in place and have cash to support their retirement needs.

How would you answer the two questions I posed at the start? A resounding "yes" would be my response.

What Singapore has achieved is truly a miracle and, definitely, not by accident. Our leaders and our pioneering generation dared to dream together of the possibility of a metropolis rising out of a mudflat swamp and they worked together to make it happen, one brick at a time. We are blessed that the successive generation of leaders in our Government continue to build on that dream and bring us to where we are today.

There are many economists and governments studying the Singapore model and lessons learnt. I quote from the Demographia International Housing Affordability Survey, 2020 edition: "no major metropolitan area in the high-income world faces the housing affordability challenge of Singapore. Singapore's six million people live on a fully developed island nation so small, that they could fit into one-half of Tokyo Bay. As a result, Singapore lacks the supply vent of low-cost suburban or exurban land that moderates house prices across an urban area. This is Singapore's unequaled housing challenge... but Singapore has effectively managed its scarce land supply and established a market that produces middle-income housing affordability. HDB also seeks to achieve social objectives through its policies, such as to: promote progressivity by giving a higher grant amount to the lower income; promote family formation by providing bigger grant amounts for families than for singles; promote mutual care and support by encouraging families to live with or close to their parents or children.

The lesson of Singapore for the world is not so much the intricacies of its housing market design. Rather, it is that Singapore pro-actively and successfully prioritized affordable home ownership for its citizens, and developed means to accomplish that objective based upon its unique conditions."

Kudos to colleagues at MND, HDB, CPF and the whole-of-Government, for all that you do to house Singaporeans from cradle to retirement. You deserve our show of appreciation.

What is waiting for the road ahead? The paradigm shifts all the time and the COVID-19 pandemic has thrown quite a few curveballs at us from many directions and public housing is not precluded. Over these past two days, many ideas have been thrown around and indulge me as I add a few to the already long list.

Challenge number one is said many times, long wait time for BTO Flats with median wait time of 4.3 years, not counting the long queue to apply and book for a flat. HDB is already implementing a hybrid of Build-ahead a certain number of flats to compliment BTOs to shorten wait times. And as Minister Desmond shared yesterday, HDB is ramping up the construction of flats to catch up on lost time caused by COVID-19.

Of course, the key question is, what would it take for HDB to further ramp up the numbers and reduce the median wait time by half, to address the backlog and demand from, especially, the first-time applicants. Share with us your 苦中 or pain.

Meanwhile, I hear from a young couple that the interim rentals HDB offered for young families to set up home while waiting for the HDB keys have been most helpful. They are very grateful for HDB supporting them in their journey and more can benefit from this.

And of course, four in 10 applications reject when offered a flat, and perhaps that is why the supply demand forecasting is a little bit in the air. This issue has to be managed, so that HDB can better plan demand and supply and I ask applicants: be serious, $10 for one application, that is why four in 10 applications reject.

Challenge number two: perception that BTO flat prices are unaffordable. From what I have seen, Singapore public housing is higher quality and more affordable than most other cities. Affordability, as my fellow Nominated Member colleague said just now, is all about buying within your budget. HDB has assured that there is a HDB flat out there for a different range of incomes and needs, and that the BTO flat is priced to affordability and is not priced to recover cost.

This explains the big deficit that HDB chalks up every year for its Home Ownership Programme. So, how will HDB persuade home buyers that there is a BTO flat for them that is affordable and accessible, rather than for them to hear from coffeeshop talk that HDB flats are not affordable.

Maybe an AI app may help the home buyer to match their needs and budgets to HDB BTO launches as well as resale flats and discover the opportunities that they have not thought of, and that might even save them cost. Affordability is all about managing your own expectations.

Challenge number three is that HDB resale prices are driving up BTO prices. Now, more subsidies for those flats in popular locations, in my opinion will only lead to the BTO flats in these locations being more prize trophies. So, putting too much premium for BTO flats in these locations may put it out of reach for ordinary Singaporeans. I think the premium location housing is a good scheme that can be expanded to more popular locales to address this good problem.

Challenge number four is the resale prices of HDB flats. The Government measures to cool the currently heated resale market have already been introduced and will take time to work through the market. Of course, the question is whether this is enough to deter speculative behaviour. And for buyers, do not kill me – I like the idea of the principle of Government sharing in the gains of the resale flats since there were grants involved. And of course, I like the idea of expanding the PLH rules to cover non-PLH locales and perhaps there can be some form of ABSD or stamp duty when you buy resale.

Challenge number five is the current generation of retirees and soon-to-be-retired. There are some Singaporeans who have planned the move to sell their private property or to downsize from the current HDB flat and to retire in a smaller HDB apartment. Their retirement plans are of course impacted by the cooling measures. It is their own bad timing. However, might the HDB support their efforts to retire well joyfully in a HDB home.

Challenge number 6 is now the younger generation. In preparing for my speech, I listen to some young people. There is a changing attitude and lifestyle among the younger generation. They want more personal space and we have seen more singles moving out of their parents' homes, even when it is a landed property, even when they have their own bedroom, to share a rental flat with friends. The work-from-home norm which is catching on among the younger generation in particular would require more space at home for work.

My advice to them, from my experience working from home should be the flexibility that I can have and not the permanent shift from the employers' real estate costs to my personal real estate expense. For many of them, they do feel that Government grants are all very helpful, but insufficient BTO and resale prices continue to escalate and the downpayment of 20% is a non-starter unless they get help from their parents.

Challenge number seven is the sandwich middle class. With private condominiums pricing going up, the sandwich middle class hopes that the HDB can raise the income ceiling for HDB's executive condominiums (ECs) and maisonettes so that they may be able to meet their upgrade aspirations at the lower quantum value.

Challenge number eight: as HDB is intended to be owner-occupied but the rules allow for them to rent out the HDB flat and live in their private housing, it is good to see the HDB has given our fellow Singaporeans the lift up and the progress to be able to invest in property and, without breaking HDB rules, have the ability to enjoy passive income from renting out their HDB flats most likely to our foreign workforce like nurses, therapists, technician, so on and so forth; all who need affordable rentals place to live. We read in the news about escalating rentals even for HDB rooms and HDB flats. HDB is after all subsidised housing. I hope that the owners will exercise restraint in the exuberance of profiting from this privilege of having a HDB flat to rent out.

Are there any rules or caps on rental gains for this category of HDB owners? Is there any rent control to ensure that the rental prices of HDB rooms and HDB flats will provide affordable rental housing for our guest workers?

Challenge number nine: notwithstanding that the debate today is around affordability of HDB flats, I would like for us to spend a minute to look at the overall Singapore real estate. In a UBS Global Real Estate Bubble Index Report, it is reported that most households can no longer afford to buy property in the top financial centres of the world without a substantial inheritance. While we do want Singapore to be one of the top global financial hubs, how can we prevent and limit our risk of being in that same situation? How does MAS and MND collectively plan to help ensure that Singaporeans can still get to own our limited residential real estate even as we welcome wealthy family offices into Singapore whose purchasing power will inevitably drive up property sale and rental prices?

Mr Speaker, MND, HDB, MOF, WOG, being the custodians and stewards of our land and resources have the unenviable job to prioritise for the greater good of all of Singapore. It is a very tough job and they have created a system that works and is admired. For all of us in this Chamber, I submit to you that we ought to debate difficult issues in truth and in love.

We should strive to unite and not divide. We are all here to find solutions that support the integral human development of our society in this small little 724.2 square metres of land.

As Harvard University economist Edward Glaeser once said, "All policies need to be judged by the impact on people."

Speaking of people, I would like to share with this House the story of Mdm T told to me by Montford Care, Caritas. By the way, all names have been changed to protect the confidentiality of the persons.

Mdm T is a single mother, aged 43, with two children from her second marriage. One child has a medical condition and the other child is highly active. They were victims of family violence resulting in Mdm T divorcing the second husband. Mdm T moved back to her mother's place and was dependent on her financially. She moved into a rental flat with her children in 2016. She was emplaced in HDB's Fresh Start Housing Scheme (FSHS) in March 2020 and was referred to the Fresh Start Support Programme (FSSP) in July 2020.

To cut a long story short, Mdm T, with the help of the FSSP social worker, managed to get a full-time job, moved into her HDB flat under the FSSH, got help from generous donors to set up her home, learnt to be more confident in planning, managing her children and is taking on the responsibility of managing her own bills and not burdening her mother and still have some savings left over.

HDB is not only providing affordable homes for Singaporeans, but HDB is taking care of the vulnerable and integrating the resources across the whole-of-Government, MSF and social service agencies to help Singaporeans like Mdm T and her children to have a fresh start in life. That is the Singapore Spirit, that is the Singapore system.

Mr. Speaker, indulge me this final quote: “Intentions are not enough – they must be converted into tangible results. Singapore’s success is in facilitating results consistent with intentions that are both meaningful and routinely evaluated.”

I have faith that we have done it before, and we will do it again. I stand in support of the Motion in Minister Desmond Lee's name for affordable and accessible public housing, and that this House affirms the importance of keeping public housing affordable and accessible while protecting the interests of current and future generations of Singaporeans and endorses the commitment of the Government to these twin goals. [Applause.]

Mr Speaker: Mr Henry Kwek.

8.09 pm

Mr Kwek Hian Chuan Henry (Kebun Baru): Mr Speaker, Sir. I stand in the support of the Motion raised by hon Member Minister Desmond Lee.

I listen very closely to hon Member Mr Leong Mun Wai's Affordable Homes Scheme proposal. Many Members have expressed grave concerns about it, and I would like to start my speech by highlighting one.

PSP would not charge land course at the point of sales, but when Singaporeans in sell their flats, they have to pay back the full costs of land plus interest. If somebody has not been actively putting aside the sum throughout the years, several hundred thousand dollars over, let us say 25 years, at a 2% to 4% interest rate is a huge liability on the home sellers and their children at the point, especially if we do not have any additional housing subsidies from the Government, which I have yet to hear PSP mention in the proposal.

Yet we also know that many Singaporeans relocate because they have genuine needs. That means that if they sell at that point, the new BTOs under PSP's plan would be more expensive compared to today's BTO because of the many additional grants that HDB provides the home owners, especially those families with lower income.

Mr Speaker, we have a very successful policy. Our public housing is affordable, accessible, inclusive and well-designed. As a GPC Member of Defense and Foreign Affairs, I often host visiting politicians and officials from all over the world. Our housing and urban planning policies are very well-regarded and many nations seek to replicate them. Of course, policies need to reflect changing aspirations, a core issue that many people have today is centred around the affordability of mature estates' new BTOs.

I understand Singaporeans' concerns when they see the prices where they are. But yet, those who have gotten flats in attractive locations gain significantly more housing equity after the Minimum Occupation Period (MOP). Sometimes, even two to three times. They are new BTOs in non-matured estates. This upside needs to be considered when we are talking about affordability, especially of new BTOs in mature estates.

I am not saying that we should abandon efforts to make housing more affordable. Extra grants can certainly help first-time home owners, but reducing prices means that the Government must cut back in other areas. So, we must ask ourselves, what are we willing to sacrifice? Instead of only lowering BTO prices, can we look at the issue at a different vantage point? Can we lower our peoples' expenses by helping them acquire BTOs close to their family members living in mature estates?

To achieve that, let me suggest four measures: one, HDB can extend the housing priority grant beyond of families living within four kilometres of family members to also include those within a 30-minute off-peak journey by public transport, given that we have extended our MRT network considerably; two, HDB can reserve 30% of new BTOs in mature estates for applicants who qualify for the extended proximity grants which I just mentioned, the enhanced proximity grants. Those who do not get the place in this group can still join the general ballot; three, HDB can build more 3G flats in mature states; and finally, HDB can reduce speculative demand on BTOs in mature estates or attractive locations by introducing some of the criteria from our new PLH scheme.

let me delve into the affordability of our public housing in the resale market. I recognise that the Government has introduced a number of cooling measures specifically targeting the HDB resale market. I would like to suggest that MND consider another cooling measure, which is temporarily restricting PRs from buying resale flats until we can make up for the delayed BTO constructions. Although the number of flats purchased by PRs is relatively small, I understand, it serves as a sign to our citizens that our Government is using all reasonable measures to cool the market in this exceptional time, prioritising Singaporeans to acquire flats.

I would also like to caution MND on adopting PSP's proposal to radically reduce the price of new BTOs by completely disregarding land price in pricing if the flats never sold. Frankly, many of my residents are worried. Let us walk through what will happen systematically. At first look, it seems attractive except that many Singaporeans change of flats and locations as the aspirations in life circumstances change. I mean, we know plenty of Singaporeans relocate to be closer to their jobs, parents or because of the change of marital status.

When they move under PSP's proposal, because they must pay land costs and interests, they will be worse off than today because of the generous grant provided. There is also a question of who will buy the resale flats if the price differential between a new flat without the land cost and the resale flat with the land cost is so big. In fact, it is huge.

The resale HDB market will be devastated first, followed by the private property market. Let us not forget that our housing equity forms the largest asset to most Singaporeans. We do not even need to wait for the first tranche or MOP to be completed under PSP's proposal to fuel the dire consequences. Right off the bat, many existing HDB owners will wise up and dump the existing flats in anticipation of the future sharp drop in resale value, and then apply for new BTOs.

At a time when we are still dealing with delayed BTOs due to COVID-19, this flood of new demand will make delays much, much worse.

A collapsing resale market will have significant effects on the retirement adequacy of seniors living in our flats who rely on their housing equity to finance it. It is simply unjust to engineer such a dramatic drop in prices. Seniors have no more time to save up.

There is also a considerable impact to younger Singaporeans who recently bought condominiums. It will affect SMEs and micro SME owners whose many bank loans for their businesses are secured by their housing equity through personal guarantees.

Finally, let us not forget that we are at the tail end of this property cycle. Interest rates in the US and Singapore are much higher compared to two years ago. In fact, we have just gone through the fastest ever increase in interest rate in history. Many developing countries are now seeing and experiencing a steep drop in housing prices at this juncture.

We must strive to achieve a soft landing in our property prices or for a price increase to be less than our increase in income. We should stay clear of artificially creating a hard landing.

Let me now conclude. Yesterday, in the Chamber, hon Member Cheng Hsing Yao made a wise point. The value of our land reflects decades of investment. I fully agree. I would also like to humbly add that the value of every square foot of Singapore is also anchored on our sound governance and stable policy.

This means we pursue stable, reasonable policies that evolve over time and not undertake abrupt, radical shifts to catch prevailing prodigal winds. This means we use targeted measures and avoid unnecessary systematic risks. This means we add, not deplete our reserves for the tougher journey ahead.

When we opt for savvy slogans over practical policies that benefit Singapore, trust in our system of governance will vanish. If trust vanishes, so will the value of our land no matter how many miles of fibre optics or MRT lines are buried underneath.

Mr Speaker, we are now at a particularly difficult part of the property cycle where the animal spirit of the market is colliding with the crushing forces of surging interest rates, economic slowdown and uncertain geopolitics.

We are still trying to catch up on delayed BTO construction, so it is natural that some Singaporeans are anxious. But I hope that MND can focus on finetuning our policies to improve the accessibility and affordability of new BTOs in attractive locations while ensuring that we stay clear of sudden destabilising actions. Our housing policies are broadly effective, feasible and equitable. Let us build on them and make them better. With that, I stand in support of the Motion put forth by Minister Desmond Lee.

Mr Speaker: Mr Pritam Singh.

8.18 pm

Mr Pritam Singh (Aljunied): Mr Speaker, the Workers' Party's Members of Parliament have spoken on a number of relevant areas and shared our views on the Motions before the House.

Sengkang GRC Member of Parliament Louis Chua Kheng Wee has spoken about the inadequacy of Build-To-Order HDB launches. Sengkang GRC Member of Parliament Jamus Lim has spoken about the tension between housing as an asset and retirement solution.

Aljunied GRC Member of Parliament Leon Perera has proposed building ahead of demand and the prospect of 70-year leases to build up CPF retirement funds and Aljunied GRC Member of Parliament Gerald Giam has spoken of how to arrest resale prices.

As for my speech, it is in four parts.

First, I will touch on how housing policy has evolved in the past. Second, I will discuss where we stand on both affordability and accessibility of HDB flats. Third, I will make some inquiries on how land is priced. And finally, I will ask the Minister some questions on public housing and taxpayer subsidies.

Let me start with a look at public housing policy in the past.

In 1964, the Government introduced the Home Ownership for the People Scheme so that Singaporeans would own rather than rent their flats. It was intended that through home ownership, Singaporeans would have a tangible stake in Singapore's success. The policy then was that flats would only be sold to families earning less than $800 a month.

The Home Ownership for the People Scheme did not really take off at the beginning as not many people could afford the 20% downpayment in cash to secure a flat. This changed dramatically some four years later in 1968 when CPF funds were made available to pay for public housing.

In 1971, there was a significant shake-up in public housing when the Government allowed HDB flats to be resold for a profit, although not investment. This created the HDB resale market.

In 1973, an amendment to the Land Acquisition Act allowed the Government to purchase land from owners at prices independent of the land's purchase price or prevailing market rates. This allowed the Government to purchase a great deal of land at low prices.

This historical fact accounts for the ever so often heard view that because HDB bought the land cheaply and since that land would be returned to the state after 99 years, there is scope or there could be scope for the state to take a different, more enlightened view about land costs in order to make public housing more affordable and consider other approaches beyond strict market pricing to keep HDB flats affordable.

In the 1970s, 1980s and 1990s, property prices in Singapore kept rising. Lease decay did not factor heavily in the public consciousness as many flats were relatively new. However, a serious correction to housing prices hit hard on the back of the Asian Financial Crisis.

After the 2001 elections, then Prime Minister Goh Chok Tong promised a review of costs. Much was expected of the Economic Review Committee, in particular, the Land Working Group. Then, land costs came into the gun sights of those worrying about the cost of doing business in Singapore and the cost of housing.

Instead of precipitating bold changes, the Land Working Group took the view that it was tough to demolish and rebuild Singapore's land policy. The group's report restated the constraints policy-makers faced while advocating a greater role to be played by the private sector in the provision of public housing and even suggesting the extension of grants for private home buyers.

As a country, we have been at the current property cycle before – more recently, slightly more than a decade ago, when the prices of HDB flats increased rapidly after the Global Financial Crisis.

To deal with that, the then Minister for National Development Khaw Boon Wan announced the policy decision to delink HDB prices from resale prices. However, much less was broadcasted about the fact that the increased subsidies to make flats affordable would be paid by taxpayers.

This is significant because a large part of the government solution whenever HDB prices went, perhaps, out of hand, would be to resort to deploying more taxpayer monies, ostensibly in greater quanta, to make up the difference.

A significant overlay to the property cycles over the last few decades has been the public expectation that HDB flats would be ever appreciating assets. This incorrect expectation was created, perpetuated and not corrected by previous PAP Governments.

A more responsible narrative would have informed the public that capital gains will be possible only in the short to medium term. It should have been made clear to all that quite simply, public housing on a 99-year lease cannot be expected to appreciate endlessly.

A few years ago, then Minister for National Development Lawrence Wong finally spoke the unvarnished truth about 99-year leases – that flats would be returned to HDB and only a small percentage of flats would undergo the Selective En bloc Redevelopment Scheme.

There was a highly negative public reaction to this clarification. One academic at the Lee Kuan Yew School of Public Policy put it this way, "The government hasn't been entirely consistent in their messaging with regard to housing policy, which created the uncertainty and anxiety."

Singaporeans, or at least some Singaporeans, felt that there was a reneging of what they perceived as an asset appreciation promised by PAP.

I now move on to the second part of my speech – where are we now?

Property prices in Singapore have soared in the last couple of years. As far as HDB flats are concerned, resale prices are breaking new records.

Singapore is unique in this regard. In most parts of the developed world, property prices are moderating or falling because of rising interest rates. Since the US Federal Reserve System started raising rates in March 2022, the situation in other countries has developed in a normal way. When interest rates rise, property transactions decrease and prices drop.

In Singapore, despite steeply rising interest rates for nearly a year now, prices have shot sky high. This is not normal. It is only because of new cooling measures that the property market shows signs of moderating.

The fact of Singapore's property prices going in a different direction from many other countries provides some proof that external circumstances are not the cause.

Sir, housing prices are essentially a matter of supply and demand. As far as property in Singapore is concerned, the Singapore Government controls the supply of new property in the market, both in the public and private sectors.

The Singapore Government also controls the number of new citizens and permanent residents (PRs) and has full information on birth rates. It controls the inflow of work and employment pass holders.

The Government knows the application rates for HDB flats and controls HDB allocation. The Government is the largest landowner and developer of land and is the regulator of land policy.

Because of a preponderance of control over land supply, the Government is in the best position to ensure housing prices remain affordable and stable.

The levers at the disposal of the Government do not just include introducing cooling measures overnight by way of fiat. They include building public housing ahead of demand and stepping up private land sales to meet demand at reasonable prices.

The fact is that the prices of HDB BTO flats, resale flats and private condominiums generally move in synchrony – which brings me to today's two Motions.

The different phrasing of today's two Motions indicates the different thrust of each. The Government's Motion implies that HDB flats have been kept affordable and accessible while PSP's Motion suggests that flats are now not affordable and accessible.

Some of the difference could be due to a different understanding of what each word means and represents.

I would argue that affordable HDB flats mean HDB flat pricing that is not out of synchrony with salaries. For example, the rise in resale flat prices, should not be perceived to outstrip salary increases. Resale prices have increased because people need homes and the HDB did not build enough BTOs to meet demand, which should have been known and calculable, notwithstanding COVID-19 related delays.

Over the last five years, the prices of larger resale flat, specifically 5-room and executive flats, have risen even faster than 4-room resale flats. Million-dollar HDB flats no longer make the news. Such sales take place even in areas such as Woodlands, heightening the anxieties of parents and young families and adults with regard to affordability.

While the house price to annual income (HPI) is a common gauge to appreciate the affordability of HDB flats, in the Singapore context, it is the taxpayer subsidy, or what the Government refers to as generous subsidies, that is keeping the number in check.

In all likelihood, either these subsidies will grow ever larger to keep HDB flats affordable or more subsidies will have to be recouped at the point of sale, similar to how it is proposed for Prime Location Public Housing (PLH) flats currently.

This would be a somewhat analogous albeit different situation to the PSP's proposal for deferred land cost by way of its Affordable Homes Scheme. In one situation, in this case, PLH flats, a designated portion of taxpayer subsidies are returned to the Consolidated Fund. In the other, land cost will be returned into the past reserves.

The Government regularly trots out that the HDB housing backlog after the Asian Financial Crisis as a reason for not wanting to build excessively. However, this sacred cow is one that needs to be slaughtered, particularly because of the serious implications an overheated housing market has on public housing prices for the common man and woman.

Clearly, the orthodoxy is one that feeds itself. If the Government does not release adequate parcels of land quickly enough, a bubble can rapidly form, one that has a direct implication on HDB BTO and resale prices and the prospect of an increase in taxes to fund subsidies.

What about the word "accessible"? Accessibility includes not just being able to apply for and book a flat. It also means securing a flat in a timely way.

Today, waiting times can stretch up to four to five years for BTO flats. When people get their flats later, they may also put off having children earlier, a largely perverse policy outcome in the face of our efforts to encourage young couples to form families and have children.

The decision to build to order rather than ahead of demand has likely had an impact on the reproductive rates of Singaporeans. It should not come as a surprise if couples and newer generations of Singaporeans want to occupy their own home before starting a family and having children.

Let me share a newspaper article with an approach to accessibility that needs to be reviewed. This will address accessibility in a meaningful way. The multi page advertisement from HDB in The Straits Times is dated 3 July 1989. It is titled, "The new HDB booking system, how it works for you."

And I quote from this newspaper article: "Under the booking system, HDB will announce every quarter, the building contracts it has awarded. The number of units of each type of flat, their location, layout and design and the price range for each type of flat in each location as well as the expected date of completion will also be made known. HDB will simultaneously release broad plans of the building contracts for the subsequent nine months. The number and type of flat and their locations will also be made known. The details provided in these broad plans may change depending on the demand for flats in the area. Thus, HDB will in effect announce a rolling 12-month building programme every three months. It will do the same at the start of every quarter and applicant who has booked a flat will normally take possession of his flat in about two and a half years after booking."

Today, the BTO system is both similar and different to the booking system of 1989 in some respects. But one fact is dramatically different. The BTO system today does not promise flats for buyers in two and a half years. Of course, the downside of this pre-BTO model, which ensures an ample supply of flats is that in the event of a "black swan" episode, like the Asian Financial Crisis, there may well be an excess stock of flats which take time to clear, including administrative costs.

But in that worst-case scenario, new accessibility options can be considered, for example, HDB would be able to offer excess flats towards schemes like the Parenthood Provisional Housing Scheme, which is, oversubscribed even today. Other options include expanding rental options for low-income households, which host large families to flat types that can be up to 3-room or even 4-room in size. I acknowledge the reply given by Minister Desmond Lee to Sengkang GRC Member of Parliament, Mr Louis Chua Kheng Wee by way of his Parliamentary Question that since 2018, the HDB has offered close to 11,000 BTO flats with shorter waiting times of less than three years.

However, as the Minister revealed, for the 23,184 flats launched in 2022, only 8% are short-wait BTO flats. The Minister's new commitment, as announced yesterday, to increase this to 2,000 to 3,000 flats each year, will not move the 2022 figure of 8% in a significant way.

How is it that the HDB could build high-quality flats at a much faster rate decades ago compared to today, even after the introduction of productivity measures, such as prefabrication technology? Can the Minister make a commitment to bring accessibility to commitments made in 1989?

Mr Speaker, it is trite to say that any major reset of public housing policy cannot take place without upsetting either buyers or sellers or perhaps both. The Government currently sets land costs at fair market value to the price of flats. Mr Leong Mun Wai has sought to address that the land cost component of HDB flat prices from a new perspective, through the PSP Affordable Homes Scheme proposal. The Government would be familiar with the gist of this proposal as it was originally put forward by a researcher from The Institute of Policy Studies, a Government think tank about a decade ago.

The idea of the land cost for public housing being accounted for differently is not new. There have been calls from the public and in the mainstream media to see how land cost can be dealt with to make HDB prices more affordable. And these come from a good place, and they should not be received by accusations of wanting to raid the reserves.

In 2002, The Business Times published a reader's letter which said, "land is purchased and assigned to HDB by the Singapore Land Authority. The actual land costs on the assignment to HDB should not be governed by the market, as the role of HDB must include the important social objective to provide public housing to those who are unable to participate in the private sector. This is a fundamental policy issue which needs to be acknowledged. We need to be more transparent with regard to the cost of land assignment, so that the public can constructively and actively participate in examining the formula of land assignment to HDB."

In 2013, on the back of the "Our Singapore Conversation", a Straits Times editorial titled, "Pondering next phase of public housing" stated, "When the HDB's key mission of building affordable homes has to go hand-in-hand with broader considerations, a variety of fresh ideas deserved to be explored. Those floated by National Development Minister Khaw Boon Wan recently are lower-priced BTO flats with a longer Minimum Occupation Period before these can be sold on the open market. A shorter lease to match cheaper prices and the separation of new flats from others by allowing resale only to the HDB. Other means of lowering prices could be to increase grants to first timers or take land costs out of prices and recover this when the flat is resold."

In a POFMA clarification on 14 October 2022 directed at Yeoh Lam Keong by the Ministry of National Development, the Government stated that it cannot sell state land at nominal or at a much lower cost than its fair market value without the President's approval, as doing so would constitute a draw on past reserves.

On this point, I have some questions for the Minister. Can the Minister confirm if the words, "not much lower cost than its fair market value" – the emphasis being on not much lower – as stated in the POFMA direction, does it suggest that land for HDB flats can be sold to HDB at a price lower than its market value, as established by the Chief Valuer? If so, under what circumstances can this be done?

In comparison, such an interpretation would not be inconsistent with the concept of a reserve price for sites sold under the Government Land Sales, GLS, for private housing, and industrial GLS programmes which are pegged to 85% of the estimated market valuation of each site. Tenderers will qualify if they bid more than 85% of the assessed market value of the land. If they bid less than up to 85%, the tender exercise can be aborted or is aborted.

Does the 15% discount on the market price of land or the reserve price under GLS programmes constitute a draw on past reserves? And will the President's approval be required for such land sales which are sold below market valuation, and if not, why not?

Finally, how did the Government decide on accepting tenders for private land at 15% below the market value and what is the basis to this figure of 15%?

Based on a recent Parliamentary Question by Sengkang GRC Member of Parliament, Mr Louis Chua Kheng Wee, we also know that the Government does not automatically rule out bids below the reserve price for GLS sites. And that the award of a site depends on the prevailing market conditions, number of independent bids received and the specific circumstances of each site.

I would like to ask the Minister, how do these exceptions – because they are exceptions – avoid the often heard PAP criticism of raiding pass reserves? Would such exceptions provide enough reason and context to review how the Government prices land for public housing with a view to gradually cool the market? Conceptually, this would not be dissimilar to the fiat the Government can wield in not ruling out tender bids below the reserve price for private land.

I now come to the final section of my speech with questions for the Minister on taxpayer subsidies.

Sir, the quantum of subsidies the HDB allocates for the home ownership scheme is another important but less ventilated aspect of HDB policy when it comes to affordability. These are taxpayers' subsidies and they represent the "loss" that the HDB incurs on the HDB's home ownership programme. This loss is fully funded and made good by the taxpayer. In his oral reply to my supplementary question last month, Minister said that resale prices had increased to around 28% or 29% over the last few years. But that BTO prices had been kept stable, ostensibly because taxpayer subsidies made up the difference.

It must follow that Government expenditure would be reallocated or directed from some other programmes to fund the homeownership programme. This fact alone, one that has significant fiscal implications – but also a fact the Government, to my knowledge has thus far, never canvass as a reason to raise taxes would make it important for the Government to provide a breakdown of the dollar value of taxpayer subsidies for the home ownership programme. The broad answer given to my Parliamentary Question on a breakdown of taxpayer subsidies filed last month was that the taxpayer subsidies are not the same across BTO developments. This reply raises important, questions of fairness and equity.

Mature BTO flats are more highly sought after compared to non-mature flats precisely because there is a greater profit and upside to be made after the Minimum Occupation Period, bringing the question of subsidies into acute focus.

Mr Speaker, I speak without benefit of the information sought in my Parliamentary Question. Based on the Minister's reply, it would appear that an applicant who succeeds in securing a BTO flat in a mature estate where flats can be significantly more expensive, benefits from more taxpayer subsidies than one who secures a flat in a non-mature estate. With respect to these taxpayer subsidies, a distinction between mature and non-mature BTO flats is important because any deployment and subsequent recovery of subsidies for the home ownership programme ought to be, in principle, equitable and progressive.

To this end, different subsidies allocated for different HDB BTO developments did not prevent the former Minister for National Development Khaw Boon Wan from sharing the dollar value of subsidies for specific BTO developments. On 9 September 2012, in a written answer to a question by Member of Parliament Ellen Lee, even without being specifically asked, the Minister shared the example of Waterway Banks – a BTO project launched in November 2011 in Punggol. The then Minister shared that this project had 1,016 units of 2- to 4-room flats. The project cost was $279 million and the sales proceeds amounted to $240 million with taxpayer subsidies making up to $39 million.

The then Minister's answer starkly makes the point that there is actually no reason that can adequately explain why the current Government does not release the information on the taxpayer subsidies allocated for each BTO development. Coming back to Minister Khaw's revelation of subsidies from the Waterway Banks' project, will Minister Desmond Lee confirm if taxpayer subsidies to make up the difference between the sales proceeds and project costs are applied equally, regardless if a buyer purchased a 2-room or 4-room flat for example, or is the subsidy tiered proportionally to flat sizes?

Compounding the matter of limited transparency on subsidies further, is the application of the resale levy at the point of sale. The policy intent of the resale levy is to reduce the taxpayer subsidy the buyer receives on their second subsidised HDB BTO flat and ensures a fairer distribution of subsidies between first and second timers. At the point of sale of their first subsidised flat, the first time buyers of both a mature and non-mature BTO flat must return some portion of the taxpayers' subsidies they originally received through the resale levy.

Can the Minister clarify, for individuals who bought a BTO flat after 3 March 2006, when there was a change in resale levy policy, what is the range of subsidies a 4-room mature and non-mature BTO flat lessee respectively would have received, even though the actual resale levy is fixed for both lessees at $40,000 by HDB?

Until the Minister releases more information, it is open to question if the payment of the resale levy, which crucially does not distinguish between mature and non-mature flats, is either fair or equitable in view of the potentially wide variation between the original subsidies allocated to either lessee upon the purchase of their first BTO flat.

I hope this information is forthcoming so alternative pricing models for HDB flats, a fair allocation of taxpayer subsidies and new policy proposals can be considered and advanced.

In conclusion, Mr Speaker, the PAP Motion as drafted, does not sufficiently take into account the reality that the Government should endeavour to make HDB BTO flats more affordable and more accessible than they currently are. The Workers' Party proposes an amendment to the Motion in the name of the Minister for National Development.

The single amendment is as follows: in line three, to delete "endorses the commitment of the Government to" and insert "calls on the Government to intensify its efforts to meet".

Sir, I seek your permission to move the amendment. May I hand over a copy to you before seeking your approval to circulate it to Members?

8.45 pm

Mr Speaker: Can I have a copy of the amendment? [A copy of the amendment was handed to Mr Speaker.]

Mr Pritam Singh: Yes.

Mr Speaker: Mr Singh, do you have copies made for amendments?

Mr Pritam Singh: Yes, Speaker, I do.

Mr Speaker: Can we circulate them? [Copies of the amendment were distributed to hon Members.]

The proposed amendment by the Leader of the Opposition to the Motion on Affordable and Accessible Public Housing is in order. Please move your amendment.

Mr Pritam Singh: Sir, the single amendment is as follows:

In line 3, to delete "endorses the commitment of the Government to" and insert "calls on the Government to intensify its efforts to meet".

I ask Members to consider whether the current anxieties of Singaporeans do not warrant greater effort by the PAP Government to review its commitment to affordability and accessibility with respect to public housing.

Voting for the PAP Motion, as drafted originally by the Minister for National Development would mean that Singaporeans are satisfied with waiting up to four to five years for a HDB BTO flat.

It would also mean that Singaporeans do not have quarrel or concern with the price of some BTO flats, such as 5-room BTO flats in Ang Mo Kio, priced at $877,000 and the significant increase in resale flat prices across the board recently.

It would also mean that young couples and first-time Singaporean families who cannot secure a HDB BTO flat in a timely fashion and are pushed to the resale market where resale prices are higher than they have ever been – are not seeking better outcomes from public housing policies.

We know from our engagement with Singaporeans that this is not the case.

In the circumstances, it would be thoroughly underwhelming and missing the point for this House to carry a Motion which endorses the commitment of the Government's effort on affordability and accessibility thus far.

Amending the Motion to call on the Government to intensify its efforts to make HDB flats more affordable and accessible would be consistent with the reasonable expectations that Singaporeans have for public housing today.

For the record, the Workers' Party has no fundamental objection to the PSP's Motion. One PAP Member inferred the PSP's Motion to be insidious. The Workers' Party does not share that view. We do not read any implication into it but see it as a call on the Government to review its public housing policies with the view towards greater affordability and accessibility. This is something the Government, to its credit, does regularly in response to feedback.

For example, at the last Committee of Supply debates, specifically on HDB Priority Schemes, the Workers' Party called on the Government to increase the ballot opportunities for first-timer, married couples with children to secure flats. Sometime later, the Government announced changes broadly along these lines.

On the PSP's specific proposals which are separate from the wording of the Motion, we believe a deep conversation of the options surrounding land pricing policy and how land for public use is valued, should be a priority of the Government to ensure HDB flats can be more affordable and accessible, particularly in the face of the use of more taxpayer subsidies to fund the HDB home ownership programme. [Applause.]

8.53 pm

Mr Speaker: The question is, that the words proposed to be left out, be left out.

The House has resolved on 6 February 2023 that the Motions on Affordable and Accessible Public Housing, and Public Housing Policies and on any other amendments moved by Members on these two motions be proceeded simultaneously as a debate on a single question. In accordance with the decision of this House to have a simultaneous debate on both Motions and amendments, we will proceed.

Any clarifications for the Leader of the Opposition before I call on Minister Desmond Lee? Leader.

Ms Indranee Rajah: This is not so much a clarification. It is just a short point of order which probably does not require a reply. But it would have been helpful if the Leader of the Opposition had put forward the amendment earlier so that Members would have had the benefit of seeing the amendment and have been able to debate it. I do not, of course, that it comes just after everyone else has spoken and just before the Minister will speak.

Mr Speaker: Ms Sylvia Lim.

Ms Sylvia Lim (Aljunied): Thank you, Mr Speaker. I just wanted to respond to say that it reminded me very much of the Justice Motion that I tabled in November of 2020 when Mr Murali put forward an amendment to the Motion at the last minute.

Ms Indranee Rajah: And, indeed, I am sure Mr Murali had good reason to do so because I think his amendment came after listening to various speeches. But this amendment, I think, could have been done a lot earlier. But it is all right, we will deal with it as it comes.

Mr Speaker: I now call the Minister for National Development to make his reply on his Motion on Affordable and Accessible Public Housing, followed by Mr Leong Mun Wai for his reply on his Motion on Public Housing Policies thereafter. I will put the question in respect of each Motion to the House for voting. Minister for National Development.

8.55 pm

The Minister for National Development (Mr Desmond Lee): Thank you, Mr Speaker. First, I would like to thank Members on both sides of this House who have shared your views on public housing. It is an important topic for this House. It is an important topic for Singapore and this discussion is taking place at the time that we are in, after the COVID-19 pandemic.

Sir, in many other cities, housing is largely a matter of personal responsibility. Residents look for their own housing on the open market, do their sums, borrow if they have to and find their way – whether to buy, rent or some other arrangement.

Governments intervene largely by enabling private developers to build and sell homes to people. They may provide public housing but this is usually as a social safety net for the lower income.

In Singapore, we have taken a very unique approach, one that has been developed over the decades since Independence and continually improved to achieve two very important fundamental objectives.

First, public housing is social policy. We are building homes to give Singaporeans a roof over their heads, but we are also building diverse communities for Singaporeans to live, bond and experience life together. In doing so, we build a nation as one people.

Second, we want to give Singaporeans a stake in the nation by having a home they call their own and sharing in the progress by unlocking the value of their homes and growing their nest egg. Today, 90% of Singaporean households own their HDB homes.

To achieve this, we harness a combination of national policy and Government resources on the one side and elements of the open market on the other side, to help unlock the value of people’s homes. But in so doing, we must be very clear-eyed about long-term sustainability, as many Members who spoke during the debate have underscored.

Mr Speaker, in my opening speech, I explained clearly that the supply tightness and the spike in resale prices we face today is a recent phenomenon triggered by COVID-19 disruptions. We all went through this together. We are taking active, concrete steps to resolve the imbalance and address the concerns that Singaporeans have raised.

We are decisively ramping up the housing supply and will launch up to a total of 100,000 new flats between 2021 and 2025. Members may recall that we announced this in 2021, in the midst of fighting COVID-19.

We will also launch more Shorter Waiting Time flats, of around 2,000 to 3,000 flats per year by 2025, and we will recalibrate our building programme over time so that they make up a larger proportion of new flat supply, with flat supply comprising BTO flats, Shorter Waiting Time flats as part of BTO flat supply, Sale of Balance Flats and Open Booking of Flats, on top of the resale market options.

Mr Xie Yao Quan, Ms Denise Phua, Mr Louis Chua and Mr Leon Perera had called for building ahead of demand and building Shorter Waiting Time flats.

We have priced BTO flats to ensure affordability and kept BTO prices stable in the last two years.

To prevent the resale market from running ahead of economic fundamentals, we implemented two rounds of cooling measures and are seeing some moderation in the rate of increase in resale prices.

We are still closely monitoring the housing market and we hope that Members can be patient and watch as it develops.

I have also committed to Singaporeans that we will not stand by but will continue to enhance the accessibility and affordability of public housing.

We acknowledge the concerns of first-timer couples trying to set up their very first home and have been studying ways to better help them get their first homes faster.

We understand the concerns that people have raised about higher BTO prices in mature estates.

We have sought to address some of these concerns through the Prime Location Public Housing (PLH) Model in the more central and very attractive locations in Singapore.

I thank Mr Xie Yao Quan, Ms Janet Ang and Ms Denise Phua for their suggestions to expand the PLH model to other locations.

We will continue to review our housing models to ensure affordability and accessibility of flats in other mature estates and choice locations, while avoiding an excessive windfall gain to those who successfully book a flat in such areas.

In fact, the Leader of Opposition spoke about Central Weave @ AMK. The price he cited was that of the most expensive 5-room flat on the top floor in a location in the heart of Ang Mo Kio Central, next to a hawker centre, next to a wet market, next to two shopping malls, next to the MRT station, next to the bus interchange, next to parks and other amenities. It was a conscious decision to build public housing, as opposed to private housing.

Recently, there were GLS sites and launches of private housing in Ang Mo Kio, not in Ang Mo Kio Central. The prices for private housing, which I think you can compare and are clear for all to see, is that there is a clear distinction in prices between the HDB flats in this project in Ang Mo Kio Central and private housing launched by the private sector.

In the brochure itself, members of the public as well as Members of this House can see the range of BTO prices before grants as well as the market comparables for HDB resale prices nearby, which after adjustments, will give you a broad sense of the gap between what is available on the resale market and what is available as subsidised housing in a choice mature estate.

But what I have also emphasised is that this Government needs to provide affordable and accessible public housing, not just for this generation but also for future generations of Singaporean. This is long-term sustainability.

We are a small city-state, 720 square kilometres with many competing needs and our scarce land needs to be carefully stewarded. We will create space to meet the needs of today's Singaporeans and tomorrow's generation, but this will involve rejuvenating and recycling land, and building more intensively.

Resources are limited. Singapore has no natural resources to rely on. We have to create and build up the fiscal resources needed to support the home ownership aspirations of Singaporeans.

So, how do we allocate limited resources for public housing among potentially unlimited housing needs, while reflecting our values as a nation?

We will prioritise first-timer families who need housing to build their families. We will help lower-income households more because we believe in housing as a social leveller.

Our housing policies also reflect our values of prudence and sustainability. We must not subsidise housing at the expense of other equally important needs for Singapore. We must not enhance housing accessibility and affordability of this generation, by robbing our future generations, whether of land or fiscal resources, or the reserves which are intended to put them in better state, through thick or thin.

This is what a responsible Government should do. Above all, we must continue to build a nation of home owners, for this generation and the next, to continue the legacy our forefathers have started.

We firmly believe in home ownership, as it provides us the stability to build our families and raise our children, give us a sense of rootedness in Singapore and allow us to have a stake in our country's progress.

Home ownership has worked for us and we need to continue with the good work to make it work for the next generation. That is why we sell HDB flats on 99-year leasehold, which strikes a balance between providing a home-for-life, asset appreciation and enabling us to rejuvenate our city and build new homes for the next generation too.

Ms Hazel Poa, the Leader of the Opposition and Mr Louis Chua asked why we did not build even more and even faster. At the same time, several Members have sounded a word of caution, taking a longer-term view and looking at the lessons of the past.

I have just said that we are already doing that. Today, we are already overseeing almost 100 BTO projects island-wide, at different stages of construction. There are almost 80,000 HDB flats under construction, as we speak.

We will press on. This high tempo will continue and by about 2025, we expect to have about 150 BTO projects going on at the same time.

By contract value, HDB is not just the largest housing developer, but also exceeds all the other private residential housing contracts combined by more than 50%. So, we are already building aggressively and at large scale.

We should also remember that HDB is not the only one ramping up, especially after the pandemic. Since the pandemic started to subside, the overall pace of building and construction on our island has gone up very significantly.

Individuals, businesses, private developers, organisations, Government agencies are all pushing ahead with their important projects while doing catch-up on COVID-19-related delays suffered by existing projects.

Fiscal resources, foreign manpower and construction capacity are not without their limits.

Several Members, including Ms Hazel Poa, Mr Louis Chua and the Leader of the Opposition, have suggested that the Government has under-estimated demand and under-built the supply of flats. Ms Hazel Poa suggested that the Government knows the number of marriages and the immigration numbers. The Leader of Opposition has indicated a wider range of parameters.

We do in fact have models that take into account many considerations – marriages, births, deaths, income levels, economic conditions and cycles, demand for different housing types and so on – in trying to project the real demand for flats and for property in general.

However, as we all know, it is not a perfect science and it certainly cannot account for sudden shocks and what sudden shocks can cause in terms of human psychology and market behaviour. In fact, for many years before COVID-19 hit, application rates for BTO flats were low and in fact, the resale market was soft. I had mentioned all of these in my opening speech. I trust Members, including Members of the Opposition, had listened to that. In fact, my colleague, Senior Minister of State Sim Ann, had emphasised those points.

Then COVID-19 hit, the dynamics shifted rapidly and we are in the current situation where demand for housing shot up. The housing market is highly sentiment-driven and demand can suddenly appear, or disappear.

Let me give a real example. At the height of the property boom in the mid-1990s, there were as many as 150,000 buyers in the queue for public housing and the wait for a flat could be as long as seven years.

However, when the Asian Financial Crisis struck in 1997, the queue vanished, virtually overnight, some say. HDB ended up with 31,000 unsold flats, which took more than five years to clear.

Because of the unintended oversupply, home buyers could walk in to buy ready flats in the early 2000s. However, home owners paid a heavy price, with flat prices, or resale flat values, staying depressed. Some who bought flats just before the crisis ended up with negative equity and even lost their homes and hard-earned savings. The many unsold flats represented a waste of taxpayers' money.

The holding cost incurred from the vacant housing stock is not inconsequential. It was money that could have been spent on other uses – healthcare, education and other areas, especially after a financial crisis.

People who were sitting in this House at the time were asking lots of questions. The Auditor-General was asking lots of questions. I can tell you that if you were to look at the records, the mood was quite the opposite of what you are hearing today.

Several Members of Parliament like Miss Cheryl Chan and Mr Sitoh Yih Pin also pointed out that the danger of oversupply is real. Should there be a persistent or significant oversupply of housing, this imposes a downward pressure on the housing market, which in turn hurts the asset values of all flat owners.

Even the Workers' Party is cognisant of the implications of an oversupply, as seen in their 2019 Working Paper on HDB resale prices. But today, with perfect hindsight, they are asking about actions of the years before. This indicates that vulnerability.

The paper mentioned, "Assuming an average household size of 3.3, this would mean that around 9,000 or so new dwelling units are required annually. Completions within the same time period have far exceeded the resident population growth. Private vacancies have only started to inch down, but there are still around 12,000 private units completing up to 2022." And then it goes on to say, "Will the HDB have a vacancy rate problem, compounded by a still steady stream of 16,000 to 17,000 BTO units in the last few years, which will continue to increase supply up to 2022?"

This was a report commissioned within the Workers' Party, quoting experts from the property sector. In 2019, they cautioned HDB from persisting in building 16,000 to 17,000 BTO units, instead saying: would vacancies cause problems? Better just go down to around 9,000 BTO units or so because they made a lot of assumptions. They marshalled a lot of data and experience, and this was the recommendation.

So, in 2019, the Workers' Party was recommending that HDB should only build 9,000 dwelling units or so. To put this into context, HDB launched around 16,000 flats in 2018, the year before the report; 15,000 flats in 2019; and 17,000 flats in 2020. The rest is recent history. Had we tapered down our supply to the Workers' Party's levels in 2019, or listened to you and your experts, I think our BTO shortage would be even greater today.

So, I think we all accept that the best of models cannot, firstly, fully account for black swan events. Secondly, you cannot be certain how market psychology would work and there is a confluence of factors that come together to determine housing market sentiments. This shows just how difficult it is to accurately predict residential property demand, or for that matter, the direction and size of movements in the property market.

We therefore need to be careful in calibrating flat supply to meet demand. Most importantly, it is important for us not to try to ascribe a wrong set of reading of the facts because before COVID-19 struck, the data, in terms of application rates across the board, as well as resale prices, indicated that the housing market was relatively stable – until around the time of COVID-19 when the situation changed.

And in fact, think about the crises. During the Asian Financial Crisis, demand vanished and prices plunged. COVID-19 is a crisis of a different sort, but it is still a crisis. The exact opposite happened: demand went up. Today, with perfect hindsight, we still make conjectures as to what we think caused this change in movement. I described, or attempted to describe, just some of those broad strokes in my opening speech.

So, I think it is very important for us to recognise what we ourselves had said in 2019 as we sit here and try to pontificate about what the Government had or had not done.

Several Members, Mr Leong Mun Wai and Mr Jamus Lim for instance, have also put forward proposals that effectively will result in a draw on past reserves.

Most of the points have been dealt with by my colleague, Minister Indranee Rajah, but in fact, Mr Jamus Lim sought to justify that paying lower land price is a way of "being present" for the current generation.

Mr Leong proposed the Affordable Homes Scheme, which as my colleague, Senior Minister of State Sim Ann and many Members of this House have explained, is not a better alternative to addressing the challenges of affordability and accessibility, compared to what we have today and compared to what we intend to do and are studying to do.

Minister Indranee Rajah has also explained that if the occupiers of flats under this scheme do not sell the flats, then by leaving land costs out of the equation of this proposal, it is effectively a draw on the reserves.

We have also heard many suggestions on improving public housing affordability. We have shared that we price new BTO flats based on affordability, not at the median level as the Workers' Party has repeatedly called for, or what was originally in the PSP's manifesto of 2020 – though, having heard Mr Leong, I am not sure if the manifesto still stands.

We have shared that we price new BTO flats based on affordability for different income levels. Based on the market value of the comparable flats, we then apply a significant discount to ensure they remain affordable to first-time buyers across different income levels, not just at the median. On top of that, we provide additional grants for first-timer families, with more grants to those who need them the most.

With this approach, today, HPI, or Home Price to Income ratio, is less than three after grants for those at the 25th percentile – or households at the bottom 25% in terms of total household income.

In 2022, almost nine in 10 first-time BTO flat buyers have mortgage servicing ratios (MSRs) of less than 25%. What it means is not just a statistical fact. Nine in 10 of these families use less than a quarter of their total household income to pay for their mortgage instalments. They can finance their HDB loan completely with CPF, with little to no cash needed. The MSR figures are even lower for those at lower-income percentiles with the higher grants they receive.

To give an example, using the average price of $342,000 for a 4-room BTO flat in a non-mature estate in 2022, a family with a household income of $5,000 can receive $45,000 in housing grants and affordably purchase the BTO flat at an MSR of 21%.

In other words, they can service their mortgages entirely from their monthly CPF contributions, with no cash outlay.

This is an appropriate time in which I deal with the Leader of the Opposition's questions repeatedly about transparency and the extent of the subsidies given to buyers in the mature estates and the non-mature estates.

I have explained and my colleague Ms Indranee Rajah has tried to explain. In fact, in this speech, just moments earlier, and in my opening speech, I tried to explain and break down how we price HDB flats. Also, in reply to Mr Gerald Giam in a Parliamentary Question, I thought I tried to explain very clearly and answer some of his questions.

When we build HDB flats, we look at the market comparables for HDB because it is public housing. Then, we determine the affordability indicators for different income levels, the mortgage servicing ratios, and we then know that we need to price it at a certain level so that buyers can be able to afford at the indicators that are in the report card, as what we say each time when we announce on affordability. And these prices are significantly lower than what the resale market can bear.

I will just wind back. HDB is already the most transparent on its pricing and costs than any other property developer. You can look at the brochures. You asked for more information but the information is already there and explained at length to the Member.

Look at the information when we put out at every launch. For every project, we have the range of BTO prices, which are subsidised, and right next to it is a column of the comparable resale prices.

We have to make some adjustments because depending on the level, depending on the amenities, depending on the tenure, we have to make adjustments and these are adjustments made using valuation principles.

So, once you have done that, you can see that this difference in the brochures, in the information that we put out, for every launch, for many, many years already, broadly reflects the extent of the market discount, which is real and which buyers can realise after MOP when they sell because the BTO price is significantly below market.

But I have also taken pains to explain to the Member that we have to make adjustments. We have to recognise that for each flat type, there are different floors and so we put the range. Likewise, the comparables also have different flat heights. So, we put the range to be transparent.

That difference broadly reflects the extent of the market subsidy for the projects. And you can see today that it has become very large compared to, say, 10 years ago. It is very clear. That – and I did not mention in my opening speech – in turn feeds the psychology when you see the resale prices going up and BTO prices remaining almost the same. There is the sense that BTO is a better deal now, better go for it, especially in good locations.

But as I also explained to the Member, if you want to know the extent of the subsidies for each project, you also have to take into account the other half of the picture. Because apart from significant market discounts, you would be familiar with the grants that we give – Proximity Housing Grant, Enhanced CPF Housing Grant, so on and so forth. That has got various parameters, so it is not so straightforward. It depends on means testing, it depends on flat type, it depends on whether you tap on the scheme for Proximity Housing Grant to open up that grant to yourself. That gives you a sense of the picture.

The proceeds from the sale of flats – and all this is not new; I have said this a number of times – the proceeds that HDB collects is less than land and construction costs. And they are every year. And that is why Mr Leong Mun Wai's proposal is far more expensive to the ordinary citizen than it is under our scheme and Members who have spoken understand what this is so.

The land and construction costs every year is more for our HDB projects than the proceeds we collect because of the discounts we give in terms of market subsidy as well as the grants that are means tested or based on flat type, based on proximity, based on Fresh Start, based on this and that, and the proceeds we collect are significantly less than how much we spend.

That is why I explained in the opening speech, if you were listening carefully, that the development cost, which is how much we spend and how much we collect are on two parallel tracks and they converge when you see that there is a gap, a deficit, between how much you spend and how much you collect. That is the $3.85 billion deficit in HDB's Home Ownership Programme in the last financial year – and two-point something billion dollars before that and one-point something billion dollars before that. That is for all the projects.

The Leader of the Opposition makes a good point about whether there is equity. Are we giving people in certain projects more discounts or subsidies than others?

Whether there are more discounts and subsidies, again, depend on those factors, but the broad market discount across all projects, barring PLH, in the same launch is broadly in the same parameter to ensure there is equity. But later on, when they sell, it depends on the resale market, it depends on the condition of the flat. Property valuers will tell you that, property agents will tell you that, your residents who buy and sell instinctively know that.

Okay, maybe we can clarify over coffee later if you need more information. [Laughter.]

So, that is the extent of the difference. For PLH, we give additional market discount in order to make sure that the sticker price before grants is still within reach of Singaporeans. We have to give extra subsidy.

That is why for your mature estate BTO prices, they have to be higher generally than in non-mature estates because they account for the difference in location, the valuations, the amenities, the distance to the city, so, a number of factors and also because we try to apply an even-handed extent of market subsidy. You can see that information on the brochures. I have said that. This is the third time I have said that.

In terms of HDB as a transparent developer, I have said that it is more transparent on pricing than others.

Construction costs, if you care to know, most private developers will not tell you that. It is all a part and parcel of their financial statements. But construction costs are published on HDB's website and GeBIZ, and the cost of building flats and the revenue from sale of flats can be found in HDB's financial statements.

All of these are audited. All of these are subject to the Auditor-General's overall supervision.

This is more than what private developers typically disclose. We understand private developers, as I said in my opening speech, do things differently which is probably more intuitively to most of you. They look at the cost of development, cost of marketing, and recover that cost and price for profit and return.

But HDB is pursuing a social objective. Deficits are a function of achieving those goals of affordability and accessibility.

Let me turn to why – and I am not sure whether I need to go into this but many Members, including my colleagues have explained. As a result of what I have just described, the PSP's proposal is going to be far more expensive to those whom in the ordinary nature of things, buy because they want to have a home and then at some point in time, they need to sell.

Most people do not go into the housing market either thinking this is a home for the rest of my life or going in as a pure speculator.

I think it is perfectly human to say, when I buy a home, it is a home. I am going to spend money, I am going to invest in it. It may make money, it may lose money, it may break even. I hope to live there. It is a lot of effort to move in, renovate and move in and there is social capital to invest in your neighbours and all that, with children in the schools nearby.

But it is not wrong for some of these people to say at some point in time, my life circumstances have changed and I need to sell – not sell to make money but sell because it is part of life's circumstances.

So, I think if PSP ascribes to everyone who is a reseller that you must then punish them with a certain way of pricing on resale, then I do not think that is being fair to Singaporeans. That is not being fair to our own human nature when we are buying homes.

Yes, there are speculators, but I think most Singaporeans look for a home but hope that also helps with their retirement adequacy, gives them a sense that their asset will appreciate. Yes, there will be ups and downs based on the market cycle. But I think it is not incongruent to expect both, especially if this is the single largest expense or investment of your life.

So, therefore, we clearly charge below construction costs and land costs whereas the PSP's proposal is, well, you live here forever. It is an expense, it is a user fee. But the moment you resell, based on the land costs from I do not know how many years ago when you first bought from us, we will accrue the interest and if you bequeath to your children, they will pay the land costs and interests over two generations.

I think, clearly, without even the interest accruing, the fact that you expect the buyer of a flat to pay for construction and land costs at a point when they finally need to sell and move, is just plainly more expensive and more unaffordable for Singaporeans than the existing model.

Many Members have already explained why they think Mr Leong Mun Wai's Affordable Homes Scheme will not work and will not solve the issues we are facing today or tomorrow.

Mr Leon Perera and Mr Gerald Giam reiterated the Workers' Party's proposal to peg non-mature estate home prices at three times the median annual household income.

I will not go into detail on this because I think there was very robust discussion between Workers' Party's Members of Parliament and my colleague Senior Minister of State Sim Ann on this issue of affordability. But whether it is a HPI of 5.0 or 3.0, if you look at the Parliamentary Question data that we have given to you for the HPI that Singaporeans at different income levels have, you will see that it is at five generally for non-mature estates and for lower-income families, it is around three or less. The charts show that.

Most importantly, the vast majority use CPF and pay little to no cash. Those are indicators of affordability. Mr Lim Biow Chuan also very eloquently explained that the fact that people are prepared to spend and invest in a property as opposed to renting because they cannot afford – all these are indicators that give you a sense that BTOs are broadly affordable.

So, if the Workers' Party says they will want to make significant changes to the Motion because they think that a lot more work needs to be done for affordability, then I think they have not explained how in bringing the HPI from the current level to three; and in fact, for some, it is already below three and you are going to raise it to meet your HPI of three artificially, by increasing prices for the lower income to meet your dogmatic three, I think an important question is how will you fund it? Will you fund it by, like how Assoc Prof Jamus Lim has said, valuing housing so much like a social good, like a park, like a hospital, like a school, or like roads – $1 a metre he said.

So, while the proposal sounds attractive, it ignores the trade-off that far lower prices would attract even more flat applicants, whether they genuinely need housing or not. It also does not address the windfall gains enjoyed by flat buyers, some of whom may be from the higher income levels and, quite apart from first-time BTO sale, how do you ensure the affordability of the resale market over time. That dogmatic proposal achieves none of that.

And so, we think this is one-dimensional and my colleague Senior Minister of State Sim Ann had already addressed this and keeping in mind time and that my learned colleague Mr Leong has to speak after this.

So, instead, we want to offer a variety of housing options of different sizes in different locations at different price points to cater to varying housing needs from our flat buyers.

Sir, in over 50 years, we have provided housing for a nation in what Ms Janet Ang rightly pointed out – a city-state, very limited land, no resources but for the industry of people and their imagination, their will power, their drive, their willingness to sacrifice and see the big picture.

We have done this against the odds. Not us, but our forefathers have set the right example. They demonstrated the ethos of hard work, prudence, selflessness and sacrifice. They not only resettled in and housed a generation – and it was by no means an easy feat – but also built up the resources that we enjoy today. We must embrace the same values and not pursue housing policies that benefit ourselves at the expense of future generations. But we should also embody our pioneers' spirit of always seeking to do better and to overcome our constraints with creativity and far-sighted planning.

Therefore, we started a series of Housing Conversations with Singaporeans under Forward Singapore since last year to hear their aspirations and ideas, their hopes and fears. We will study their ideas, including the suggestions we hear from Members from both sides of this House during these two days of debate, so that we fulfil that commitment to the twin goals of continually ensuring affordability, accessibility and continuing to improve our housing system.

My colleague Minister of States Assoc Prof Faishal Ibrahim has already explained how we proactively planned ahead and made provisions to help seniors monetise their flats to supplement their retirement. Because one important theme that came up in this debate was whether housing gives you a peace of mind, build up a nest egg and affords retirement adequacy. And we have also come up with new and better housing schemes such as the Community Care Apartments.

9.33 pm

Mr Speaker: Minister. Leader.