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Housing Singapore

The following is an article by Very Fine Commentary posted on 7 February 2011.

by Hou Shi Hang

Free market or government intervention? It depends on your priorities.

Despite the strong stance of the Washington Consensus against government intervention, it is not a logical inevitability that governments will mess up the distribution of goods and services. It is merely a tendency that governments generate a degree of inefficiency. Inefficiency is not in itself a condemnation, while efficiency should be seen as an advantage rather than a definitive end, as there are inevitably other social goals that must be considered. Similarly, the efficiency of the free market is not proof that it is the “correct” method of economic distribution.

My Waterway at Punggol (HDB)

One good example of this principle is the Singaporean housing system. In most countries, the housing market is dominated by the free market. The government usually acts to supplement the market by providing for low-income households, or to promote home-ownership through legislation or housing subsidy. Unlike most other countries, Singapore does not emphasise the role of the free market in the provision and distribution of flats. For new flats, the Housing and Development Board (HDB) has relied on queuing, and, since 2002, the Built-To-Order ballot system. This is highly reminiscent of the heyday of central planning. The rationale for indulging in central planning in this case is to avoid price volatility in the housing market and to make sure low-income households are not left out. This is an attempt to “legitimise” the market by making the prices more palatable to low income groups. The high degree of control the government wields also allows it to use housing policy for social ends; the government incentivises marriage by making new HDB flats eligible only for married couples or two or more singles above 35. Similarly, HDB flats have to abide by an ethnic integration policy and maintain a certain ethnic ratio, all in the name of maintaining racial integration.

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