GE issues – Housing a nation and why MND’s “affordability” mantra is false

MND Under One Roof ad p2By Howard Lee

I’ll begin with a disclaimer – this article is in no way meant to cast any negative aspirations against Koh Chieng Mun and Moses Lim.

The “Under One Roof” series has received its fair share of praise and is one of the few local television products that has made it international, and both Tan Ah Teck and Dolly have been credibly in their portrayal of “Singapore’s funniest family”.

But I have issues with this attempt by the Ministry of National Development to soft-sell (or hard-sell, take it as you wish) the idea that homes in Singapore are affordable. This advertisement can be found in bus shelters and MRT station platforms island wide, and it is a tad ironic that it also sits on the North East Line, which cuts into the estates of many Singaporeans who would rightly have no reason to believe that homes in Singapore are affordable.

When we bought our Housing Development Board flat more than 10 years ago, my wife and I decided to save hard and and clear up our loan way before the “standard” 30-year loan period. We eventually did, but being this aggressive and determined also left us exhausted. The only comfort is that, without this debt, we are more at ease with job options.

HDB corporate video websiteWe have very little left now in our CPF accounts, and it was clear that the idea of “cashing in” on the flat would not work, for this is the only roof we have over the heads of our children and us. The HDB “asset” is no more than an illusion, and it is with some relief to see that MND has somewhat stopped pushing the “asset” narrative.

But it is still with much anguish that I read this advertisement, for it can only demonstrate how out of touch MND, and I dare say the current government, is with the issues that Singaporeans face on housing.

10 years ago, the only “grant” we received was the first-time buyer subsidy, and even so we have no clue if it has not already been factored into the price. Back then, a 5-room flat costs way less than S$350,000. We paid no cash, too, but we were fully aware that this would be cash-down-the-road when we eventually grow old and retire.

Even then, it was not a situation that I would deem HDB flats to be affordable. So when MND proudly proclaims that they are – and using public funds to buy such advertising space with clearly no other reason than to peddle that misconception – I could feel both eyebrows and temperature go up.

In 10 years, we have seen the cost of a like-for-like HDB flat increase by more than S$100,000, and yet our incomes have grown insignificantly to match the increase. I can only imagine that younger couples – and in the future, our own children – who are starting out on their own today would face even greater obstacles. Unlike me, cutting short the loan is no longer an option – they would have to take life-time loans, and hope they do not have to come up with cash or risk it falling short should they lose their jobs.

And they would be left with very little for retirement at the end of 30-odd years. Having children can only be an option they weigh as a financial liability – is it worth counting on them for support in old age, or better to hedge bets in this one nest egg?

Transactional as it sounds, it would have no doubt crossed the minds of many. And we wonder why Singaporeans are not producing enough babies.

NDR 2015 housingYet sadly, we see this same narrative being peddled further during PM Lee Hsien Loong’s National Day Rally last night. The magic number was “S$2,000” – the quantum of increase for both the household income ceiling in order for you to be eligible to buy a HDB home, and for you to be eligible for a Special CPF Housing Grant (SHG). The other magic number is “$20,000”, the quantum of increase for the maximum SHG to S$40,000.

These measures do not makes homes in Singapore more affordable. They just allow more Singaporeans to enter the public housing fray, putting their retirement funds on the line for a roof over their heads. The price of HDB flats will not decrease – if anything, now with an increase in “market demand”, prices could even go up (to which the PAP hopefully has the good sense not to call “asset appreciation”). Meanwhile, private property would not offer much of a competition, as they would “need” to be priced just slightly above HDB’s executive condominiums. So honestly, wither the “affordability”?

No, MND and PM Lee, homes in Singapore are not affordable. Affordability is not buying something you will pay for 30 years down the road, at possible risk to your own retirement and a future family you dare not have. Affordability is paying for something you are comfortable with today without having to bet on your future.

Khaw, minister in charge of Nparks
Khaw Boon Wan, Minister for National Development

HDB homes will also not be affordable by virtue of some grants and subsidies. True affordability comes with a serious relook at the underlying cause of high properly prices – land valuation, parcel sale price to developers, cost of production including labour, property taxes. Many of these causes have been attributed to former National Development Minister Mah Bow Tan, which the current Minister Khaw Boon Wan has done little to resolve, besides building more flats to manage demand and suppress inflation.

I do not believe that MND is that incompetent at finding the right solution, painful as it could be, to which the ruling People’s Action Party needs to bite the bullet and convince Singaporeans it is worth it in the long term. Why the hesitation and these half-hearted measures instead?

What are the alternatives, and has PAP considered them? The Singapore Democratic Party has proposed an alternative national housing plan, which includes proposals such as building non-open market HDB flats that do not factor in cost of land (the premise presumably being that cost of public housing should not be injected with commercial value). During GE2011, The Workers’ Party has also proposed for pegging the price of new HDB flats to median household incomes rather than to resale market prices, which has been shot down as a “raid on the reserves”.

Image - Wikipedia
Image – Wikipedia

Both these proposals have one thing in common – taking public housing out of the market, so that they can be truly public, rather than be subject to the sky-rocketing market forces that we see them subject to today. There is no reason why residential estates should be subject to valuations based on commercial prices, so why do it? Dare the PAP consider these alternatives, or would there be more rhetoric on “raiding the reserves”?

The fact that MND needs to run out a series of advertisements right during elections season, and the PM still going at the issue during the National Day Rally shows that a lot still needs to be done at truly managing the cost of housing. What we have now is an uneasy stalemate, but real affordability has not been achieved.

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