Understanding the HDB mess

Understanding the HDB mess

by Brad Bowyer, writing as the shadow Minister* of National Development under the People’s Voice Party

Current Public Housing Policy in Singapore centres around the Housing and Development Board (HDB). The HDB was set up 1 February 1960 taking over from its colonial predecessor, the Singapore Improvement Trust (SIT). Initially, it only provided rental units then in 1964 the Home Ownership Scheme was introduced, and they started to sell units. In 1968 the government allowed Central Provident Fund (CPF) funds for this purpose.

Before 1971 Resale of flats was not allowed and the HDB required owners who wished to sell their flats to return them to the HDB at the original purchase price plus only the depreciated cost of any improvements they may have made in the time they owned them.

But later the government used the concept of ‘home ownership’ to underpin the country’s overall economic, social, and political stability and presented rather simplistically HDB housing as an asset that will invariably always grow in value and can be passed on to future generations to nurture a sense of belonging to the country.

This is the single most important factor to explain People’s Action Party (PAP)’s success in getting re-elected over the last 50 years. It has continually emphasised ownership and putting down roots and has created many schemes which reinforce this notion such as the Home Protection Scheme of 1981.

However, HDB’s own annual reports list ALL HDB Flats in Singapore as “Under Management”. In the Housing act (revised 2004) it differentiates between sold, leased and rented. Most of the act discusses the lessee responsibilities and the rights of the HDB in relation to that.

Now since Minister of National Development Lawrence Wong publicly let the cat of the bag and reminded Singaporeans that their flats will revert to State ownership when their 99-year lease expires they are trying to change the narrative to one where public land is scarce and must be recycled for future generations.

But how scarce is the land?

Using the 1967 Land Acquisition Act as a tool the government became the biggest landowner in Singapore and by 1985, owned or controlled 76.2 per cent of all the land in Singapore, more than double the 31 per cent it controlled 1949.

By 1984 HDB’s land bank part of that was already 4,940 Acres (the size of 10 large HDB towns), with varying tenures and has since grown but the data is currently unavailable to the public.

Beyond the question of land scarcity and ownership, we also have the incorrect pricing of a depreciating asset.

Former minister of National Development Mah Bow Tan, in a 13 April 2013 Straits Times article, disclosed that the then current pricing formula of new flats was 5.5 times the annual median income of its applicants although he was going to look at reducing this to 4 times over the coming years. There was no mention of the actual development and build costs and, in fact, these have been kept as secret as possible since the mid-1980s.

Conventional metrics measure housing affordability by dividing the median home price by gross median household income, a measure known as the house price-to-income ratio. A ratio of less than 3.0 is considered affordable, and a ratio of more than 5.1 is considered “severely unaffordable”.

Thus, the government has always by choice been applying a formula in the unaffordable to a severely unaffordable range for what is supposed to be “Affordable Public Housing”.

I find it very questionable that we have been mis-sold an overpriced depreciating lease as an affordable always appreciating asset that we can pass to our children. This misleading has drained both our current finances as well as our retirements while flowing billions into the national coffers and making us financially beholden to the government and must be reversed.

As Minister of National Development, I would propose returning HDB to its primary goal which is to provide affordably, and hopefully temporary housing for those Singaporeans unable to purchase private housing on their own at this time. It will be made clear that HDB is rental or Lessee agreement and not true ownership.

The HDB mandate will be expanded to create a secondary goal of being a bridge to real long-term private home ownership with the creation of transitionary low-cost private housing priced at max 3 times median annual income. As HDB is already a “Pseudo” private developer this will not be a difficult task to manage.

Finally, the HDB policy can be expected to set a fairer priced floor on Singapore’s property market and not the inflated one that currently exists. This will go hand in hand with adjustments in wage policy, CPF policy and the rules related to property speculation and foreign ownership as we balance the current bubble and find the true value of the Singapore Property market.

And as the government technically holds the land it owns and manages in trust for the people and has already charged them as though it was private property I see no reason why in that process we cannot convert current HDBs to a special class of Freehold status as we manage the transition to a more equitable housing model for all and one that gives true ownership and value.

It is time to break the PAP government created Ball and Chain.

As always, I welcome your thoughts on these ideas and the issue.

This was first published on Brad Bowyer’s Facebook page and reproduced with permission.


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