Ex-GIC Chief Economist Yeoh Lam Keong took to Facebook on Tuesday (17 December) to address comments by Nominated Member of Parliament Professor Walter Theseira and ERA Realty head of research and consultancy Mr Nicholas Mak on the public housing policy proposals by ground-up initiative Future Of Singapore (FOSG) of which Mr Yeoh had a hand in writing.
Mr Yeoh, a former adjunct professor at the Lee Kuan Yew School of Public Policy, shared a photo of a Straits Times article titled “HDB lease top-up proposal has drawbacks: Observers” in which Prof Theseira and Mr Mak commented on the proposal by Mr Yeoh and several others from FOSG at a public forum held at the Singapore Management University on 3o November.
In his post, the economist talked about the points presented by the two men, first tackling Mr Mak’s reservations on automatic lease extension as proposed by FOSG in their policy paper.
In FOSG’s policy paper, it is proposed that the government provide HDB flat owners with an affordable 99- year lease top-up after their unit reaches 50 years.
Mr Yeoh said, “He (Mak) argues that lease extension would face huge popular outcry if it was ever stopped after introduction. But isn’t that true of all good and necessary public social policies?”
Giving the example of the cessation of subsidised Built-To-Order (BTO) flat or closing of polyclinics and affordably preschools and the outcry that would follow, Mr Yeoh asked, “Is it a good argument therefore not to have introduced them?”
He pointed to the 1993 lease extension reform legislation in the UK which “successfully deepened and developed London’s extensive international residential leasehold market as well as protected leaseholders’ rights” there, adding that he doubts the UK authorities ever need to seriously consider fully repealing the legislation
In the ST article, Mr Mak also argued that the provision of more units of cheap rental flats might prevent Singaporeans from working harder. To this, Mr Yeoh said that ample empirical research shows that lowering the cost of living for the poor and anyone else to affordable levels has a negligible effect on the incentive to work.
Mr Yeoh went on, “To take Mr Mak’s arguments to their logical limit, we should also not subsidize BTO flats, healthcare or education either as it might make our citizens unnecessarily lazy!”
Moving on to Prof Theseira’s “more serious” comment on resale flats coming down to the construction cost pricing, Mr Yeoh said that this ignores a counter-argument of FOSG’s proposed 15 year minimum occupancy period (MOP) and the fact that resale flat values would be boosted as these now become the only leasehold asset with an affordable, regular lease extension and free rebuilding after 100 years. Also, Mr Yeoh says that the professor’s comment “ignores the normal premiums that resale flats have over a BTO flat – choice of precise location and immediacy of purchase and sale.”
Mr Yeoh said, “Resale BTO flats also currently already enjoy up to a $160k grant discount and have only a 5 year MOP.”
“If Prof Theseira’s arguments were correct, resale HDB prices would even now be in the process of being pulled down towards the deeply subsidized resale price,” he added.
Yet, Mr Yeoh said, this is not the case as “the BTO market is effectively still segmented from the resale markets which would even more effectively so under our proposals.”