SINGAPORE — The Housing Development Board (HDB) has just announced that it incurred a record net deficit of $4.367 billion for Financial Year (FY) 2021. This is before taking into account government grants transferred to the statutory board.
According to HDB’s press release entitled, “Record Deficit of $4.367 billion Incurred by HDB in FY 2021”, this deficit is 86% higher than the $2.346 billion deficit incurred in FY2020, and is the highest ever deficit recorded since the inception of public housing in Singapore.
HDB said that the bulk of the losses – $3.85 billion – stems mainly from the expected loss of $2.262 billion for flats that are currently under development, a gross loss of $659 million on the sale of flats and the disbursement of $849 million in CPF housing grants.
Of the $3.85 billion deficit incurred, about $2.262 billion stems from the expected loss for flats being built. HDB said it has largely absorbed these costs.
HDB BTO flats are not priced based on the total development costs incurred, which comprise construction and land cost. Instead, HDB determines the market value of new flats from comparable resale flats nearby and applies a subsidy to them.
HDB added that it received grants from the Finance Ministry to cover its deficit. In all, HDB is said to have gotten $42.97 billion in grants since its establishment in 1960.
However, so far, the People’s Action Party (PAP) government has not revealed the original cost of all the land it acquired through compulsory acquisition since 1960.
POFMA Issued
On social media, many have enquired about the details of the cost structure in constructing Built-to-Order (BTO) flats. Some have received correction orders under the Protection from Online Falsehoods and Manipulation Act (POFMA) from the Minister of National Development, Desmond Lee.
In September, Facebook page “The Alternative View” was issued a POFMA order under the fake news law after implying that HDB profits from the sale of flats at an Ang Mo Kio BTO project.
Addressing the matter in Parliament, Mr Desmond Lee said the total loss on the project amounted to about $270 million.
Claims that HDB profits from the development and sale of BTO flats are false, he added.
The POFMA incident led Non-Constituency Member of Parliament (NCMP) Leong Mun Wai from Progress Singapore Party (PSP) to ask Mr Desmond Lee in Parliament the questions of HDB’s net loss for the Ang Mo Kio Central Weave BTO project; cost of land paid by HDB to Singapore Lande Authority (SLA) for this project; and net profit and loss position for the Government, including HDB and SLA, for this project.
While Mr Lee did not fully answer Mr Leong’s questions, he nevertheless said that the estimated land cost for the project was $500 million, which was the amount HDB paid to the government for buying the land used in the project.
In total, Mr Lee said HDB itself would incur a $250 million loss on the project and an additional $20 million if the grants were included.
According to HDB’s annual report for FY21/22, it spent $4.46 billion in total to purchase land.
Mr Lee, however, did not reveal the actual cost of the land which the government had to pay to acquire it in the first place.
Subsequently, former GIC Chief-economist Yeoh Lam Keong and The Online Citizen Asia (TOC) were also served with POFMA correction orders as directed by Mr Lee.
In one of the notices addressed towards TOC’s article, the government said that TOC has falsely conveyed that the government’s sale of land to HDB for the Ang Mo Kio Central Weave BTO project will lead to an increase in Singapore’s reserves.
“When HDB requires land to develop flats, the land has to be taken out of the Past Reserves. HDB has to purchase the land by paying fair market value for the land, and the money goes into the Past Reserves. The estimated land cost for Central Weave @ AMK is about $500 million,” the statement said.
“If the Government arbitrarily prices the land below its fair market value, such as at the historical price that past Governments had paid to acquire the land, or at just a nominal $1, then it is not putting back fully what it has taken out from Past Reserves. This is equivalent to drawing down the Reserves…”
Bishan Land Acquired By Government At $0.30 Psf
Indeed, historical prices of land which were acquired by past PAP Governments were much lower than their present fair market value. Many of these lands were acquired compulsorily from Singaporeans at a very low monetary value under the Land Acquisition Act.
Take, for example, the land at Bishan was acquired from Kwong Wai Siew Peck San Theng temple through a compulsory acquisition by a past PAP Government.
This was disclosed by Mr Lim Chin Joo, who was the lawyer acting on behalf of the temple, in a news article in 2010 (‘Land acquisition – for the sake of nation building‘, 3 Dec 2010, ST). The temple originally owned the cemetery land at Bishan before it was acquired and developed by HDB.
Mr Lim was invited to the 140th-anniversary celebration of the temple in 2010 and thereafter he wrote the article recounting his experience dealing with then-the National Development Minister Teh Cheang Wan over the compulsory acquisition of the temple’s land.
When the land acquisition gazette notification finally came, the clansmen were saddened by the news and appointed Mr Lim as their legal adviser.
After much negotiations, the government was only willing to pay a paltry $4.9 million for the 131ha of land owned by the temple. “As expected, the compensation did not amount to much. It came to less than $5 million for the 131ha of land – or 30 cents per square foot after appeal,” Mr Lim recalled.
“I wrote to the HDB and the permanent secretary of the Ministry of National Development on two occasions. The replies left no room for negotiations. We were told the decision to acquire the cemetery had come from the top.”
After appealing to Mr Teh and more talks with HDB, HDB agreed to let the temple remain where it was, and allotted surrounding land to restore it and to construct a columbarium. Request for the crematorium was rejected. The clansmen at the temple had to accept whatever terms the government demanded.
“After due consideration, the clansmen accepted the acquisition for the sake of nation building. Bishan estate was the result. It was a decision that benefited Singapore,” said Mr Lim.
Hence, with a land acquisition gazette notification, the government at the time acquired the Bishan land on the cheap at 30 cents per square foot in 1979.
On another note, the HDB BTO estate that was launched in 2020, Bishan Ridges, had 1,502 units and sold 4-room flats at about $555 per square foot.
MND: Government Does Not Profit From Land Sales
In any case, the Minister through the POFMA office required TOC and Mr Yeoh to put up the POFMA correction notices, with the clarification article saying:
“Neither the Government nor the Past Reserves profit from land sales. When State land is disposed of at fair market value, there is no addition to the Past Reserves but a conversion of one type of asset (land) to another (cash).”
“For the Central Weave @ AMK BTO project, HDB will pay the Government fair market value for the land, estimated to be about $500 million. This money will be paid into the Past Reserves, but does not result in a net increase in the Past Reserves.”
