Are HDB subsidies really very generous relative to land costs?

Yesterday, for the first time, HDB released detailed data on the land and construction costs of HDB flats completed over the last three fiscal years. I welcome this as the result of all the efforts by Opposition lawmakers in Parliament including those of Mr Chiam See Tong in March 1988.

The data reveals land costs accounted for almost 60% of the total cost of building HDB flats.

In contrast, net government subsidies, which included CPF housing grants, only accounted for 12% of the total cost in Fiscal Year (FY) 21/22. This 12% can be interpreted as the “discount” from the market price that HDB applies to BTO flats.

Table 1: Breakdown of HDB Costs from FY19 to FY22, source by CNA Reports 7 Dec 22

We must ask ourselves, is this 12% discount really very generous and enough to make HDB flats affordable?   Notice this is the discount to the total cost which is the market price for HDB flats estimated by HDB.  The actual subsidies received by Singaporeans is the CPF Housing Grant which is only 4.7% of the total cost, which is much smaller than 12%.  We also have no idea how the market price was estimated although it is likely that the land cost was derived from it.

In response to Mr Chiam See Tong’s queries in 1988, the government released similar data on the land cost, construction costs and subsidies for 4-room HDB flats in four towns (Pasir Ris, Hougang, Bukit Panjang, and Toa Payoh). We can see that in the 1980s, the subsidies from the government were not only more generous at 23%, but also covered a much larger proportion of the land cost, especially in the New Towns.

Table 2: Breakdown of HDB Costs for FY86 & FY87, source from Parliamentary Question (PQ) by Mr. Chiam See Tong, 30 Mar 1988
Table 3: Breakdown of HDB Costs for FY86 & FY87 by towns, source from Parliamentary Question (PQ) by Mr. Chiam See Tong, 30 Mar 1988

In my opinion, the pricing of HDB flats should only account for construction costs and price differences between locations. This was arguably the case in the late 1980s, when the total land cost accounted for a substantially lower share of the total price of an HDB flat. 

Land costs should be taken out of the picture, because much of the land used for building HDB flats was surrendered by the Pioneer Generation to the government for a relatively modest sum under the Land Acquisition Act between the 1970s and the 1980s. The Pioneer Generation endured difficulties when they were evicted from their homes and resettled with a low level of compensation. They accepted this because they were told their land was going to be used for a higher purpose, to provide affordable homes for every Singaporean.

However, what we are seeing now is that Singaporeans today must pay market prices for the land that was taken away from their forebears, and only get a small discount from the government that barely covers one-fifth of the land charges.

The time has come for us to question whether even our public housing policy has lost its way. 

Singaporeans deserve better.

For Country, For People.

Share This :