PSP Housing Debate: Ensuring Affordable Homes for Every Generation

Mr Speaker Sir,  

I thank the Ministers, Senior Minister of State, Minister of State and Members for making so many contributions which have enabled us to have a lively debate on public housing.

I have certainly learned a lot from this debate because the rebuttal points have been specific and substantial. While we may differ in our policy ideas and recommendations, all of us in this House share a common objective of keeping public housing affordable and accessible for Singaporeans. I also agree with Ms Janet Ang that we are here to unite and not divide but that is provided the Government does not treat every alternative ideas as a source of division.

I will now give specific responses to the questions and rebuttals. I will demonstrate to Mr Murali Pillai and all of you that what PSP has proposed are feasible aspirations based on pain and choice. This is because our policies will benefit most Singaporeans but there will be some slight negative effect on some as well, like those who have committed to high-priced resale flats in anticipation of future profits. This is no different from some of the other policy proposals made by PAP Members.

Comparisons with Japan

I thank Mr Sitoh Yih Pin for pointing out the example of the Japanese property market which, indeed, is one of the reasons why I have tabled this Motion.

I spent a total of 12 years, first studying and later working in Japan. So, I have a fairly good understanding of what the overuse of property as an economic management tool had done to that country. However, the lesson I have learned was opposite to what Mr Sitoh has tried to convey.

The Japanese property market downfall was not due to just a change in policies. It was caused by property being used as a tool to prop up the economy for too long until it is no longer sustainable.

The property market cannot rise forever at a fast pace. In the long term, any country’s population will eventually peak and decline and there will be fewer buyers than sellers. Continued economic growth will then depend on raising productivity and competitiveness.

 However, the more important property investment and speculation become in an economy, the more likely that economy will become less competitive because property speculation and rent seeking are easier and better alternatives to innovation and entrepreneurship.

 In Japan, for example, I have seen how the average Japanese has been bogged down by their mortgages, some of which straddle two generations. It is from that angle that I got worried when I look at the situation in Singapore today – high property prices but a dearth of innovation and creativity. What we need is more innovation and entrepreneurial spirit to continue competing effectively with the rest of the world in the Information Age.

A home is a place for a Singaporean to share comfort and love, not a chain that ties him down with a mortgage that needs to be serviced for the larger part of his life. He should spend his life innovating, creating and fulfilling his potential. Singaporeans can become knowledge workers only if they are liberated from the bondage of mortgages and high property prices.

The only saving grace is that our property market is still rising partly because of population growth through immigration. If we do not want to be left with no choice, however, except accepting a continuous fast pace of immigration, we will have to seriously consider a reset at this stage when the foreigners, especially the Chinese, are still eager to put their money in our property market.

So, I think this is a brilliant opportunity, while our market is very bullish, for us to reset the policies.

I think, for years, policy-makers and policy analysts have debated – maybe we should change our public housing policies, but we are at such a high price already, how do we do it? I think that has been bothering a lot of people. But I think this is a brilliant opportunity.

Fortunately, unlike Japan, we can use our public housing sector as a buffer. We can continue to allow foreigners and well-off Singaporeans to invest in our private property market at higher prices but we must maintain an affordable and accessible public housing market so that our young Singaporeans can have the financial security to be enterprising risk takers and build Singapore into a competitive information economy.

Reasons for Reset of Housing Policies

While the Government thinks it is doing its best, I think there are substantial reasons to think that there needs to be a reset because the current system is not delivering all the outcomes that we desire.

For example, young couples are not forming families as fast as we want, CPF savings are being depleted and going forward, there is no sign that this will slow down because as BTO prices escalate, the amount of CPF savings required to pay for the mortgage will be bigger and bigger. Our CPF contributions are capped but housing prices are not capped.

Also, the lease decay problem is worsening. If we do not change the way we price the HDB flats, the lease decay problem will be a problem of every generation.

These are some of the problems that accompany the current housing policies. I think we need to address them. I do not think in the debate and even what the Minister said just now have fully addressed them.

The Minister had concentrated on doing more of the same, sorting out the current tight demand-supply situation, but what is required is a fundamental change in the thinking of what should be the best public housing policies going forward.

As a result, PSP has proposed the Affordable Homes Scheme and the Millennial Apartments Scheme as key proposals for the policy reset. I must say again that the Affordable Homes Scheme and the Millennial Apartments Scheme, we had them in mind right from the beginning. I did not shift my ideas from taking out of land cost and now add that land cost as a deferred land cost. I must again repeat that point.

Affordable Homes Scheme and Retirement Adequacy

So, what are the advantages of the Affordable Homes Scheme? The most important objective of this scheme is to stop the depletion of the CPF savings of Singaporeans from buying HDB flats. What we are aiming for is to delink the CPF account from the HDB flat.

Mr Murali Pillai argued that only the Ordinary Account savings can be used for housing. There is still the Special Account savings. But how many Singaporeans can meet even the basic retirement sum with just their Special Account savings and without having to sell their flat?

Under the current system, retirement adequacy will only deteriorate further as CPF contributions are capped and remained the same level for many years while HDB prices continue to rise.

Senior Minister of State Sim Ann shared just now that maybe the retirement situation in terms of the CPF saving balances are better than what we have gathered. But nevertheless, as BTO prices continue to go up, CPF contributions will continue to be depleted.

One thing I want to highlight is that Senior Minister of State Sim Ann had defined the CPF account now as being one that would cater for both buying the HDB flat and for retirement. That is something new to me. The CPF account has been pulled into financing the HDB flat from 1968. The original definition or the original intention of the CPF account is for retirement. I hope the Government will clarify on that later.

We want a situation whereby Singaporeans do not have to depend on resale prices for their retirement.

Many Members have pointed out that resale prices go up and down. This proves my point – that retirement adequacy needs to be delinked from housing prices because resale prices go up and down.

Is our current system fair to the elderly Singaporeans who may be forced to retire during a recession but have not enough money in their CPF and may therefore have to sell their flat at a lower price point? Not everyone can control when they retire or when they must monetise their flat for retirement. This is a real problem and I hope Members on the other side of the House will consider when they are voting for the two Motions.

At the same time, the Affordable Homes Scheme increases owner-occupation intent without having to tighten current rules on the Minimum Occupation Period, which Ms Denise Phua has suggested. Application for BTOs in popular areas will increase and upper middle-income Singaporeans may be unhappy but that is the cost we have to pay to reduce social inequality.

Impact of Affordable Homes Scheme on Resale Flat Prices

Mr Sitoh Yih Pin, Mr Xie Yao Quan and Mr Vikram Nair are concerned that the PSP’s proposal will cause a collapse in resale prices.

In fact, a collapse is actually counterintuitive because in the long term, the supply of resale flats will be reduced as new sellers will not sell their flats unless the price is high enough for them to earn a profit after paying for the deferred land cost. Furthermore, there will also be support for the resale market from the backlog of housing demand.

In addition, a large pool of buyers who are ineligible for BTO flats, buyers who want to live in a specific location because they want to live near their parents, Permanent Residents and buyers who want to upgrade to a larger flat form a large pool of demand that will underpin the resale market.

Most importantly, we must bear in mind that in Singapore, the resale market HDB market is still much lower than the private property market, so there is a demand there.

But I believe that the Affordable Homes Scheme is also aiming at engineering a soft landing of the current surging resale market. That will be healthy after recent market exuberance. We want a buoyant resale market, not an exuberant one.

At the same time, to complement that strategy with a Millennial Apartments Scheme, which can increase the number of housing units in the same prime location housing site by building smaller units for rental. These quality rental apartments will absorb demand while people are waiting for their new flats.

I think the Millennial Apartments Scheme is a much better policy solution than the PLH scheme in terms of providing choice to young Singaporeans, reducing the profit motive in speculating in HDB flats in mature estates and thus moderating social inequality.

The current BTO system, which feeds on the resale market and vice versa, does not make the overall housing market accessible to young Singaporeans. I think we all agree that this is detrimental to our total fertility rate. The current system cannot provide a large enough price difference between BTO flats and resale flats to restrain the resale market.

But the Affordable Homes Scheme, which is based on the clean concept of taking out the land cost for the owner-occupier, can do this and make the overall housing market more accessible to young Singaporeans.

Breakeven Sale Price of Flats Under Affordable Homes Scheme

Next, I want to address some of the questions raised by Mr Lim Biow Chuan and Mr Henry Kwek on the Affordable Homes Scheme. There are two main areas that they have raised.

One is – will the scheme actually increase the holding cost of the buyers? I called that a breakeven price, meaning the land cost is determined today, you add on the interest payment and what would be the price going forward when the buyer wants to sell the flat in the market. The idea is that, this breakeven price should not be much higher than the breakeven price for the current HDB owners. Of course, there is an accrued interest involved but we can actually adjust the number of years for accruing the interest.

So, this is something that we can still subject to more research, but, as a starting point, we can say that the accrued interest will accrue for 25 years. That is the normal term of a loan. First, I propose an idea, but based on the experience that we have in the public housing market, if it is a good idea, then based on the experience accumulated by HDB, we can decide on how much we want to accrue that interest going forward. This is one thing.

Affordable Homes Scheme Flats After Death of Owner

Second thing is, there is a question about what happens if the flat is given to a beneficiary? Does the beneficiary need to pay the accumulated interest on the land cost? The answer is that the beneficiary can live in the flat as long as they are just an occupier. But they can also sell the flat. When they sell the flat, then the same rules apply. They have to return the land cost with the accrued interest to the past reserves. But if they cannot sell the flat in the market, then they sell the flat back to HDB, based on a formula which I have explained to Ms Carrie Tan just now. It is based on the user price, minus the location premium and some depreciation.

Again, we can decide on how much depreciation we want to put into the price later.

Impact of Affordable Homes Scheme on the Past Reserves

So, I have addressed the resale market, I have also addressed some of the questions raised by the Members. Next, I will address the impact, or the perceived impact, on the reserves.

Given the advantages of the Affordable Homes Scheme and the Millennial Apartments Scheme, their implementation will require the Government to change its mindset regarding accounting for land reserves. I beg to disagree with Mr Cheng Hsing Yao and Mr Sitoh Yih Pin, that we must necessarily charge a price, because land is a scarce resource. PSP believes the land cost should not be charged for owner-occupied HDB flats because it is a public good, with all the social benefits that can be shared by society.

Our proposals are still fair to future generations, because not all the land cost will be lost. We are also giving the present generation a leg-up to do better, which is the best inheritance which we can pass on to our future generations. In fact, Affordable Homes Scheme will make it fairer for future generations who can enjoy HDB flats at the user price, rather than the higher BTO price in the future. This is the most consistent and fair treatment for every Singaporean in each generation.

Whether it is a draw on reserves, actually we all know that it depends on the definition of use. If the use is to serve a very useful purpose, then we should not hesitate to redefine the use – public housing land is state land, we can redefine it. If public housing land is defined as state land, then there is no question about the use of reserves. But there will be a cost.

Still, this cost can be managed under our budget resources and there is no need to actually use the reserves.

Ms Denise Phua asked about the fiscal implications of our policies. The total land cost paid by HDB is only about $3 billion a year. Under our scheme, most of it will not be permanently lost, first of all, and can be recovered with interest from the deferred land cost. But even if we need to fund the whole sum, we will have more than sufficient fiscal resources required for the implementation of the reset. We only need the Government to do more for Singaporeans, because we actually have the resources.

The Government has been saving repeatedly, again and again, in many ways, just to take the resources and put it back into the reserves. First of all, reserve accumulation, that is something that you cannot spend unless the President approves it.

Second, the Government said, put 50% of the net investment return into reserves. You can only use 50%, so that 50% becomes the net investment return contribution (NIRC), which goes to the Budget.

Yet again, I do not know whether Members noticed, 80% of our NIRC was never used, maybe except during the COVID-19 years, in the current year. For most of the years, NIRC was re-parked into endowment and trust funds. So, this is the money, 50% of the net investment returns that is supposed to be used for the budget. We will assume that it should be used for the current year for the benefit of Singaporeans, but the Minister for Finance put that under endowment and trust funds again. So, the funds, again, are not used in the current year.

For example, in 2019, $13,570,000,000, or 80% of NIRC was ploughed back into the funds. Hence, if we can use part of that money, the $3 billion that we are talking about to execute the public housing reset, represents a very small fraction of NIRC allocated to the Budget each year.

So, we can see that we do not need to use any additional reserves at all, we only need to deploy our current resources where and when they are needed.

With the above, I hope I have addressed most of the Members’ questions, but of course, questions are welcomed afterwards. Next, I will conclude today’s debate.

Ensuring Affordable Homes for Every Generation

The asset enhancement policy, which started in the 1990s, may have reached its limit as the price of any asset cannot rise forever, especially one with a lease decay problem. The Government’s appreciating asset narrative for the HDB flats has become untenable, as more than 50% of the HDB flats will be over 50 years old by 2030.

It is also counter intuitive to believe that a system that relies on rising HDB prices can actually deliver affordability.

The ecosystem developed to sustain the asset enhancement policy, like the BTO supply and pricing systems, as well as the link between CPF retirement funds and housing prices must be reviewed and changed accordingly.

We have explained why Affordable Homes Scheme and the Millennial Apartments Scheme are the way to achieve a reset of the public housing policy. When PSP advocates that the land cost be taken out of the pricing of owner-occupied HDB flats, so that every Singaporean in each generation can have access to affordable housing, we also believe that this is in keeping with the spirit with which our Pioneer Generation sacrificed their land for national development. A spirit, which the Government might have forgotten from the 1990s onward.

The Pioneer Generation have responded to the call for national development and sacrificed much when they gave up their land. These are not just the big landlords and capitalists, but also ordinary Singaporeans, including farmers who were resettled from rural areas, such as Chua Chu Kang, Lim Chu Kang and Punggol, and indigenous Malay fishermen who were resettled from the Southern Islands. They surrendered their lands to the Government, in the hope that it will be used to improve the lives of Singaporeans, not for the Government to accumulate reserves for the sake of accumulating, with no clear and transparent definition as to what constitutes “a rainy day”, when we can use the reserves for the benefit of Singaporeans.

In the run-up to this debate, some descendants of the Pioneer Generation who had given up their land came to see me and asked me to fight for affordable homes for their children. Is it not a great irony that a family that had earlier given up its land for a pittance, thus sacrificing housing for his descendants, is now seeing his descendants pay half a million dollars each for a 90 square metre BTO flat?

Thus, PSP believes that it is the Government’s duty to live up to the hopes and expectations of the Pioneer Generation and repay them by ensuring their descendants continue to have affordable homes.
















Mr Speaker, the President said at the opening of this 14th Parliament that Singaporeans are masters of their own land. But that rings hollow when a significant number of Singaporeans have difficulties owning a house.

I have spoken about this in my maiden Parliamentary speech on 1 September 2020. I said, “it is disconcerting to have many of countrymen live outside Singapore in Johor and Batam while we are housing more than two million foreigners on our island at the same time. Surely more consideration can be given to Singaporeans who are citizens of our sovereign city state.”

So, let us work together as one united people to achieve a better future for Singapore and Singaporeans.

Singaporeans deserve better.

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