OUR public housing system needs to evolve with the times. Which elements in our current system remain relevant, which require strengthening, and which need overhaul? If some major changes are called for, how do we implement them without adversely affecting the vast majority of Singaporeans who own those valuable assets and are quite comfortable with the status quo?
It is important that in doing so, we do not forget the needs of the silent majority. We must be mindful not to throw the baby out with the bath water. We must implement these changes judiciously and with heart.
From MPs' speeches and other comments aired during Our Singapore Conversation, I distilled four issues worthy of deeper reflection.
First, what should be the purpose of building HDB flats? The HDB flat is first and foremost a home, where couples start their lives together. But it is also an asset, which they can use to build a better life in their prime, and provide security for their retirement needs.
In the early years of Singapore's independence, homelessness and squatter living were the norm. At that time, we were all first-time applicants of HDB flats. Having basic, no-frills, low-cost homes was top priority. As Singapore progressed from third world to the first, the quality of HDB flats improved dramatically and we have now become a nation of proud homeowners. The majority are HDB second-timers. HDB flats have become significant assets to most Singaporeans.
We enabled this transformation through several important housing policy changes. In 1971, we allowed HDB flats to be resold for a profit. Before that, flats could only be sold to HDB at pre-determined prices. In 1989, we allowed flat owners to retain their HDB flats even when they buy a private property. Before that, they would have to sell off their HDB flats.
In 1993, we allowed buyers to take loans based on the prevailing market value of the flat, which allowed sellers to maximise the value of their assets. Before that, housing loans were based on HDB's historical selling prices. In 2003, we allowed flat owners to sublet their flats. Before that, the underlying principle was full owner-occupation. These policy changes have benefited many Singaporeans. Many were able to upgrade their homes, and dramatically improved their quality of life. It has also allowed many to accumulate large nest eggs, to fund their retirement needs.
Looking ahead, as we may no longer get the same kind of returns from reselling an HDB flat as in the past, how will its role as an asset be affected? If it is likely to diminish, how should we make the adjustments? How will any such adjustments impact different groups of Singaporeans with different aspirations and needs?
Second, what kind of housing should the Government provide to support future needs? Over the years, we have widened the range of choices, in terms of flat types and designs, to meet a wide range of aspirations. Many are now clamouring for the HDB to return to basics and its original mission of helping Singaporeans own a basic home. But what does "returning to basics" mean?
Returning to basics?
DOES returning to basics mean that we should focus only on HDB flats? Where should we set the income ceiling for HDB flats? Should we lower it, raise it or remove it altogether? What about the upper middle class? Should we, for example, stop offering executive condominiums (ECs)?
Does returning to basics mean that we return to pre-2003 days of strict owner-occupation? How will this affect the many retirees who rely on the income from subletting or the younger homeowners who use it to help support their lifestyle needs?
Does returning to basics mean that we return to pre-1989 days when we require HDB flat owners to sell off their flats when they buy a private residential property? How will this affect the plans of many Singaporeans who aspire to live in a private condo and use their HDB flat for rental income?
Third, how do we ensure the affordability of new HDB flats for a new generation of newlyweds? Global liquidity and low interest rates since the global financial crisis of 2009 have caused house prices to appreciate sharply, more than income growth. Affordability has worsened.
Whilst high prices make homeowners happy, it has caused anxiety amongst young buyers as well as their parents. Some couples look to their parents for help, but this may be at the expense of their parents' retirement savings.
We will do more to reduce BTO (build-to-order) flat prices relative to incomes, and reduce the financial burden of housing on our young. One way is to increase housing grants for families with children to partly improve affordability and reward parenthood. However, even as we make new HDB flats cheaper, we must continue to encourage prudence and avoid over-spending on housing.
In the earlier days, a three-room flat was acceptable to many. Now, it is a four-room flat or even a five-room flat or EC. What can a young graduate couple in the workforce for two years reasonably aspire to? What about a lower-income household? Are these aspirations within their means? Will they get into trouble if individual circumstances change or when the economy heads south? As a government, how can we help meet newlyweds' aspirations, while also ensuring they make prudent and sustainable purchases?
Keeping flats affordable
FOURTH, how should public housing respond to the ageing of our population? When our population was young and incomes were rising across the board, public housing was an effective way of sharing the fruits of economic growth.
But as our population ages and economic growth moderates, we have to be much more proactive and creative in working out options to help elderly Singaporeans unlock and monetise their HDB flats. We have tinkered with the Lease Buyback Scheme, and introduced some right-sizing incentives. What else can we do?
Our public housing policies have been highly successful in enabling the vast majority of Singaporeans to own their homes. The opportunity to own homes has not been confined to those in the high or middle income groups. Low income Singaporeans too have benefited. This is quite unique in the world.
A relook is however necessary in the light of significant demographic and economic changes. The primary mission of HDB to offer an affordable flat for the majority of Singaporeans will remain unchanged. Fortunately this is within our control as we set BTO prices and HDB is the largest housing developer.
We have stopped BTO prices from rising by delinking them from resale prices. We can now pause and see what else we can do to bring BTO prices in non-mature estates to, say, around four years of salary as it was before the current property cycle started. We will do so partly through cooling measures to nudge the property market down; partly by seeing if an alternative housing option can be designed.
One thing is clear; we are committed to restoring and maintaining the affordability of new HDB flats to the vast majority of first-timer Singaporean households. Their Singapore Dream of owning their own flats, like their parents', is safe.
At the same time, with the ageing population and the bulk of the seniors' savings tied up in their HDB flats, we have to press on with more options for the seniors to unlock their assets.
We should organise several Our Singapore Conversation discussions to explore some of these issues with fellow Singaporeans. I invite concerned Singaporeans of all ages to mull over these issues with us. Share with us your worries, your fears, your hopes and your dreams. We hope to hear many views and ideas so as to better inform our housing policies.
Let us work on the challenges together and shape better housing policies for our future generations.