SINGAPORE – MPs weighed in on the issue of public housing affordability on Monday, with suggestions that ranged from urgently ramping up the Build-To-Order (BTO) flat supply to capping prices of four-room BTO flats.

They were debating two motions – one tabled by National Development Minister Desmond Lee that called on Parliament to affirm the Government’s commitment to keeping public housing affordable and accessible while meeting the needs of present and future Singaporeans, and the other by Progress Singapore Party Non-Constituency MPs Leong Mun Wai and Hazel Poa for a review of government policies to keep public housing affordable and accessible.

In his speech, Mr Leong proposed that Singaporeans who live in the same flat their entire lives be exempted from paying for land cost to keep homes affordable. Several People’s Action Party MPs rose to question his proposal.

Here are some key points raised by MPs on day one of the debate, which continues on Tuesday.

Increasing supply of BTO flats

Workers’ Party MP Louis Chua (Sengkang GRC) questioned if the Government’s plan to build up to 100,000 flats between 2021 and 2025 is adequate to meet demand.

He noted that with the Government launching 23,000 flats each year in 2022 and 2023 – 35 per cent more than in 2021 – BTO supply should fall by 20 per cent to about 18,400 flats in 2024 and 2025.

While building an average of 20,000 BTO flats yearly between 2021 and 2025 would be an increase from the 17,000 flats built per year from 2016 to 2020, it is still 13 per cent below the average of 23,000 flats built yearly from 2011 to 2015, he said.

BTO application rates have climbed to new highs over the past decade, he said, citing how it has increased from 2.8 times in 2012 to 5.6 times in 2021.

“Despite the ramp-up in supply with 35 per cent more units last year, overall application rates have remained stubbornly high at 5.1 times in 2022, compared with an average of just over three times in the past decade, suggesting that the level of demand-supply imbalance remains a critical concern,” he said.

If the Government knows that demand for flats is broad-based, it should take proactive steps to address demand from Singaporeans rather than curb it, he said.

Ms Denise Phua (Jalan Besar GRC) said the Government should “do more for couples embarking on marriage and parenthood, especially first-timer applicants”.

She urged the Government to take a calculated risk and build in advance, rather than just build to order.

Mr Sitoh Yih Pin (Potong Pasir), however, urged caution.

He cited a period after the 1997 financial crisis when there was a surplus of Housing Board flats, resulting in walk-in selections where people could walk in and purchase flats at a lower price than those who had queued and paid for them.

Omitting land cost in BTO prices unwise

Mr Vikram Nair (Sembawang GRC) said Mr Leong’s suggestion to have BTO flat owners pay the land cost when they sell their flats would create severe market distortions.

“Under Mr Leong’s proposal, the upshot is that for everyone who chooses to sell their flats, they will now be required to pay land costs – something they were not previously required to – which will be a huge lump sum payment at the time of sale,” said Mr Nair.

This would cause more people to end up paying more for their flat at the time when they sell than they currently do when first purchasing the unit from the HDB, he said.

Ms Phua asked how Mr Leong’s suggestion to exclude land cost from BTO prices would be financed, and what impact the move would have on other national spending priorities such as healthcare and education.

By not considering land cost in BTO flat prices, Mr Leong is “proposing a very big valentine gift of a double subsidy to every Singaporean who’s interested to buy, and I wonder how this will be financed and traded off against other national needs”, she said.

Mr Sitoh said Mr Leong’s proposal would send property prices downwards.

“Be careful what you wish for,” he said, adding that lowering BTO flat prices drastically could impact the resale market and cause property values to nosedive.

Retirement adequacy

Associate Professor Jamus Lim (Sengkang GRC) said most HDB home owners use their Central Provident Fund (CPF) savings to finance their mortgage, which conflates two competing ideals – growing retirement savings as much as possible to ensure retirement adequacy, and keeping public housing as affordable as possible. Tying these objectives that run counter to each other together requires grants to align them, he added.

Escalating home prices in turn require the Government to keep enhancing the grants it gives out, which allows prices to run away even further, in a never-ending, self-reinforcing cycle, Prof Lim said.

“If one is able to offload one’s flat before its price collapses – as it must, eventually – then we can retire comfortably.

“But then, the one holding the bag is a fellow Singaporean, someone who bought your resale because they needed the space for a growing family, and couldn’t afford to wait for a BTO,” he added. 

Addressing such concerns, Mr Murali Pillai (Bukit Batok) highlighted that people can use only their Ordinary Account in their CPF to fund housing instalments.

“The Special Account is preserved, the Retirement Account is preserved,” he said.

Mr Murali added that while Singaporeans may pay through their CPF to own a flat, they can recoup this amount if they sell their home, which may go towards funding their retirement needs.

Extending the prime location public housing (PLH) model

Mr Xie Yao Quan (Jurong GRC) proposed expanding the PLH model, which applies to newly built BTO flats in prime locations.

The model features a longer minimum occupation period (MOP) and a subsidy clawback that is activated upon the flat owner reselling the flat, in order for the Government to recoup additional subsidies it factors in to keep public housing in prime locations affordable.

Mr Xie said the PLH model could be made more flexible, with a tiered system of MOPs and subsidy clawbacks.

Besides PLH flats with a 10-year MOP and a clawback, other tiers could also be introduced, such as a six-year MOP with a 2 per cent clawback, he said.

“This tiered system would allow the Government to flex the amount of additional subsidies to apply to various projects,” he said.

This would help to keep all BTO projects within reach of target segments, and also effectively mitigate the windfall effect for different BTO projects to varying degrees, he added.

Mr Xie also suggested capping BTO prices to keep them affordable. He cited how the price of a four-room flat should be capped at five times of median income, or just under $500,000, before grants. 

Meanwhile, Ms Phua noted that a preference for BTO flats in mature estates has led to excessive demand for such areas and in turn caused more BTO applicants to fail in their attempts to secure a flat.

She suggested that the Government provide more substantive incentives – both financial and non-financial – for applicants, especially first-timers, to move into non-mature estates.

“It is not uncommon to hear of governments in other countries providing very attractive incentives to entice people, citizens, to relocate to targeted residential zones,” she said.

Ms Cheryl Chan (East Coast GRC) said that if Singaporeans want the Government to intervene and make resale flats more affordable for the younger generation, “we may have to do a few bold things”.

She suggested that younger Singaporeans would have to convince their parents to settle for lower profits when selling their flats, adding that home owners should be willing to live in the same property for longer and not inflate demand on a cyclical basis.

Ms Chan also said asking for more subsidies should not be a solution. “If we are honest about it, we know this must be paid through taxes or some other means,” she said.