About 85% of Singaporeans live in public housing such as these HDB apartments

In writing our three-part article, we did quite a bit of brainstorming, research and refining of ideas as we got the story together. In the end, the refined product took shape after many iterations and team discussions. In the process, however, we stumbled across a few ideas that seemed quite relevant to Singapore housing, yet did not really fit into the narrative of that article.

We decided to put these aside, and revisit them later.

One of the things we thought about, but couldn’t find a good answer to, is why public housing makes up 85% of home ownership in Singapore. On the surface, it doesn’t seem a bad thing. After all, it shows that the government is taking care of the people, right? But then we thought about it a bit more, and compared that figure with other countries, and we realised that, in highly-developed, affluent Singapore, something didn’t quite add up.

In Switzerland, for example, “According to the National Census in 2000, dwellings (partly) funded by the state sector represent 11% of the housing market and amongst them, 5% are built by cooperatives.”  – Local Welfare in Switzerland Housing, Employment and Child Care, WILCO publication no. 7.

Even in Hong Kong, only about 48% of all occupied housing is subsidised by the government, either in the form of Public Rental Housing or Subsidised Home Ownership. The rest, about 1.4 million housing units, are private property.

Tenure Split as Percentage of Total Housing StockSource: Housing statistics in the European Union 2010

Owner-occupied and privately-rented homes are the majority in many developed countries.

Social Housing as Percentage of Total Housing Stock in Selected Countries, 1980–2008

 Source: Housing Europe Review 2012 – CECODHAS Housing Europe

In nations such as the UK, Sweden, France and Denmark, the trend is towards public housing at 18- 20% of total housing stock.

Housing Tenure % / Size of Social Sector

  Owner occupation Private rental Social rental Number of social units
Netherlands 54 11 35 2,400,000
Austria 55 20 25 800,000
Denmark 52 17 21 530,000
Sweden 59* 21 20 780,000
England 70 11 18 3,983,000
France** 56 20 17 4,230,000
Ireland 80 11 8 124,000
Germany 46*** 49 6 1,800,000
Hungary 92 4 4 167,000

Source: Social Housing in Europe, LSE London, July 2007

**France: Does not include 6.1% ‘other’
***Germany: owner occupation includes shared ownership/equity ‘Genossenschaften’.
Sources:
France: from www.union-hlm.org/gp
Hungary: from Housing Statistics in the European Union 2004
Germany: from Scanlon & Whitehead (2001), Intl trends in hsg tenure & mortgage finance
Netherlands: www.cbs.nl; www.vrom.nl
Not otherwise stated: from experts’ country reports

“In the majority of countries included in the survey the social housing stock has been declining at least in proportional terms.” – Social Housing in Europe, LSE London, July 2007; The table is from this same study, and shows the rates of owner-occupation and private rental in specific European countries.

A people driven by success, and to succeed, are by their very nature aspirational; and Singapore, as a whole, is quite successful. Perhaps, in a way, the Housing Development Board (HDB) is a victim of its own success? In creating and fulfilling the housing aspirations of the ordinary Singaporean, it has in turn created even greater expectations and requirements. And it has been trying to catch up ever since. First came Executive Condominiums (EC), which were an attempt to duplicate the private condominium lifestyle. And for whom? You guessed it, the poster-child of 90s aspiration, the yuppies – young, upwardly-mobile professionals – who started off in modest HDB apartments but wanted more.

Then came schemes such as the Design, Build and Sell Scheme (DBSS), which was an attempt to create HDB flats that had the trappings of a private condominium, such as high-end furnishings, costly fixtures and fancy lift lobbies. Unfortunately, since the only limit placed on these units was that buyers had to fulfill normal HDB buying restrictions, the private developers who built these DBSS blocks milked them for all they could, and prices reached a premium of 35% over a standard HDB unit in the same area.

This really illustrated to us that a large portion of HDB dwellers are actually willing to compete at or near the level of private property. Those EC and DBSS prices were actually within a stone’s throw of private property prices at the time. HDB, in trying to cater to the aspirations of this segment of HDB dwellers, has caused public housing to compete with private housing in both features and pricing. They have perhaps lost sight of what made them such a success in the eyes of so many Singaporeans in the 1970s and 80s. They have lost sight of that primary goal, which is to provide cost-effective, durable housing for the majority of Singaporeans.

If some part of that majority has graduated beyond such basic accommodations, it shouldn’t be HDB’s mandate to provide for them. In fact, why not build fewer HDB flats, but instead release the land to private developers? Such aspirations might be better catered to by allowing private developers to build the housing instead.

The private property niche is barely 15% of the total housing market in Singapore. With such a small niche, even minor fluctuations in global trading and capital flow can cause massive changes. In this kind of market volatility, speculators are like kids in a candy store. Of course, such behaviour will introduce even greater volatility. And sometimes, like in 1997, the kids discover that those brightly-coloured candy bars they are holding tightly in their greedy little fists, are actually firecrackers, already lit…

Releasing more land to developers will have a two-fold effect on such a market. Firstly, a larger market can absorb the effects of volatile influences better. A larger market will have increased supply, and thus greater price elasticity of supply. This has been shown to moderate price fluctuations to some degree, even in the face of volatile global demand.

Secondly, more land means more developers competing with each other, and more supply. Ergo, developers will have to be truly competitive to attract buyers. Such companies will be forced to innovate and offer real value to consumers, at competitive prices. They will have to do more, provide more value and offer better service. Now that’s real productivity that consumers can feel, not just a buzzword that we hear every day!

In order to achieve these goals, the land released for private development has to first, be sufficient. Just off the top of our heads, a good ballpark figure would be enough land to double to private property volume, from 15% of the total market, to 30%. In addition, the land must be of sufficient plot ratio to truly replace any HDB units that might have been built there. It would defeat the purpose of releasing land for private development if a HDB block were to be replaced by a single bungalow! Once the market has had time to adjust to the new balance of private versus public housing, the authorities could then decide if further release would be appropriate.

In this way, a measured response can be implemented to address both the aspirations of Singaporeans, and the refocus of HDB on truly affordable public housing.

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  One Response to “85% in Public Housing – Too Many?”

  1.  

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