Affordable and Accessible Public Housing

Minister for National Development.

With your permission, Mr Speaker, may I ask the Clerks to distribute the annexes before I begin my speech?

Please do. [Handouts were distributed to hon Members.]

Members may also access these materials through the MP@SGPARL app. In the course of my presentation, I will refer Members to the various annexes and then you can follow as I speak.

Mr Speaker, Sir, I beg to move, "That this House affirms the importance of keeping public housing affordable and accessible while protecting the interests of current and future generations of Singaporeans, and endorses the commitment of the Government to these twin goals.”

Sir, this Government is committed to keep HDB flats affordable and accessible for Singaporeans. This has been the work of several generations and we will continue to work hard to deliver this commitment.

We help Singaporeans own their homes by: (a) building public housing in step with demand; (b) by pricing new flats affordably and providing generous grants to first-time buyers; and (c) by maintaining a stable and sustainable property market where asset values increase in tandem with economic growth.

In the past 10 years before COVID-19 hit, we had a fairly stable market.

We grew HDB supply in step with demand. This is because we saw household sizes falling as part of societal trends, with the nuclearisation of families and more singles wanting to live alone. We opened up access to better meet housing aspirations of singles.

May I refer Members to Annex 1. [Please refer to Annex 1.] If you look at the chart, you will see that from 2001 to 2021, while the number of residents living in HDB flats increased by only 10%, we had increased the total number of HDB flats by 29% – almost a third. In fact, if you look at the boxes at the bottom of the chart, we have the 2011, 2016, 2021 BTO application rates, these were lower before COVID-19 and spiked up during the COVID-19 years. In fact, these numbers have been skewed because of the higher application rates in the earlier years by singles. If you take that away for 3-room and larger flats, the application rate in the non-mature estates was very low – one point something, two point something before COVID-19 hit.

The Home Price to Income ratio (HPI) – Members will be familiar with this concept – HPI measures broadly the number of years of total household income that it takes to pay for a home.

Let me draw Members' attention to Annex 2. [Please refer to Annex 2.] Look at the chart. In 2012, the HPI for a 4-room flat in a non-mature estate was six. So, about six years of total household income to afford a home. From 2015 onwards, the HPI had dropped and remained below 5. This is because the annual increase of BTO flat prices in non-mature estates is less than 1%, lower than the 3% annual increase in incomes.

Members, please refer to Annex 3, the next page. [Please refer to Annex 3.] You can see that HDB resale prices also stayed fairly stable and even somewhat softer. This was the period prior to COVID-19. In fact, from 2013 to 2019, the HDB Resale Price Index (RPI) experienced almost six consecutive years of decline, falling by around 12%.

But in the last three years, supply has become tight and resale prices have risen. Why did this happen?

First, our building programme took a very hard hit during COVID-19. Construction work was halted for a few months, there was a severe worker shortage, the supply of construction materials was disrupted and we had to shore up construction firms all over Singapore.

As you can see from Annex 4, in 2019, before COVID-19 hit, we completed some 12,000 flats. [Please refer to Annex 4.] In 2020 when COVID-19 hit, we completed fewer than 8,000 units.

When people saw that the supply of BTO flats was disrupted and project completions delayed, some decided to get a resale flat instead, so, demand for resale flats went up.

Others got worried and decided to join the BTO queue even earlier because they did not know if they could indeed successfully ballot for one on time and they also saw that the waiting times got lengthened because of COVID-19. So, the demand for BTO flats also went up, causing further anxiety.

Take a look at Annex 5. [Please refer to Annex 5.] Over the last three years of the pandemic, first-time BTO applicants increased by 80% and second-time BTO applicants grew even more by a whopping 140%, compared to the preceding three years from 2017 to 2019, pre-pandemic.

At the same time, there has been a marked shift in social norms. Young Singaporeans want to move out to live on their own earlier. This trend may have been accentuated by the pandemic, as many people worked from home and wanted more space of their own.

As a result, housing demand spiked. There was also a sharp rise in the resale prices. On the ground, young couples shared with us their concern about the sharp rise in the resale prices, the perception that choice BTO projects in mature estates are more expensive and the overall worry that HDB flats may be out of reach. In fact, their parents worry even more.

We fully appreciate these anxieties, even as we work hard to ensure that BTO flat prices remain stable.

We know that Singaporeans are unhappy about the longer wait times and the delays. So are we. My HDB colleagues have been working hard to catch up on lost time.

Please refer to Annex 4 again. We completed more than 20,000 homes last year, 2022, the highest annual number in the past five years, reflecting a concerted effort by HDB and the contractors working together to catch up on lost time to help to complete delayed projects. And we will press on to finish building another 20,000 flats this year, deliver more keys to waiting home buyers.

We have also ramped up the supply of BTO flats to meet the higher demand.

In 2022, we launched over 23,000 new flats. We will launch another 23,000 new flats this year. Between 2021 and 2025, in total, we will launch up to 100,000 new flats if needed.

We had earlier introduced Shorter Waiting Time (SWT) flats before the pandemic, so you wait less than three years for a flat. While there have been some delays, more than 8,000 of such flats will be completed in the next two years.

We have done more to prioritise First-Timer (FT) young couples. Since August last year, we have set aside at least 95% of 4-room and larger BTO flats for FT families, both in mature and non-mature estates.

Despite strong demand and rising construction costs in these past two years, we have kept BTO prices almost flat.

Please refer to Annex 6. [Please refer to Annex 6.] In 2019, a 4-room BTO flat in a non-mature estate was priced at $341,000 on average before grants. In 2022, the average price was $342,000. The price has barely changed.

We do so by setting BTO prices based on affordability outcomes rather than just pass on rising costs to buyers. For instance, construction costs shot up almost 30% in this period. But we do not price BTO flats based on cost.

Instead, we look at the household income across different levels and establish what the prices of flats should be to make them affordable to flat buyers.

In non-mature estates, BTO flats are typically priced at around a Mortgage Servicing Ratio (MSR) of 25% or less, to ensure that buyers can use less than a quarter of their household income to pay for the mortgage instalment with little to no cash outlay. In mature estates where the locations are more diverse, MSR can exceed 25% in certain areas, with HPI of around five times or more.

We also establish the market value of our new flats, based on the recent transacted prices of comparable resale flats nearby.

Please refer to Annex 7. [Please refer to Annex 7.] As you can see, we have kept BTO prices relatively stable even as median household incomes have increased.

To launch BTO flats at selling prices that are below market and are affordable to flat buyers across different income levels, we have to apply a substantial market discount.

On top of this, we provide generous grants. Eligible first-timers can enjoy the Enhanced CPF Housing Grant (EHG) of up to $80,000, with more in grants provided to those with lower incomes.

Mr Leong Mun Wai claims that the Government has somehow lost its way and public housing is way too unaffordable.

Let us look at the facts.

First, for first-timers who apply for BTO flats in non-mature estates, virtually everyone gets a chance to select a flat within three tries.

Second, more than eight in 10 buyers who collected their keys to BTO flats or bought resale flats last year, 2022, can service their monthly mortgage fully from their CPF contributions with little to no cash outlay.

The median Singaporean household income is $8,400. Do you know the proportion of BTO flats that would be affordable to this family? Is it half of all BTO flats because it is median? The answer is no.

Please refer to Annex 8. [Please refer to Annex 8.] Close to 70% of the BTO flats that were launched last year, 2022, across all estates can be affordably purchased with a household income of $8,400 at a MSR of 25% or less, meaning that these households use a quarter or less of their household income to pay for the mortgage instalment.

Third, after two rounds of cooling measures last year, we are seeing some moderation in the rate of increase in resale prices and we are keeping a close watch.

This is set against the context that 90% of Singaporeans own their homes today. More remarkably, around 85% of our low-income households own their homes.

Generally, our HPI ratios are four to five times. This means that it takes around four to five years of total household income to buy a home.

If you look at Annex 9, it shows how we compare with other major cities. [Please refer to Annex 9.] In London, Los Angeles and Sydney, it is between eight and 15 times income, so between eight and 15 years of total household income. In Hong Kong, it is more than 20 times.

So, while there are concerns over resale prices, public housing remains broadly accessible and affordable today.

Why not make it even cheaper?

My colleagues and I have been engaging a broad spectrum of Singaporeans on public housing in the past few months. One of the concerns is over access to flats in mature estates.

Many young couples have not been successful in securing a BTO flat because they are trying hard to secure one in a mature estate. This can be seen from the first-timer BTO applications to mature estates which is about 1.6 times that to non-mature estates in 2022.

The pandemic has also exacerbated this, as the highest application rates to mature estates over the past six years have all been in the last three years of this pandemic.

We hear the reasons and aspirations of young couples. They want to stay near parents and living nearer to transport nodes can save time in terms of going to work. They tell us because buying a home is one of their single largest life decisions, they feel they cannot compromise on location. If it is the single most important buy, it must not be a "second-best" that they have to live with for years to come.

We can understand their point of view. However, many people think the same way. But mature estates are already built up and available new land is limited.

Despite these constraints, we have been doing our best to launch more projects in the mature estates in the last few years. But the irony is this – the more BTO flats we supply in mature estates, the more buyers join the queue.

Why? Because Singaporeans can see that the subsidy in a BTO flat is real and realisable and that it means that after the Minimum Occupation Period (MOP), they can sell the flat if they need to move and make capital gain. This is especially the case for flats in mature estates because they are highly sought after.

Would it then help to price these flats even lower? If we did so, we would be increasing the windfall gain that successful buyers enjoy and even more may join the queue. The result would be higher demand, greater competition for BTO flats in mature estates and greater anxiety among flat buyers all around.

At the end of the day, this will not help first-timer couples who are looking for a flat to build their families. It will also be unfair to all the families who failed to secure a flat in a mature estate and so missed out on the large windfall gain.

So, what have we been doing? We are not just building more flats in the mature estates but also consciously moderating the prices there. For example, we launched the Prime Location Public Housing (PLH) model where public housing in prime, central locations come with additional subsidies to ensure that they remain affordable and accessible to Singaporeans. The quid pro quo is that they come with additional conditions.

However, flats in desirable locations in the mature estates cannot be priced at the same level as other flats. Even Mr Leong acknowledges the need for "price differences between locations" in his Facebook post.

We are considering how to prevent the locational premiums from pricing out all but the most well-off buyers while avoiding an excessive windfall gain to those who successfully book such a flat in the mature estates.

In addition, I would like to encourage first-timer couples not to put your family plans on hold and consider a BTO flat in a non-mature estate first.

On our part, I would also like to assure Singaporeans that we are doing our utmost to improve the accessibility and affordability of HDB flats. We know that policies cannot remain static as the aspirations and needs of our people change and our society evolves. That is the reason why we have been engaging thousands of Singaporeans as part of our Forward Singapore engagements over the past few months.

In terms of supply, we are committed to launching up to 100,000 new flats between 2021 and 2025 if needed. Once we get over this current challenge, we intend to launch more Shorter Waiting Time (SWT) flats from 2024 onwards. We aim to reach pre-COVID-19 levels by launching around 2,000 to 3,000 SWT flats per year by 2025, with waiting times of under three years.

After that, over a period of time, we will recalibrate our building programme so that SWT flats form a larger proportion of our supply of new flats than today. In this way, we reduce waiting times and better support the home ownership as well as marriage and parenthood aspirations of Singaporeans.

In terms of demand, we will continue to review how we can better allocate flat supply to meet the most urgent housing needs.

In our public engagements, there has been one consistent point of agreement – that first-timers should be prioritised, especially those who are getting married as well as those with young children and who are looking to buy their very first home. We are therefore studying how we can provide even more support for such first-timer families looking to buy their first homes.

We are also looking at measures to reduce the high rejection rate for BTO applications to ensure that BTO flats are prioritised for those with genuine and urgent housing needs.

And we will consider if more housing support can be given to first-timer couples or first-timers buying a resale flat to help them in their home ownership aspirations.

We will announce these new measures when ready.

But in improving our policies on housing, we must as a responsible Government always ensure that they remain sustainable. They must enable us to continue providing Singaporeans with accessible, affordable housing not just now or for the next election term, but decade after decade, for the next generation of Singaporeans and the generations after that.

That is why we disagree with the Progress Singapore Party’s (PSP) implicit claims in its Motion and decided to table our own. Our position is that we must maintain housing accessibility and affordability while keeping in mind other needs that Singaporeans have and ensuring that what we do is not at the expense of future generations of Singaporeans.

In essence, land in Singapore is extremely limited and we allocate limited land and resources to support housing needs with a few key principles in mind.

First, we are committed to home ownership because a home that we can call our own roots us to Singapore and provides the basic stability for our families and our children to grow up in. So, our HDB flats are kept affordable with significant subsidies and grants for first timers and as a home for life. Our housing policies are strongly geared towards ensuring that HDB flats are meant for living in, not for speculation.

Second, we want public housing to be inclusive. We tier our grants to support the lower-income more so that despite their circumstances, they can still buy a home to build their families and their children can have a good environment to grow up in.

For those who are not ready for home ownership, we provide public rental housing at heavily subsidised rates and paired up with ComLink to provide holistic social support for our tenants.

Our policies, such as the Ethnic Integration Policy, also seek to promote social cohesion.

We have recently made provisions to keep HDB flats in very central and attractive locations within the reach of the average Singaporean through the Prime Location Public Housing model.

Third, we believe that individuals have a key role to play too. Each one of us has to do our part to save up and meet our own housing needs. That was a major motivation for us to create and develop the CPF system and I have explained how, with the CPF, public housing today is more affordable to most Singaporeans.

It is easy to ask, why not make flats even cheaper? As a society, we have to debate and agree on how affordability should be fairly defined because ultimately, we, the people of Singapore, are all collectively paying for it.

We already allocate substantive fiscal resources to support the Home Ownership Programme. In the last financial year, HDB incurred a deficit of $3.85 billion on its Home Ownership Programme. Many of us may not appreciate what this means. To put this into perspective, the revenue from the 1% GST increase this year is less than half of this.

What about the needs of our citizens for healthcare, education, transport and so on?

We have heard many alternative proposals, including from Opposition Members of Parliament, and we give them the benefit of the doubt that the intent is to improve the lives of Singaporeans. But they are not as frank about the trade-offs.

For example, Mr Leong Mun Wai says that BTO flats can be even cheaper if HDB does not have to pay for state land at fair market value.

I have already explained that HDB does not price based on cost recovery. BTO flat pricing and BTO development costs are two separate and independent things. So, what Mr Leong has repeatedly asserted is plain incorrect.

More importantly, land is part of our reserves. Proceeds from land sales do not come to the current Government as revenue for spending. The proceeds go back to the reserves in order to preserve the value of the reserves. We invest the reserves and use part of the investment returns to fund the Government's annual Budget and support the needs of current and future Singaporeans.

If HDB does not pay for fair market value for state land, it means that we are reducing the value of reserves and allocating more of it to today's housing. By doing so, we are reducing the resources available to meet the other needs of today's generation as well as the needs of future generations.

Mr Leong deliberately avoids these trade-offs and sugarcoats the tough realities that we all face. But the Government cannot and will not take such an irresponsible approach.

Mr Speaker, this Government has been committed to home ownership for our citizens from day one of nation building. Embedded in this commitment is also our vision for a strong and cohesive nation and an inclusive society.

But what this Government believes equally in is to be frank about our challenges and trade-offs and explain how we seek to meet the competing needs of Singaporeans in the current generation as well as balance the needs of this generation with the needs of future generations. Mr Speaker, Sir, let me say a few words in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] The Government understands that Singaporeans are concerned about public housing because of three key reasons: (a) high resale prices over the past three years; (b) the apparently high BTO flat prices in mature estates; and (c) the uncertainty in getting a chance to book a flat and the long waiting times for BTO flats. The Government is working hard to ensure that public housing remains affordable and accessible.

In terms of supply, we are committed to launch up to 100,000 new flats between 2021 and 2025 if needed. We also intend to launch around 2,000 to 3,000 Shorter Waiting Time (SWT) flats per year from 2025 onwards. These flats will have waiting times of under three years.

After that, we will also recalibrate our building programme so that SWT flats will form a larger proportion of our supply of new flats.

In terms of demand, we will continue to review how we can better allocate flat supply to first-timers, especially those who are getting married as well as those who have young children, and who are looking to buy their very first home. We are also looking at measures to reduce the rejection rate for BTO applications to ensure that BTO flats are prioritised for those with genuine and urgent housing needs. We will consider if more housing support can be given to first-timers buying a resale flat. We will announce these new measures when ready.

We are not just building more flats in the mature estates but also consciously moderating the prices there. For example, we launched the Prime Location Public Housing (PLH) model where public housing in prime and central locations will come with additional subsidies to ensure that they remain affordable and accessible for Singaporeans.

We are also considering how to prevent locational premiums from pricing out all but the most well-off buyers, while avoiding an excessive windfall gain for those who successfully book such a flat in the mature estates.

The Government has been committed to home ownership for our citizens since day one of our nation building. As a responsible Government, we will always ensure that housing policies remain sustainable as we continue to improve them.

Our predecessors have worked hard to build the public housing system for Singaporeans so that we and our next generations will be able to have a better life than them. We are the beneficiaries of their foresight and prudence and should do the same for the next generations.

As we listen to different feedback and proposals, we should be frank about our challenges and the trade-offs and explain how we seek to meet the competing needs of Singaporeans in the current generation as well as future generations. The Government has always been frank and upfront about all these matters.

(In English): Mr Speaker, Sir, our public housing is not perfect, but it has made housing accessible and affordable for Singaporeans and we must always keep improving it. Ninety percent home ownership in a cosmopolitan city is not something that many other major cities have been able to achieve.

But these achievements are not just our own. Our predecessors worked so hard to build public housing for Singaporeans, worked so hard to pay for their own homes and above all, worked so hard to build up our reserves so that the next generations, including our own, would have a better life than them.

So, we, the beneficiaries of their foresight and prudence, should inherit these same values and do the same for the next generation. [Applause.]

Question proposed.

In accordance with the decision of this House to take this Motion together with the next Motion standing in the name of Mr Leong Mun Wai, I will now call Mr Leong Mun Wai to move his Motion and make his opening speech before allowing Members to debate on both Motions. Mr Leong.