Singapore’s public housing model is often heralded as a massive success. Over 80 percent of the resident population lives in a Housing and Development Board (HDB) flat, of which about 90 percent own them. These high rates of public housing ownership are quite rare, globally, earning HDB plaudits while its work has been turned into case studies at top universities around the world. “Lessons from the best public housing program in the world”, headlined an article from The World Bank in 2018. “From Slums to Sky Gardens–Singapore’s Public Housing Success”, gushed the American Society of Landscape Architects the same year, after HDB organised a tour for them.

Yet, this rosy external view of Singapore’s public housing is increasingly out of sync with the domestic one. There is growing sentiment amongst the Singaporean populace that the words “affordable” and “accessible” do not reflect the public housing system today. HDB flat prices—both for resale and new units, the latter being tied to the former—have continued to climb aggressively in recent years, in tandem with property appreciation in open markets in the world’s major cities. Public housing units of over S$1m each, once unthinkable, are now commonplace. Just last month, there were 74 such units sold, a record. Wage growth hasn’t kept up: Singapore’s housing price-to-income ratio is now seemingly at one of its highest levels ever (details below).

Click here to subscribe to Jom

These soaring prices are primarily rooted in demand outpacing supply. There are simply too few HDB flats for prospective buyers. That stated 90 percent homeownership statistic can be misleading, since it includes dependents, such as children and senior citizens, who live under the same roof even though they do not actually own the homes. It’s less home ownership per capita than home ownership per household. Moreover, they are not freehold properties but are all 99-year leasehold ones—thus many “owners” feel more like “lessees”.

Nevertheless, the upward price movement is undergirded by the fervent belief that public housing flats are ever-appreciating assets which will allow the homeowner to make a profit from the sale of their home. “85% of Singaporeans are living in HDB flats and we intend to keep the values of these homes up. It will never go down!” Lee Kuan Yew thundered in 2011, ahead of a crucial general election. Lee understood that Singaporeans’ household wealth had become heavily dependent on HDB prices. Over the decades, the government actively encouraged and facilitated the financing of HDB flats using Central Provident Fund (CPF) monies. In effect, the public housing system took on the additional role of a ‘retirement nest egg’ for the now older generation. If prices decrease due to radical policy actions, Singapore will effectively be eroding an entire generation’s worth of accumulated capital. 

This has created a natural intergenerational tension: while older homeowners want prices propped up, younger prospective owners feel increasingly priced out of the market. This is occurring amid relevant global trends, such as increased capital inflows into Singapore, perceived as a safe haven by many foreigners; as well as local ones, such as HDB lease decay, which has started to challenge Lee’s frothy outlook on ever-rising prices.

With this situation unfolding, what options do we have now? In order to properly assess them, we need to first consider the origins of public housing in Singapore.

“Ownership is critical because we were an immigrant community with no common history,” Lee said in 2009. “Our peoples came from many different parts of Asia. Home ownership helped to quickly forge a sense of rootedness in Singapore.” He also believed that Singaporeans would be motivated to work harder if given “a tangible and valuable stake” in an asset whose value is linked to the country’s fortunes.

During the first 30 years, the PAP government achieved remarkable success on this front: housing conditions improved, and wages grew in tandem with property prices, all of which led to a higher standard of living for most Singaporeans. In 1971, the resale market was launched to allow homeowners to sell their HDB flats, opening the door to upsizing and social mobility. Within three decades, the HDB managed to house more than 85 percent of the 2.7m population within public housing flats, of whom over 70 percent were owner-occupiers.

The 1990s, however, were characterised by government deregulation and financialisation of the public housing system, which ignited the resale market. The focus of public housing policies shifted towards owning and growing an asset that could be used to generate wealth. This deregulation came in the form of housing loans, physical upgrading of HDB estates, and providing more demand-side subsidies through CPF grants. Naturally, it led to a rapid boom in the price of resale flats. What was originally intended as a social policy mixed with a smattering of free market economics slowly became a financialised nation-wide investment vehicle.

From 1990 to 1998 alone, the housing price index increased by more than three times. In 1999, Singapore’s median household income was S$3,500. That year, a four-room resale flat transacted for an average of S$249,999, making for a housing price-to-income (HPI) ratio of 5.9. According to the ratings used in the Demographia International Housing Affordability index, a popular annual comparison produced by two north American think-tanks, Singaporean resale flats in 1999 were “severely unaffordable”.

Sociologist Chua Beng Huat argued that the shift towards a more market-oriented housing policy inadvertently created new forms of inequality and exclusion, particularly for low-income households and marginalised communities. Homeowners, comprising mostly upper- and middle-class households, enjoyed a remarkable degree of asset appreciation, which renters and potential first-time market entrants could not. Following this era of financialisation, the prices of HDB flats continued to climb over the next 20 years. 

Singapore had a HPI of 5.8 in 2021 in Demographia International’s latest report. This was an increase from 4.7 in 2020, and 4.6 in 2018–19. Here, Singapore ranked 53rd in terms of affordability out of 92 major metropolitan housing markets.

A decade ago, Khaw Boon Wan, then minister of national development, expressed his desire to bring the prices of new flats back down to “about 4 times the annual median income of its applicants—30% lower than the current 5.5 times.” It is perhaps safe to say that the former minister recognised that a HPI of 5.5 was far from ideal. From this we could infer that this desired level—four times the annual median income—was a level of affordability deemed acceptable by the Ministry of National Development (MND).

Recall that the objective of public housing in the 1960s was to provide affordable homes for everyone. But over the years, this purpose receded in importance, while housing’s utility as a retirement asset for older Singaporeans grew. What’s noteworthy is that no other country in the world has a mandatory savings programme closely tied with a social housing programme on a national level.

The Netherlands uses a fixed public pension scheme with most of their citizens covered under occupational plans that are enforced industry-wide. Israel has a universal pension system that requires contributions from both employer and employee. In Singapore’s case, allowing CPF savings to be channelled into one’s HDB flat purchase effectively pegged Singaporeans’ retirement adequacy to the value of their flat. 

A comparison of pension systems around the world is beyond the scope of this piece. Suffice to say that by unwittingly making one’s retirement adequacy so dependent on one’s flat price, Singapore has distorted the market in ways that are perhaps not yet fully understood. Moreover, it has created the sort of intergenerational wealth transfer that Singapore wanted to avoid. An establishment adage about Singapore’s CPF is that it’s superior to pensions in other countries, where often the younger generation ends up paying for the financial burden of the older generation through taxation. With the CPF, so it goes, each individual saves for their own retirement. But that’s true only if one ignores escalating HDB prices. One could argue that a similar intergenerational wealth transfer occurs in Singapore, just that it’s transmitted not through the tax system, but the public housing market: younger generations transfer wealth to older ones by paying lofty prices for flats that have appreciated in value.

This is partly why the government is hesitant to simply build more flats to accommodate demand. Ageing societies like Singapore are characterised by low birth rates, which means that natural population growth (excluding net migration) will eventually taper off or decline. Singapore’s total fertility rate dropped to a historic low of 1.05 in 2022, well below the commonly accepted natural replacement rate of 2.1. If the HDB drastically increases the available supply of public housing stock, at some point we may have a surplus of empty flats. 

As Ku Swee Yong, a real estate consultant, noted, “HDB resale prices will soon decline due to the escalating supply of resale flats resulting from an increased number of citizens passing away and having to dispose of their HDB flats, and the decreasing number of younger residents who will be able to purchase them. The decline will be gradual but the speed will certainly accelerate.” Chua highlighted this risk of excess supply as something that the government has been acutely aware of since the 1990s. 

But as long as prices remain high, many couples will continue to delay marriage or put off the idea of having kids altogether. Numerous empirical studies have found a strong correlation between housing prices and fertility rates in East Asian societies. This point was raised in Parliament by Leon Perera, formerly with the Workers’ Party (WP), citing a 2021 working paper that found a significant link between higher resale prices and a lower total fertility rate in Singapore. “No flat, no child in Singapore”, the authors titled their paper. The higher the flat prices, the argument goes, the lower the fertility rate.

Separately, the issue of lease decay may also exert downward pressure on prices. Contrary to Lee Kuan Yew’s memorable “It will never go down!” statement in 2011, we cannot expect an HDB flat to appreciate in value forever. Based on Bala’s curve, a guideline set forth by the Singapore Land Authority, the value of an HDB flat will decrease over time due to lease decay.

In MacPherson, for instance, an HDB flat located in the vicinity of Circuit Road would have had its Temporary Occupation Permit (TOP) issued in 1964. At 60 years, the flat would only have 39 years remaining on its lease. Critics, including the WP, have rightly pointed out the fundamental problem with channelling CPF monies (retirement fund) into a leasehold flat (depreciating asset).

BTO flats tend to appreciate significantly in the first five to 30 years of their leases. But a 99-year lease still ultimately makes the flat a depreciating asset. Even if the demand for the flat drives up the price in the short term, at maturity it will approach zero. 

Any temporary deviation from Bala’s curve will be due to the combined effect of subsidies propping up prices and higher market demand. For example, the maximum grant for purchasing a resale flat was most recently extended to S$190,000, a S$30,000 increase from the previous amount of S$160,000. Announced in his 2023 Budget statement, Lawrence Wong, deputy prime minister and finance minister, declared the government’s unwavering support towards first-time applicants by providing grants. But this arguably creates a greater burden on the government and taxpayers, and ultimately props up the market.

At some point, HDB flat values will start to drop due to lease decay. The PAP is thus faced with a chicken-and-egg problem:

• HDB flats are relatively expensive for many;
• But the value of HDB flats cannot be allowed to drop drastically, because that will jeopardise homeowners’ retirement nest eggs;
• To improve affordability for the younger generation, the government supports first-time homeowners with subsidies and grants; but grants don’t bring down prices, they prop up prices even more;
• Partly due to the high costs of living, including property prices, younger Singaporeans are delaying marriage and even deciding not to have children altogether;
• Due to the declining birth rate—and other factors like land scarcity—the government is hesitant to significantly increase the supply of HDB flats; and
• In turn, demand continues to outstrip short-term supply, and the prices of HDB flats remain high.

Balancing the interests of current homeowners with prospective ones is arguably the government’s most urgent, and complicated, policy challenge. The MND and HDB are faced with a difficult—if not impossible—task. The government’s latest policy tweaks were announced by Lee Hsien Loong, the prime minister, in his 2023 National Day rally speech. Housing estates will be reclassified from mature/non-mature to Standard, Plus, and Prime (depending on desirability of location). Stricter rules for Plus and Prime properties, including a 10-year minimum occupation period (MOP) and income ceilings for resale buyers, could ease the “lottery effect”, said analysts, and temper resale prices from 2035 onwards—though demand could spill over into other segments. While this is somewhat refreshing, many fundamental problems with the market remain, according to Ku Swee Yong. There are “400,000+ ageing HDB flats (over 40 years old) coupled with the ageing demographics of Singapore residents,” he told Jom. “We are none the wiser about how the issue of ‘ageing residents in ageing depreciating flats’ may be dealt with.”

Policy proposal #1: Universal Sale and Lease Back (USB) (as suggested by the WP)

The PAP government previously announced the Voluntary En-bloc Redevelopment Scheme (VERS) in 2018, which ensures that homeowners have the option of being compensated before their lease runs out. The scheme also takes these flats out of the existing supply of housing stock for re-development purposes. In 2019, the WP suggested expanding the earlier Lease Buyback Scheme (LBS) and making such a sale universal rather than voluntary.

This effectively creates a backstop in the public housing system and ensures a level of stability concerning decaying leases and depreciating value. At the same time, additional supply to the total housing stock will not only come from new BTO flats being constructed, but from the existing supply of older flats. Depending on the original date of construction, HDB flats taken back by the government may not need to be torn down immediately and could provide an option of shorter leases to meet the overwhelming demand. This will arguably help with managing supply risk which, in the context of public housing, is incredibly important given that the housing supply is price-inelastic in the short run—supply cannot go up or down quickly in response to price changes. 

Trade-off: greater costs incurred by the government to finance such an initiative for all HDB estates instead of just some.

Policy proposal #2: Homeowners can only sell their flats back to HDB 

Many commentators online have suggested regulating the resale market in a move that would make the HDB—rather than the free market—the sole arbiter of resale prices. This move would have a much more immediate effect as compared to reducing loan-to-value ratios, imposing higher down payments, or longer MOPs; the first two may not be effective as Singapore has a high savings rate, and a longer MOP only delays the windfall effect but does not solve the problem—they will simply do so after 10 years instead of five. (As with the most recent changes to Plus and Prime categories.)

By giving the HDB full control over resale prices, they will be better equipped to solve the problem of speculative pressures driving up public housing prices. As the price of resale flats are gradually stabilised, excessive profit-making will also be curbed, and by extension, expectations will be managed. Of course, such a system will require further study that explores the potential administrative costs incurred as well as other unforeseen ramifications. 

Trade-off: administrative costs incurred by the government to directly oversee the buying and selling of resale HDB flats

Policy proposal #3: Raise fertility rates? Depopulate? A call for public deliberation over a new social compact, followed by citizen co-creation of population policies (as suggested by Jom)

This is less a proposal per se, but a call for a holistic dialogue on the kind of Singapore we want, with a specific end-goal: policy recommendations on all demographic-related matters, from immigration to public housing and retirement planning.

For instance, some believe that in order to ensure the long-term viability of our public housing system, the declining birth rate must be addressed. This would be very much in keeping with PAP economic orthodoxy—a growth model dependent on high population growth—but what would be the end point, a cynic might argue: a population of 10m by 2050, with outlying islands like Pulau Ubin and Pulau Tekong blanketed with HDB new towns?

Instead, these cynics, including many in Jom’s team, believe that it may be time for a fundamental rethink of Singapore’s economic growth model—towards one that might, for instance, involve much lower rates of consumption and population growth, while narrowing the gap between rich and poor. In terms of individual liberty around love and family, it would involve a dampening of this national obsession with nuclear families and procreation—humans as widgets in a production system—towards a situation where any and all partnership and child-bearing choices are equally cherished, respected and protected.

To be sure, there will be economic and social trade-offs involved with any such shift. A public deliberation will allow all viewpoints to be aired, not simply those emanating from the dominant capitalist class.

The original HDB programme was designed to meet the aspirations of Singaporeans in the 1960s. A revision of it must have as its starting point a quest to understand the aspirations of Singaporeans in the 2020s. We cannot remain shackled to the neoliberal dreams of a bygone era if we are to address our present public housing crisis. 

HDB flats are unequivocally becoming less affordable and accessible over time, and the situation risks spiralling out of control. This disquieting admission may perhaps have the salutary effect of forcing us to treat the issue with the severity it deserves. Perhaps, it is more appropriate for the government to retire their use of the terms “affordable” and “accessible” when describing our public housing situation and instead use them as policy goals to be met.

“Without home ownership, we would have become like Tokyo, Seoul or Hong Kong, where the voters in the cities are disaffected because they pay a large proportion of their salaries in rents,” Lee Kuan Yew said in 2000. But Lee’s own home-ownership model, some 60 years old now, has led to that very voter disaffection, over high mortgages and rents. If the party he co-founded cannot find an adequate compromise between the interests of current homeowners, prospective ones, and the state’s coffers, it may one day suffer electorally. 

Public housing, conceived in Singapore partly to foster social stability, has ironically become a source of social instability.

Jonathan Lin is a Singapore-based contributor who enjoys writing about sociopolitical issues as a form of self-expression. He used to be dismissive of people who were vocal about social justice causes but now believes in the importance of social activism and reform.

This essay was initially published in Jom’s first annual print magazine, which you can purchase here.

Letters in response to this piece can be sent to sudhir@jom.media. All will be considered for publication on our “Letters to the editor” page.

If you enjoy Jom’s work, do get a paid subscription today to support independent journalism in Singapore.