Seen as a model for developing countries,
Singapore’s public housing program is experiencing growing pains as older estates near the end of their 99-year leases. The depreciating value of government-built Housing and Development Board (HDB) flats remains a complex issue in the city-state — raising questions about home ownership and retirement adequacy.
Singapore’s home ownership rate of more than 90% of the population is one of the highest in the world. It is much higher than the rates in other developed countries.
The issue of the lease expiry of older HDB flats began to ruffle feathers following a blogpost by National Development Minister Lawrence Wong, when he reminded the public that older flats must be returned to the state when their
99-year leases expire. Therefore, he cautioned flat buyers not to fork out large sums of money for old flats hoping they may profit from the government’s Selective En-bloc Redevelopment Scheme (SERS). Under this scheme, the government identifies selected HDB blocks or precincts with high redevelopment value and takes them back for redevelopment. Homeowners subjected to such a compulsory acquisition get duly compensated and a new flat with a fresh 99-year lease in a nearby location.
The remarks sparked a public debate leading to widespread apprehension and anxiety among Singaporeans. Despite government attempts in recent months to limit the fallout, public sentiment is still mixed.
“The negative reaction has been so visceral because people felt there was a letting down of a promise by the government — although the legal terms on the 99-year leases are very clear, ” said Assistant Professor
Ng Kok Hoe from the Lee Kuan Yew School of Public Policy, who wrote a
commentary on this issue.
He added that is mainly because the policy communication over the years has sent mixed messages. “The government hasn’t been entirely consistent in their messaging with regards to housing policy, which created the uncertainty and anxiety. So we can understand the public reaction.”
Reframing the narrative The dominant narrative of HDB flats prior to Mr Wong’s blogpost in 2017 has been that one’s HDB flat is not just a home but an appreciating asset that would grow in tandem with the increasing wealth of Singapore. Homeownership has often been described as a source of retirement income that can make up for low cash savings in one’s Central Provident Fund (CPF) account.
“Unfortunately, the narrative in the 1990s onwards became one of asset appreciation amounting to a windfall. The government let that narrative run its course but the time has come for reality to bite. And reality bites — for all stakeholders, including the government,” said Eugene Tan, Assistant Professor of Law from the Singapore Management University. “There is much at stake for all, and the issue should not be seen simply as the reality of a 99-year lease. This is because the HDB flat also represents for many Singaporeans an important form of retirement security.”
In an effort to soothe public anxiety, Prime Minister Lee Hsien Loong addressed the issue for the first time during the National Day Rally last year. He explained HDB sells its flats with 99-year leases so that when they expire, the government can redevelop the land and build new flats for future generations to be fair to them.
He also warned Singapore must guard against becoming a country split into the haves and the have-nots. “Our society would be split into property owners and those who cannot afford a property. And I think that would be most unequal, and socially divisive."
“We are witnessing the reframing of the official discourse of public housing. Gone are the days of unadulterated praise of public housing as an appreciating asset,” noted Dr Tan. The shift in discourse is now that public housing is an integral part of affordable housing, giving Singaporeans a stake in the country — all in the context of a broad-based strategy for social policy.”
No easy solutions Despite the government’s effort at course correction the crux of the problem still remains. “Those responsible for housing policy are caught in a very unfavourable position because they are not totally in control of it. A lot of the public anxiety is actually around the issue of retirement income and that hasn’t been properly addressed yet,” said Dr Ng.
He added policymakers should seize the current public interest in the matter to initiate a wider discussion and review existing policies on housing and retirement adequacy.
“Engaging the people by explaining to them some of the constraints in the current situation, the options at hand and asking the people what they think would help. It would soothe anxiety to some extent if the public had a better appreciation of the government’s deliberations behind the scenes.”
While there are no easy solutions, one possible way forward is decoupling housing and retirement income. So long as these two are “tightly bound up” the issue will be harder to solve.
“In practical terms, that would mean having more varied sources of retirement income. We should plan retirement income policies and don’t assume that for the vast majority their retirement income will come from housing assets. If there are other forms of public pension schemes, the less people will look towards housing as a source of income,” argued Dr Ng.
Policymakers should also consider adopting a “more varied housing policy that seeks to diversify the system, is responsive to needs and offers better balance” .
Nonetheless, this issue will likely grow in political sensitivity in the years ahead as more and more flats become depreciating assets.
“Some had expected SERS to be the "solution" to flats having zero value at the end of their 99-year leases but the reality is that SERS will only be available to a very small minority,” said Dr Tan. “It’s a harsh reality for which the political implications might not be clear for some time to come. This issue of “decaying leases” is likely to be a circle that cannot be squared.”
If you’re interested in reading such content, subscribe here.