SDP proposes non-open market flats in housing policy

[mojito]

Despite his reservations about class divisiveness, Yeoh Lam Keong actually called the SDP plan "the best housing policy plan I've seen".

As usual, the undereducated, overpaid PAP IBs do not quote in full.

 

[Cruxx]

Quoting from real estate agents and property consultants whose ricebowl depend on buying and selling of properties?
Goh Meng Seng???

Ho boy, you PAP peons are foolish beyond belief.

Please, Char_Siew sees himself as more of a "moderate".

 

[tanwahp]

Despite his reservations about class divisiveness, Yeoh Lam Keong actually called the SDP plan "the best housing policy plan I've seen".

All SDP needs to do is to put in a supplementary idea on catering to inflation of NOM flats.

SDP needs to acknowledge that it has missed this part rather than keep rebutting critics, or it will sound like the PAP.

What I can think of is to adjust NOM flat prices yearly by using the CPI or AIR indices.

BTW thanks for your points. You're the first SDP nick I come across that did not zap people for disagreeing with them.

 

[saratogas]

I think SDP proposal is good for those who seek contentment and don't wish for progress in life.

 

[yellowarse]

All SDP needs to do is to put in a supplementary idea on catering to inflation of NOM flats.

SDP needs to acknowledge that it has missed this part rather than keep rebutting critics, or it will sound like the PAP.

What I can think of is to adjust NOM flat prices yearly by using the CPI or AIR indices.

Personally I'm in favour of adjusting for inflation, which is different from capital appreciation. But I didn't write the plan

The SDP panel thought otherwise after debating the pros and cons. They didn't miss it.

 

[yellowarse]

I think SDP proposal is good for those who seek contentment and don't wish for progress in life.

Even if you wish for progress and riches, don't speculate in public housing to achieve your aims.

 

[Fook Seng]

I hope whatever new plan that is eventually put up, the sense of being caught in a gaming operation is not there. Some would say, "Heng ah. Tan Dio". Others would say, "KNNBCCB. Just missed it".

 

[yellowarse]

I hope whatever new plan that is eventually put up, the sense of being caught in a gaming operation is not there. Some would say, "Heng ah. Tan Dio". Others would say, "KNNBCCB. Just missed it".

That's why the NOM policy is clear: sell on cost recovery basis, no capital gain, no speculation, no 'bites of the cherry'.

 

[wwabbit]

I do agree that the NOM flats do need to be sold back to HDB at a price higher than the buying price, otherwise it would be little different from being a rental scheme.

I'm not so sure about using CPI or AIR. Anything closely related to inflation rate would bring us back to the problem we face today, especially since the cost of housing is what mostly drives inflation rates today, so NOM flats would be almost as good as investment again.

I'm thinking of maybe something like CPFOA -0.1%, i.e. 2.4%

 

[yellowarse]

I'm not so sure about using CPI or AIR. Anything closely related to inflation rate would bring us back to the problem we face today, especially since the cost of housing is what mostly drives inflation rates today, so NOM flats would be almost as good as investment again.

Good point. This was one of the concerns raised when they were doing the plan.

 

[yellowarse]

Time we had real public housing

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At last, we have a party that is urging a true public housing scheme for Singapore. It has long been an embarrassment that we do not have real public housing here.

The policy paper put out recently by the Singapore Democratic Party (SDP) (link) is a bold move in this direction. Leading economist Yeoh Lam Keong called it an “excellent” paper on Tuesday, 6 November, when he was giving a talk — more about this later.

Readers may wonder about my opening paragraph. What do I mean when I say we do not have real public housing in Singapore? Doesn’t the fact that some 85 percent of Singaporeans live in Housing and Development Board flats point to its enormous success?But that’s only if one equates HDB with public housing. The government may say so, and will pull out all stops to brainwash you into thinking it is so, but that doesn’t make it so.

At the core of the definition of public housing must be its social objective. It is to provide a roof for those without the means to go to market for a home. The HDB might have started that way, but — it can be argued — it has long since evolved into a mass developer like any other. The very fact that it prices its new flats with reference to prevailing market prices and the insistence on costing in the market value of land make it no different from City Developments, Frasers Centrepoint or Wing Tai Holdings. Even the fact that HDB builds smaller flats does not distinguish it anymore from the others, in this age of ever-smaller condo units.

Where HDB may differ significantly from the private developers are (1) various income and family-unit eligibility criteria for buying; (2) minimum stay period; (3) restrictions on owning other properties; and (4) government grants to first-time buyers.

The first three conditions make sense when there is a scarcity of HDB flats relative to demand, and when the product is priced below market rates. Means-testing and restrictive conditions as quid-pro-quo for means-tested eligibility would then be a sensible way to allocate a scarce good, especially one heavily subsidised by public money. But HDB flats are no longer subsidised except in a highly contentious, notional “market subsidy” way and certainly no longer scarce goods. The political promise is that a flat is available to anyone who wants one. That 85 percent now live in one is proof of that, albeit waiting times are a source of discontent.

The reality therefore is that the first three conditions serve not an allocation function, but primarily to boost the attractiveness (and therefore market value) of flats built by City Developments, Frasers, Wing Tai et al. It does this by self-mutilating the flexibility and enjoyability of HDB flats. The government would want you to see the eligibility and use restrictions as “proof” that HDB flats serve social objectives, but frankly, they are poor arguments when set against the stark fact that they are market-costed and market-priced.
The social need arises from market failure. To insist that the need be served by a market-priced good is oxymoronic.

The fourth condition, that HDB flats can come with a government grant for first-time buyers, comes truer to social assistance, but it is actually unrelated to HDB. It’s a pure fiscal measure that can be put under the purview of a different ministry at any time and even extended to cover any kind of housing purchase. This has a laudable social objective, but it is not intrinsically related to HDB, nor define HDB as public housing. If tomorrow, we say the grant is applicable for a condo purchase so long as it is one’s first home, would that make condos public housing too?

Another argument I would make why HDB is no longer a public housing scheme is based on the very fact that 85 percent live in one. Are we saying 85 percent of Singaporeans are poor and need subsidised public housing? That would be ridiculous. On the other hand, if we recognise that, whilst most of that 85 percent are middle-class, some are less than that, then we must confront the fact that the sale and pricing mechanism is the same for all. How socially compassionate is it to make the lower-income pay for a flat by the same rules that the middle-class live by? Especially in a society with an income gap wider than many developed countries, to expect 85 percent of the population to obtain housing through the same market-based rules is to ignore the needs of the lower-income. In such an income-differentiated society, it is heartlessly crazy to have a “one-size-fits-all” housing policy.

The HDB has become a mass developer of middle-class housing, and has left in its wake lower-income sections of our society unattended to.

* * * * *

The SDP’s policy paper proposes a new class of “Non-open-market” housing, or NOM flats, for short. The key characteristics are: (1) priced closely to what it costs to build them without inserting land values; (2) sold on 99-year leases; and (3) can only be sold back to HDB. The price at which HDB buys a flat back is the price of an equivalent newly-built NOM flat less the pro-rated value of lease period consumed.

SDP’s calculations indicate that the resulting prices should cost households of the lower income deciles no more than 20 percent of gross income for 9 to 15 years. It argues, correctly, that expecting families to take 20- to 30-year mortgages, often paying over 20 percent of income, is to put families under financial stress. Too much Central Provident Fund savings are used to pay for a flat instead of being saved for retirement. Moreover, the crimp on disposable income discourages having children — surely a critical issue for Singapore today.

It is a detailed paper setting out clearly its assumptions and numbers, and is well worth a close read.

Where I have a problem with it would be the small issues. For example, I don’t see why their proposal for NOM flats extend all the way to 5-room flats. The scheme, in my view, should be restricted to the smaller sizes.

Another issue I have: it sets out a rather complicated pricing formula for conversion of an existing open-market flat into an NOM flat. This is to cater to those who feel financially stretched servicing loans for a flat they previously bought, and want to go onto the NOM scheme. Frankly, I would not so easily allow people to stay on in their flat while converting it to NOM. There are policy and management issues surrounding where NOM flats are to be located; I can imagine a good argument for wanting certain blocks to be NOM and other blocks not, e.g. future upgrading might bring on problems of who pays how much if there is a mix of NOM and open-market flats in the same block.

If a family is financially stretched and wishes to switch to an NOM flat, they should sell their open-market flat (on the open market) and apply for a separate NOM one.

I would also fine-tune the argument that SDP makes for building up a buffer of housing stock to reduce waiting times. I would say, build up the buffer only for NOM flats. The current Build-to-order scheme (which entails a few years’ wait) is fine for open-market flats once NOM is in place.

Why do I say this?

Because once we distinguish clearly that the public housing social objective is carried on the shoulders of NOM flats, then we shouldn’t duplicate these objectives with open-market flats. If a new family needs a home quickly (e.g. after marriage), they should opt for an NOM flat — thus the importance of having a buffer stock of ready-for-moving-in flats. When the family has a better idea of the number of children it has and more assured career and income streams, then it can sell the NOM flat and buy an open-market HDB flat (or a private condo unit). For this second home, they can plan ahead and wait.

But on the whole, the SDP has presented a good set of proposals, and I hope it opens a wider debate about what we really mean by “public housing”. What should be its social objectives? What should be the affordability limits that must govern the type and cost of flats we build? How did we fool ourselves that we had such a great public housing scheme when there was little in it that was truly “public housing”?

Yawning Bread

 

[@rmadill0]

Do see merit in the SDP's proposal but similarly, I have concern over those who had opted for NOM and subsequently lagged behind due to their non-appreciating HDB. I agree that HDB should never be an investment tool but I do see the advantage of it being appreciative. I am sure all would want to see the value of their HDB appreciated, whether they have the intention to sell now or later.

I can only cite a real life scenario.

I grew up in a modest HDB 3-room flat (meaning only 2 bedrooms). When my brother got married, he moved out on his own by applying for his own HDB flat. Few years ago, due to childcare issue as his kids are under the care of my parents, he decided to get a bigger unit to stay together with my parents. He sold his flat and my parents sold theirs too and combining the profits, he was able to get a bigger resale unit with 4 bedrooms near my parents' place with a substantial downpayment and cope reasonably well with the loan installments.

In an hypothetical scenario, If I am to apply NOM concept, can my brother benefit if he had opt for NOM and my parents did as well. both their units will be sold back to HDB at cost and they will not be able to get any profit to be able to afford the bigger unit unless they can find one NOM from HDB.

My brother has made the move due to family requirement and not to flip his flat for profit. The appreciation of his and my parents' flat made it possible for him to keep pace with the rising price of the unit in my parents' estate. If under NOM, would all this be possible?

 

[mojito]

Do see merit in the SDP's proposal but similarly, I have concern over those who had opted for NOM and subsequently lagged behind due to their non-appreciating HDB. I agree that HDB should never be an investment tool but I do see the advantage of it being appreciative. I am sure all would want to see the value of their HDB appreciated, whether they have the intention to sell now or later.

I am guessing "having your cake and eat it too" was probably not why SDP conceptualized the NOM scheme. Otherwise it would simply be one where the government builds flats, sell them just above construction cost, and allow flat owners to sell them for a tidy profit above purchase price. If I were a young aspiring flat owner, I would even vote for the PAP.

 

[@rmadill0]

I am guessing "having your cake and eat it too" was probably not why SDP conceptualized the NOM scheme. Otherwise it would simply be one where the government builds flats, sell them just above construction cost, and allow flat owners to sell them for a tidy profit above purchase price. If I were a young aspiring flat owner, I would even vote for the PAP.

Yup, so I guess we cant really have our cake and eat it. So which way to go? Buy a cheap non-appreciating NOM or buy one on a higher price but appreciate over time?

I guess we might just have to let individual decide on their own. For my brother's case, I see that he clearly benefited from the appreciating asset for him to better his life.

 

[applejuice]

Quoting from real estate agents and property consultants whose ricebowl depend on buying and selling of properties?
Goh Meng Seng???

Ho boy, you PAP peons are foolish beyond belief.

You saw thru that didn't you?? Can he continue to be a moderate without being a joke?

 

[applejuice]

I hope whatever new plan that is eventually put up, the sense of being caught in a gaming operation is not there. Some would say, "Heng ah. Tan Dio". Others would say, "KNNBCCB. Just missed it".

Can you have a policy that pleases everybody??

 

[SgParent]

Innovative doesn't mean better.

If my flat doesn't go up in price whereas other flats or pte properties go up, I will be left behind.

It means the gap between the rich and poor will only become wider.

You are confused. Paper value of property has no direct impact on income gap.

Besides, what is the point of having the paper value of your own little piece of property going up none stop, when your children need 2 generations to pay up their mortgage in time?

 

[SgParent]

That sounds like a good idea.

But how helpful it is for a policy that benefits only if there is a crash. In a crash, people can choose not to sell. But in a hike, NOM property is stagnant while OM property inflates. This will create additional wealth gap between the two classes.



Then SDP should have suggested that all HDB flats come under the NOM scheme in the long run. There is no point leaving some flats for open market because it puts pressure on NOM in some way no matter how.

I think we have already gone way past the point when we can NOM all HDB flats.

SDP's NOM scheme will only benefit those that are just looking for a roof over their heads. Those that are still embarrassingly stupid to want to strike gold from public housing can always look at the other existing property options

 

[liongsum]

I like this plan for one reason.
It offers another avenue for citizens to own property.
However, the caveat is that only those who cannot afford otherwise should take this up.

In insurance policies, there are those which have participating profits.
Right now, buying an HDB flat is akin to this.
It is the business of insurance companies to make money, so participants ride on this.
It is also the business of Singapore to nurture the market (some will not admit this), so HDB owners ride on this.

Therefore, at some point in time, those who buy NOM should sell back to HDB and migrate to the open market.
Those who can afford open market HDB but buy NOM is akin to buying an insurance with no participation in its profits.
Most people don't do this unless they cannot afford it.

 

[yellowarse]

SDP's NOM scheme will only benefit those that are just looking for a roof over their heads. Those that are still embarrassingly stupid to want to strike gold from public housing can always look at the other existing property options

Well said. Couldn't have put it better.