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Making Public Housing Affordable
Public housing prices are painful for both homeowners and those who aspire to own homes
Imagine a 4-Room BTO flat costing over $700,000. Actually, you don’t have to imagine – this has been the situation for some developments in recent years.
Now, think about the millions of tax dollars used to subsidise each of these flats, in the form of government grants, to keep them “affordable”.
And now, look at the bigger picture – In 2020, 82 million-dollar HDB flats were sold in the resale market, but in 2024, 700 million-dollar HDB flats were sold.
That is a 750 percent increase in the number of million-dollar HDB flats sold in just 4 years.
The BTO prices would have gone above the $1 million mark if not for the introduction of the Prime and Plus flats. These new classifications allow the Government to continue to charge higher and higher land cost funded by larger and larger HDB deficits paid for by all Singaporeans.
This means higher cost of living through higher housing prices and higher taxes eventually.
Meanwhile, a fresh graduate today is earning an entry-level salary of about $3400. That is just a 30 percent increase from 10 years ago. The situation is worse for those who are not tertiary graduates.
The BTO system is broken.
If we don’t fix it, young Singaporeans will find it much more of a struggle to afford a home as the years go by.
And every Singaporean will inevitably need to pay higher taxes to help “subsidise” the cost of new flats, eating into finances of Singaporean families.
How Land Cost Causes These Problems
Using a Tengah BTO flat as an example, when a family buys a flat, they pay $350,000, after CPF grants.
Out of this, $210,000 goes towards land cost.
If the family takes a 25 year loan, they will end up paying $592,345 for the flat after 25 years, all costs factored in.
Now, if the family sells the flat after 25 years, they will have to pay the accrued interest from the CPF grants.
This will bring the overall cost of the flat $685,188.
The implications of land cost for the home buyer is:
(1) You could have saved $210,000 if land cost was not included
(2) You could save more money by paying less interest on loans
(3) You could earn more interest in your CPF for retirement if you did not have to foot out so much cash right from the start
For Singaporeans on the whole – your tax dollars are going into that $45,000 CPF Housing Grant “subsidy”.
And that’s just for one BTO flat!
The Affordable Homes Scheme
I propose to replace the BTO scheme with what I call the “Affordable Homes Scheme”, or AHS.
Under the AHS, homebuyers will not have to pay for the S$210,000 land cost when they buy the flat.
So, the same Tengah flat will now cost $140,000.
Using the same 25 year loan example, they will pay $269,327 for the flat in total.
All in, that’s about $300,000 saved for the household. They will also accumulate more money in their CPF over the years for retirement.
And Singaporeans’ tax dollars won’t be used to subsidise expensive flat purchases!
If the buyer (now the homeowner) decides to sell the flat, the land cost with interest accrued will need to be paid to the government.
This is fair as HDB flats are meant to be low-cost public housing and not a tool for profiteering. This is also important to maintain price stability in the resale market.
And, the prices of HDB resale flats will not crash, as the Government claims, because of the need to pay back the land cost at the point of sale.
Let's Fix Overpriced Public Housing for Young Singaporeans
These problems are why I propose to remove land costs from new public housing developments.
With the hundreds of thousands of dollars saved, young Singaporeans can better provide for both their children and their aging parents while affording a holiday in Hokkaido or Hanoi every now and then, and still save money for their own retirement.
From my childhood experience in a small rented partitioned room in a shophouse in Chinatown, it’s important to me that our young Singaporeans today pursue higher goals instead of worrying about something basic like a home.
If this is just as important to you, give me your support and let’s fix things.
