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The Problem with HDB or Deflating the Housing Bubble-Part I

Pictures-how_the_bubble_burst_lg (1)Recent announcements by Mr Khaw Boon Wan in Parliament and on his blog indicate that he is rethinking the role of HDB in Singapore’s future. There seem to be hints that the PAP are abandoning their somewhat euphemistically entitled, “asset appreciation” policy which I call a policy of “deliberately creating a housing bubble “

I warned against the dangers of creating a housing bubble in my earlier blog, “A Bulge in the Pipeline”.   There I also explained how the various government schemes for subsidies and grants were not the solution to housing affordability. Ultimately subsidies and grants are self-defeating because they have just had the effect of increasing prices by the present value of the subsidies.

Latest figures put the number of Singaporeans living in HDB estates at 87%.  That’s nearly everyone.  We need to examine Mr. Khaw Boon Wan’s ideas very closely as they impact on the majority of our population and as immigration policy is so closely intertwined with HDB policy.

What is the purpose of HDB?

Surely the role of public housing should be to provide low cost housing to the people who most need it and not to provide some kind of asset appreciation vehicle? The original purpose of HDB was indeed to provide affordable housing of acceptable quality for the lower income groups.

HDB was born out of the Singapore Improvement Trust set up by the British Colonial government in 1927. The main aim was to resolve the overcrowding and slum conditions downtown in Chinatown and to move people out of their traditional Kampongs.

The PAP had made public housing a central tenet of its election campaign in 1959, promising to provide low-cost housing for the poor if it was elected. After the Barisan Socialis walked out in 1965 the PAP were left without any effective opposition to their policies. The PAP duly dissolved the SIT and set up the HDB.

In most advanced countries, social housing such as HDB is aimed at the bottom 20-30% of the income distribution. Mr. Khaw did acknowledge that housing for the poor was the original intention of the HDB building programme but he quickly glossed over that to state that over time it had come to serve a different function.

There are outside observers especially Americans, acutely aware of the US prime mortgage debt debacle that precipitated the financial meltdown of 2008, who see a whole population’s housing needs being taken care of by a government as the ideal socialist big-government state. Mostly these observers have never visited Singapore, let alone an HDB Estate, so what would they know?  Certainly they will not be aware of the manner in which ‘upgrading’ is used as a weapon to  threaten or  bribe residents into voting for the government which has, through being the sole provider of public housing, unusual power and control over nearly 90% of its population.

Other observers often pro –market liberal or small government advocates view a whole population living and being permanent lease holders in housing originally intended for the poor as being denied democratic rights to own property and even of the universal right to have freedom to live where they choose (the ethnic quota). It has been likened to a state of virtual serfdom like the Soviet Union or other Communist states.

Housing is a basic need whereas the ownership of property is a measure of the level of prosperity and democracy of a Nation.

Currently HDB housing is not fulfilling the role of public housing .  The high price makes it unattainable for too many, the wait list is too long and the restrictions such as typically needing to be married or over 35 or satisfy a racial quota are too onerous.  To quote Kathy Chu for USA today,

“Even so, the surging real estate market has put some pockets of public housing out of reach for Singapore residents like taxi driver Joshua Santhira, 51.

“I can find a flat, but at a price I can’t pay,” says Santhira, who wants to upgrade to a three-bedroom flat from his two-bedroom unit in Singapore’s Yishun area, 20 minutes outside the city.”

HDB is also not fulfilling the requirements of social housing. On my house to house visits I have met many amputees because with the lack of universal health care and inadequate health funding diabetes is a major problem in Singapore. I remember one man all too clearly who was isolated on a floor with no lift.   I say isolated but he was a virtual prisoner in his own home. A robust social housing programme would see him relocated to a disability- access friendly, purpose built unit. Not just a lift to his floor externally but wide access doorways internally, ramps and special bathroom.

Rebecca Lim for BBC news on February 17th  tells the story of a Ms Ng surely a candidate for social housing.

 “Ms Ng suffers from a hereditary skin condition and was only able to undergo surgery recently when a donor paid her medical bill. Her husband lost his previous job after he was hospitalised for an operation in October 2011.

In her one-room apartment she fished out unpaid bills, including one for more than S$400 owed in school fees.”

This story could illustrate many of the problems that those in need of social housing struggle with such as the cost of medical care and the lack of free school education and the reliance on charitable institutions and donations in order to survive. But what is striking here is that Ms Ng and her husband have two daughters and take care of his 12 yr old from a previous marriage yet live in a one room apartment.

Whatever purpose it now fulfills from the time of the PAP government’s expropriation of much of the land in Singapore in the 1960s to now, the original purpose has become perverted far from its original intention.

Government as Landlord

In fact HDB has been turned into a means of both bribing and controlling the majority of Singaporeans. The government through its ownership of most of the land has effectively monopolized the supply of housing to everyone but the top decile of the income distribution.  That elite landowning or freehold-sharing decile includes most of the government which is making the decisions affecting the other 90%. The ivory tower they inhabit is not just a metaphor. Such has always been the case with Landlords versus Tenants.

Never has there been a more clear demonstration of the gap between have and have nots in a population.  Singaporeans are left with very little chance of ever moving up the property ladder to freehold ownership, and an obstacle to the building of a prosperous middle class and a further squeezing of the sandwich classes across generations.   This is of course exactly what the PAP want which is to keep most of the population in a state akin to serfdom. It is impossible to have a democracy under these conditions.

With the PAP as both unfettered government and landlord the people are extremely vulnerable to deliberate government policies and conflicts of interest as well as from the usual mis- steps and U turns.  Beware then the housing bubble, uncapped immigration, insufficient supply of housing stock and now it seems interference in the market value of leases. 

In Part Two, I shall deal with:

Mr Khaw’s policy proposals which have made a mockery of the original intention of HDB and which have shortchanged Singaporeans

The government’s asset appreciation policy and the illusion of prosperity that HDB owners have been given.

Poor housing quality and high densities at a cost that in a democracy would be unacceptable

The supply and demand problem of too many people and not enough housing created by the PAP.

The dangers of Shorter Leases and Lower Priced but Restricted Housing?

And the fundamental mispricing in the HDB market

The danger of a government/ leader ( LKY) / landlord who urges you to never sell.

Now we have to make up our minds about the role that we want  HDB to fulfill. Do we want to continue in a situation where 87% of the population live in government-supplied housing and are virtual serfs because they can never really own their HDB? Or do we want HDB to revert to its role as a provider of social housing for those at the bottom?


  1. From what has happened elsewhere the world , the housing bubble in Singapore will burst , and the consequences in such an environment will be devastating , and the question asked , how and will it recover


    • Exactly. I do try to keep warning Singaporeans of this risk but I am swimming against the tide of State managed Media hyping up the price increases as fantastic examples of PAP financial good management. Who hasn’t seen those headlines every time an HDB unit sells for a record price? There is never a hint of any possible down side.


  2. You are absolutely right, Kenneth! One never truly owns his/her flat. When you purchase a flat from HDB, you are paying 99 years worth of rentals upfront! In fact, it’s a worse deal than owning a car. For a car, you can at least get back some ARAF dollars when the 10-year period is up. For the HDB flat, you get ZERO when the 99 year lease period runs out!! The HDB flat is an asset???


    • Furthermore Eric, if you are found to breach certain conditions you can lose that asset or be forced to sell it and then never allowed to buy an HDB again. Overseas readers need to understand that HDB constitutes housing for 87% of the population. The racial quota actually restricts the market for minority races depriving them of a basic human right to live where they wish and denying them access to the open market. Finally SERS has seen many HDB dwellers moved to smaller units ( widely reported to be of poor finish quality) in much higher density developments, with no choice or say in the matter.


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