The housing balancing act

Like a circus performer spinning many plates at once, the Housing Board serves many purposes – housing people, fostering stability, strengthening cohesion and generating an income for flat owners.

Last Friday, it added ‘reinforcing citizenship privileges’ to the list.

To entice permanent residents (PRs) who marry Singaporeans to take up citizenship, the HDB will now withhold $10,000 of such couples’ housing subsidies.

That sum will be given to them once these foreigners take up citizenship, or produce a Singaporean child.

Meanwhile, some PR households will have to look elsewhere to buy their resale flats if too many congregate in a particular neighbourhood.

This new integration policy, which is fashioned along the lines of the long-standing ethnic integration policy, is meant to prevent the formation of enclaves.

The new policies raise questions that could pose challenges to the carefully calibrated housing system. Will the 8 per cent quota for non-Malaysian PR households in each block depress the price of such flats?

After all, it essentially cuts out 20 per cent of potential buyers if the quota has been reached, given that that is the proportion of resale flats bought by PRs nationwide each year.

Will it nudge PRs to become citizens? Or will it create a backlash from a group which has had its privileges – from education to health – steadily rolled back in recent years by a Government anxious to placate citizens who fear foreigners are encroaching in everything from housing to jobs?

It remains to be seen what kind of dynamics the HDB’s policies towards foreigners will introduce into the system, but these changes have definitely racked up the tension among the statutory board’s competing objectives.

One can see just how difficult this balancing act can be when we examine how the HDB last Friday ended up raising the minimum occupation period for people buying resale flats without subsidies.

In response to growing public anger over what is perceived to be speculation in the resale market, the HDB now requires non-subsidised buyers to live in their flats for three years – instead of just one year – before selling them again.

The tighter rules seem to run counter to its recent measures to free up the housing market to let home owners monetise their assets.

To give ageing flat owners a chance to earn an income, it has steadily cut the number of years they needed to live in their homes before renting them out.

Before 2003, flat owners were not allowed to rent out their flats unless they met a set of strict criteria, like working or studying abroad.

That year, however, the authorities eased the rules to let flat owners rent them out if they had lived in them for 15 years, or 10 years if they had paid off their HDB loan.

From 2003, the HDB has reduced the minimum occupancy period for subletting every few years. Owners who bought resale flats without any subsidies can now rent out their property after living in it for three years.

The relaxed subletting rules gave rise to fears that people will buy them as investments instead of homes. Last Friday, the new figures revealed by the HDB showed that the fears were not unfounded.

The proportion of resale flats sold within three years grew from 6 per cent between 2005 and 2007 to 9 per cent last year. If left unchecked, such churning in the HDB resale market could further inflate prices, which have risen by 8 per cent last year alone.

Hence, while the HDB’s subletting policy increasingly helps put flats in the realm of the free market, its revised occupancy requirement for resale raises the bar for flat owners banking on their properties to raise cash for other needs.

These conflicting signals result from the inevitable tension between two of the HDB’s biggest objectives – to house a population and to grow its wealth by growing the value of homes.

No less than Minister Mentor Lee Kuan Yew reminded Singaporeans of the HDB’s latter role in January. He reminded citizens not to cast a protest vote over the affordability of public housing, as it was this system that provides homes that would in time appreciate in value.

The HDB also took pains last Friday to underline the principle that flats were primarily meant for providing shelter. It is putting on the forefront its role as a housing provider that will not hesitate to impose restrictions once that mission comes under threat.

What helps to reinforce that message is also another change announced that day: the extension of second subsidised home loans to households downgrading to smaller flats.

For years, households forced by financial circumstances to move to smaller flats were denied such loans because the HDB wanted to limit its leg-up to those moving on to bigger flats. With this change, the authorities have eased up on their fixation with asset enhancement and are now extending help to those who really just need shelter.

All things considered, there is another bugbear that has not been addressed: private property owners buying resale flats.

House hunters feeling the heat from rising prices have complained that these cash-rich buyers drive up prices and crowd out those in genuine need of homes.

National Development Minister Mah Bow Tan has ruled that out, saying their impact is minimal.

But that stand too could be up for review in time to come. The constant tension between the HDB’s competing objectives means that policies will vary according to demographic changes and public sentiment. Friday’s changes will not be the last.

Source: Sunday Times, 7 Mar 2010