Govt ‘careful in calibrating HDB flat supply to meet demand', says Desmond Lee as Parliament rejects PSP's public housing motion

SINGAPORE —  The Government has and will continue to be careful in calibrating public housing flat supply to meet demand as there are real dangers of oversupply, said National Development Minister Desmond Lee on Tuesday (Feb 7). 

An oversupply could put downward pressure on the Housing and Development Board (HDB) market and incur costs from vacant housing stock, he told Parliament.

The minister was delivering a wrap-up speech in Parliament following a marathon two-day debate on two separate motions on public housing policies, one filed by Mr Lee himself and the other by the Progress Singapore Party (PSP).

At just after 11pm, following over eight hours of debate on Tuesday, members of the House voted down a proposed amendment by Workers' Party (WP) to Mr Lee’s motion and voted in favour of his motion and against PSP’s motion. 

A total of 16 Members of Parliament (MPs), Non-Constituency MPs (NCMPs) and Nominated MPs (NMPs) spoke on the second day of the debate, in addition to four political office holders. 

A further 11 MPs, NCMPs and NMPs had spoken for over four hours during the first day of the debate on Monday. 

PROJECTING DEMAND FOR FLATS 'NOT A PERFECT SCIENCE'

During his closing speech, Mr Lee said that the housing market is highly sentiment-driven and demand can suddenly appear, or disappear. 

He was responding to comments by some members of the House including NCMP Hazel Poa of PSP and WP’s Louis Chua (Sengkang Group Representation Constituency (GRC)) that the Government had underestimated demand for flats and underbuilt homes.

Mr Lee said that the Government takes into many considerations in projecting demand for flats. These include marriages, births, deaths, income levels and economic conditions.

“However, as we all know, it is not a perfect science," he said.

“And it certainly cannot account for certain shocks and what certain shocks can cause in terms of human psychology and market behaviour,” said Mr Lee, referring to the impact of the Covid-19 pandemic which had disrupted construction, leading to the current tightness in the supply of public housing flats and spike in resale prices.

He noted how at the height of the property boom in the mid-90s, the wait for a HDB flat was as long as seven years. But the queue for HDB flats quickly vanished due to the Asian Financial Crisis in 1997, leading to an oversupply of 31,000 unsold flats.

As a result of the oversupply, flat prices stayed depressed and those who bought flats just before the financial crisis ended up with a negative equity, or even lost their homes and hard-earned savings, said Mr Lee. 

The many unsold flats, which took five years to clear, also represented a waste of taxpayers' money and the holding cost of these flats could have gone towards other uses such as healthcare or education, he said. 

Mr Lee also noted that WP had raised concerns about an oversupply of Build-to-Order (BTO) flats in 2019 and had recommended in the party’s working paper on resale flat prices that the HDB build 9,000 flats that year. 

Noting that HDB had built 15,000 flats in 2019 and 17,000 flats in 2020, Mr Lee said: “Had we tapered down our supply to WP’s levels in 2019… I think our BTO shortage would be even greater today.”

WHAT OTHER POLITICAL OFFICE HOLDERS SAID

Other political holders on Tuesday rebutted the PSP’s proposal for an “affordable homes scheme” which would exclude the cost of land from prices of new BTO flats at the point of purchase. 

Ms Indranee Rajah, who is Second Minister for National Development, likened the scheme to “a national prepaid rental scheme with an option to buy”. This means that those who bought BTO flats would not own the flats, but become renters of flats instead.

And if they do not ever sell their flats under the proposed scheme, they would not have to pay back the cost of the land. 

This would result in a depletion of reserves given that proceeds of land sales typically go back to Singapore’s reserves, she said. 

Ms Sim Ann, a Senior Minister of State for National Development, also responded to PSP's argument that flat buyers have inadequate savings for their retirement as they have to tap their Central Provident Fund (CPF) savings to service their monthly property loans.

She said that owners can monetise their flat to supplement their living expenses, such as through renting their rooms.

There are also limits placed on how much owners can draw from their CPF account to service their mortgage loans, ensuring that they have adequate savings for retirement. 

‘A FUNDAMENTAL CHANGE IN THINKING’: PSP

In his closing speech on Tuesday night, PSP’s NCMP Leong Mun Wai sought to defend the two proposals he and fellow party member Ms Poa introduced in Parliament on Monday which he said would help "reset" Singapore's public housing policies. 

The proposals — the “affordable homes scheme” and "millennial apartments scheme" — had drawn criticisms from various People’s Action Party MPs, as well as some NMPs, over the course of two days of debates. 

Mr Leong reiterated that the main objectives of the "affordable homes scheme" are to stop the depletion of a homebuyer’s CPF and to engineer a “soft landing of the current surging HDB resale market”.  

The "millennial apartments scheme", which requires the Government to keep a “large stock of quality rental flats” near the Central Business District with affordable leases of two to five years for young Singaporeans, is a better solution than the Prime Location Public Housing scheme, he added.

This is because the PSP's proposal not only provides choice to young Singaporeans, but also reduces the profit motive for speculating in HDB flats in mature estates. 

Mr Leong also stated that the total land cost paid by the HDB is only about S$3 billion a year. If PSP’s schemes are implemented, he said Singapore has enough fiscal resources for it.

He asserted that about 80 per cent of Singapore’s net investment returns contribution (NIRC) was never used, except during the Covid-19 pandemic.

Instead, he said they were placed into endowment and trust funds. 

Following Mr Leong’s speech, both Mr Lee and Ms Indranee pointed out that Mr Leong’s statements about the NIRC were wrong but in the interest of time, they will debate about it in another parliamentary sitting.

WHAT HAPPENED DURING VOTING

Speaking before Mr Lee's wrap-up speech, Leader of the Opposition Pritam Singh said that the “sacred cow” of not building new BTO flats ahead of demand is “one that needs to be slaughtered” because of the “serious implications” an overheated housing market has on public housing prices for ordinary Singaporeans. 

He also proposed an amendment to the motion filed by Mr Lee.

The minister's motion states: “That this House affirms the importance of keeping public housing affordable and accessible while protecting the interests of current and future generations of Singaporeans, and endorses the commitment of the Government to these twin goals.”

WP's proposal was to replace the words “endorses the commitment of the Government” with “calls on the Government to intensify its efforts to meet”.

Mr Singh said that the wording of Mr Lee's motion did not sufficiently take into account the point that the Government should endeavour to make BTO flats more affordable and accessible than they currently are.

On PSP’s motion, Mr Singh said it “comes from a good place” and that “a deep conversation” around the inclusion of land cost in new flat pricing should be a priority of the Government.  

In his closing speech, Mr Lee said that WP’s proposed amendments to his motion were an attempt at “politicking”.

Towards the end of the debate, Mr Lee and Ms Indranee asked Mr Singh for his party’s stance on the two motions. 

Mr Singh clarified that his party supported the PSP motion, reiterating that WP did not find the motion “insidious”. In so far as the two schemes proposed by PSP, Mr Singh said that WP is not supporting them but felt they should be studied further. 

At the end of the debate, the proposed amendments by WP to Mr Lee's motion were voted down by the House.

A total of 82 MPs, NCMPs and NMPs then voted in favour of the motion filed by Mr Lee, while 11 voted against. All nine WP MPs and PSP's two NCMPs voted against the motion.

On the other hand, 11 voted for the motion by PSP while 82 voted against it. WP's MPs and PSP's NCMPs voted for the PSP motion.

PSP's motion read: "That this House calls upon the Government to review its public housing policies in order to deliver affordable and accessible HDB flats to all Singaporeans, strengthen the owner-occupation intent of public housing, protect retirement adequacy and keep public housing inclusive for every Singaporean of each generation."