Singapore’s home-ownership and asset enhancement policies have worked well: PM Lee

SINGAPORE - Less than a week after announcing long-term housing initiatives during the National Day Rally (NDR), Prime Minister Lee Hsien Loong on Friday (Aug 24) held up the success of the Government's home-ownership and asset enhancement policies, and chided those who claim that the 99-year leases of Housing and Development Board (HDB) flats is "merely extended rental and not a sale".

"I find this argument frankly amazing. Many private properties are held on 99-year leases too, and yet nobody argues that they are merely being rented," said Mr Lee. "HDB lessees have all the rights over their flats that owners of such leasehold private properties have. You can live in it, you can transact it, you can bequeath it to you children. In fact HDB owners enjoy extra privileges because HDB flats get upgraded from time to time, with generous government funding."

Mr Lee did not name the commentators whom he was referring to. On Aug 14, The Straits Times published a commentary by International Property Advisor's chief executive Ku Swee Yong where he suggested that Singaporeans "be honest with ourselves and recognise that we are merely lessees who rent the HDB flats for their terms".

At the NDR on Sunday, Mr Lee addressed for the first time the hotly-debated topic of HDB lease expiry. Among other things, he explained that HDB flats are sold with 99-year leases so that when they expire, the Government can redevelop the land and build new flats for future generations.

He announced that every HDB flat can expect to undergo major upgrading twice during its 99-year lease period, with the new Home Improvement Programme II rolled out for ageing units at the 60- to 70-year mark. At the same time, the HIP scheme — which currently covers flats built up to 1986 — will be extended to blocks constructed up to 1997.

The authorities are also going to start planning for a new Voluntary Early Redevelopment Scheme (Vers), which will allow owners of HDB flats to vote if they want the authorities to take back their apartments for redevelopment at the 70-year mark of their lease. Meanwhile, the Ministry of National Development is working on expanding the Lease Buyback scheme.

On Friday, Mr Lee was speaking at the launch of a book co-edited by National University of Singapore academics Dr S Vasoo and Assoc Prof Bilveer Singh. The book examines how the Government's principle of asset building has facilitated the country's growth and development over the past five decades.

In his speech, Mr Lee underlined the importance of the "key national policy" of home ownership, which the Government has long pursued "for many good reasons".

It gives Singaporeans a stake in the country and allows Singaporeans to share the fruits of economic growth, since the value of homes rises when the economy does well, he said. This policy also gives "nearly every household", including those from the lower-income group, a substantial asset to their names, he added.

"As a result, we have improved lives significantly for all. We have avoided the extremes of privation and poverty often seen in affluent societies," said Mr Lee.

The Government could have adopted other forms of housing policies such as by leaving it largely to the private market — as in the case of Hong Kong — or by controlling rents like in San Francisco. Another option was to provide rental flats at subsidised rates to tenants, noted Mr Lee.

However, "none of these alternatives would have achieved the same economic and social results as home ownership", he pointed out. "Because the experience of other cities shows that the private market will not provide adequately for poor or even middle-income families."

If the Government adopted a rental housing policy, a "very different" mindset would have been created. "A tenant lives from month to month, rent to rent. He cannot sell the property or leave it to his children. He has no interest in the long-term value of the property," said Mr Lee.

In contrast, "a homeowner takes responsibility for his property, thinks long term, and does his best to protect its value". This can be done directly by ensuring good maintenance and upkeep, as well as indirectly by "upholding the society and system on which the value of his home depends".

He added: "That is why HDB sells flats to Singaporeans, and even for low-income households, it prefers to sell a very heavily subsidised flats to them, rather than to offer them a subsidised rental unit."

Apart from housing, Mr Lee said that Singaporeans can build up other assets, including their Central Provident Fund (CPF) savings.

In the same vein as the housing policy, the Government could have chosen other options to achieve the objective of helping Singaporeans save up for retirement. These include a state pension scheme that is funded through taxes, which has been implemented in other countries.

However, the Government chose to build a "unique system to help people save up for themselves, and build up a nest egg for retirement", he added.

Over time, the CPF has expanded into savings for housing, medical and education needs as well. On its part, the Government helps to grow the CPF savings by paying "fair and even generous interest rates", Mr Lee said. From time to time, the Government also tops up the CPF balances.

Such a scheme allows Singaporeans to be "disciplined" to save for the future and meet their major financial commitments, he reiterated.

While the Republic's asset enhancement approach has worked well and is supported by Singaporeans, Mr Lee stressed that the Government is "not dogmatic about it". Grants and subsidies are provided where necessary through schemes such as the Silver Support scheme to supplement the CPF savings of those with low incomes. Workfare has also been rolled out to top up the incomes of lower-wage earners, while U-Save rebates help the low and middle income households with their utility bills.

"In summary, our asset-building approach emphasises individual work ethic and personal responsibility, supported by government policies and resources," Mr Lee said.