Ponder housing affordability, land cost issues in future S’pore plans

Building bigger homes and bigger amenities would not only put Singapore in a better position to prevent disease transmission, but it will also make telecommuting more palatable, says the writer.ST PHOTO: LIM YAOHUI

Updated from : The Straits Times, 23 Aug 2021

Last month, the Urban Redevelopment Authority, which builds this city, embarked on a year-long public consultation on how Singapore’s built environment should evolve to take into account new normals. 

Feedback will help shape the country’s long-term land use plans, with the aim of exploring a number of developing options instead of formulating a single concept plan, which has been the product of each of four such reviews since 1971.

At the launch of the consultation process, National Development Minister Desmond Lee said: “The existential threat of climate change, economic and technological disruptions and change, and the Covid-19 pandemic and future pandemics, are just some examples of significant developments that will change how we plan for our future city.” 

This step to engage the citizenry is significant, and could pave the way for profound changes in how Singaporeans live, work and play in the future. 

Hopefully, people will think deeply about what transformations they would like to see – not so much for themselves, but for their children and their children’s children.

The usual clarion call for a smart, connected city, for transport-oriented developments (where the use of public transport, walking and cycling are optimised), or for a low-carbon economy are still to be heeded. They are no doubt necessary for a city to be liveable. 

But for a deeper change, Singapore needs to ponder more fundamental and urgent issues, such as land cost, population density and the affordability of homes. These intertwined issues have a huge impact on quality of life, and affects everything from wages to the country’s attractiveness to investors to how self-reliant people can be post-retirement. 

These issues would be relevant in normal times, but they are even more crucial when crises such as pandemics occur. Covid-19 is not the first pandemic, nor will it be the last. 

Last October, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services released a report which said future pandemics will occur more frequently, and be increasingly more devastating.

Since the Covid-19 scourge entered Singapore just under two years ago, it has become quite clear that working or learning from home is not sustainable for many households. And safe distancing in activity hubs such as hawker centres, coffee shops, markets, places of worship, bus stops and train stations is almost impracticable. At least, not without unsightly plastic barriers in place.

There is just not enough space. 

Building bigger homes and bigger amenities would not only put us in a better position to prevent disease transmission, it will make telecommuting more palatable. 

But most importantly, it would make it more conducive to grow a bigger Singapore core. We may not need much space to procreate, but we do need decent square-footage to bring up a family. And we certainly do not want to go the way of cities where shoebox apartments are the norm.

The question then is, how do we go about doing this with the current cost structure? Building up is one way. Not just flats which go up 70, 80 or 100 storeys, but several floors of common areas which connect the vertical blocks. These can be parks, playgrounds, shops, food centres and play schools. Townships in the clouds – much more desirable than going underground, a costlier and sun-deprived alternative.

Such infrastructure will no doubt require high-tech support apparatus such as an intelligent high-speed lift system (a vertical MRT, if you like) and an efficient waste disposal system. 

Hopefully, by building up, we can build bigger homes.

Still, will this make a dent in housing prices, which have breached $500 per sq ft for BTO flats, $1,000 psf for resale HDB flats and exceeding $4,000 psf for new condos in prime districts? 

In 1971, a three-room HDB flat in a new town cost $7,800, when the average household income was around $900. Today, a three-room BTO in Woodlands costs around $340,000, when the average household income is around $7,744 as at 2020.

Hence, the cost of a flat has gone up by nearly 44 times, while the average household income has risen by around nine times. 

This means families today devote more of their income to a roof over their head. It is worrying to think of what the situation will be if the cost of homes and incomes continue on this trajectory.

Even if we adjust for the halving of household members over the last 50 years, the illustration is still relevant. 

More affordable flats are usually in estates which are farther from the city. This means households of lesser means will populate these estates. This means longer and costlier commutes for such residents. If time is money, these folks will have even less at their disposal. 

It is thus heartening to read Second Minister for National Development Indranee Rajah’s piece in The Straits Times in June on the Government’s intent to build HDB flats in prime locations, and that it was looking at new ways to make such flats affordable.

My colleague Chua Mui Hoong followed up with a piece calling for policies which encourage people to treat HDB flats as homes rather than appreciating assets. She suggested levying a tax on “windfalls” people make from selling their flats.

Last month, at an Institute of Policy Studies lecture, Monetary Authority of Singapore managing director Ravi Menon said a property gains tax or an inheritance tax may be necessary to address the stark wealth inequality here. 

Barring rare exceptions, Singapore does not apply such wealth taxes. 

Beyond taxes, another way would be to completely disallow those who own private properties from owning Housing Board flats. No ifs or buts.

Although not immediately obvious, these issues have a strong bearing on how our city is shaped. For instance, if we sell land only to the highest bidders, we could one day end up with a ghost town in the central business district (where swathes of apartments bought by foreign speculators are left vacant) and ghettos in far-flung precincts. 

Diversity is key to a vibrant, inclusive city. 

Yes, Singapore is already geographically segregated by wealth, but we should strive to lessen, not intensify, that segregation. 

To be sure, more can be done to keep a lid on home prices – tightening restrictions on foreign ownership, for one. Because we are a tiny city-state, even a small influx of foreign transactions from far bigger countries will have a discernible impact on supply, and thus prices. 

Even if most of such transactions are in the higher end of the market, this added demand will have a trickle-down effect on prices of other properties. 

High housing prices have a negative impact on retirement adequacy. 

In its latest report, the CPF Board said that out of the 40,000 active members who turned 55 in 2020, 63.6 per cent were able to set aside the Full Retirement Sum required of their cohort, or set aside at least the Basic Retirement Sum while owning at least one property. 

That means nearly 40 per cent were unable to meet the basic sum, with which monthly payments are made to members to meet their sustenance. 

Although HDB has its Lease Buyback Scheme, which allows home owners to monetise part of their flat’s remaining lease, is this option ideal? Would it better if homes were not so costly in the first place?

Should we consider returning the CPF scheme to its original intent of setting aside funds for one’s retirement? Has the availability of CPF monies for housing unintentionally driven up home prices? After all, sellers often price their goods at the highest level which the market will bear, don’t they?

Again, while these questions may not be within the ambit of the URA’s long-term land use planning, they are questions worth asking if we want a holistic review that goes beyond brick, mortar and planning zones.