The 47-year-old block of flats stands on a hill in Queenstown, towering over a busy intersection, the neighbourhood school, and newer public housing projects a stone’s throw away.
Residents who have lived in Block 81, Commonwealth Close long enough have witnessed from their doorstep the steady evolution of Singapore – from the building of MRT lines to the rise of the Central Business District, visible in the distance.
Rising 16 storeys, the block is an icon of the nation’s development. It belongs to a cluster of flats built in Singapore’s first new town soon after the Housing and Development Board was established in 1960 to tackle a dire housing shortage.
Over 50 years, the statutory board has built more than one million flats. These, in turn, house more than 80 per cent of Singapore’s residents. Last year, the Republic registered a home ownership rate of 87.2 per cent, a remarkable achievement for a country once blighted by shanty towns.
It started with one man’s conviction of the great value of home ownership more than 50 years ago.
Then-Prime Minister Lee Kuan Yew saw it as a quick way to cement national belonging amid staggering income disparity and at a time when the Republic was struggling to muster an army to ward off external threats.
He wrote in his 2000 memoir From Third World To First: ‘I believed this sense of ownership was vital for our new society which had no deep roots in a common historical experience.’
Owning a home gave Singapore’s foot soldiers something tangible to defend.
While Singapore’s public housing system tackled pressing problems, it was also part of a grander scheme. Large tracts were compulsorily acquired from landowners to build flats that were sold at a subsidised price, amounting to a systematic redistribution of wealth. Through this, Mr Lee and the ruling People’s Action Party (PAP) recast the bottom-heavy social order by putting assets within the reach of ordinary citizens.
This expensive exercise was made possible when Mr Lee and his right-hand man Goh Keng Swee expanded the colonial-era pension scheme to allow workers to buy flats with their Central Provident Fund (CPF) savings.
Buyers could also use their CPF money for the down payments for their flats.
He told PAP Members of Parliament in 1981: ‘No Singaporean will lose out on his HDB home because he was born later or got married later.’
For a government ostensibly against handouts, housing formed a key plank of its social welfare programme. With a large chunk of retirement savings used up for housing, the flat quickly became a hedge against inflation and a store of retirement income.
Starting about 20 years ago, at the suggestion of Mr Lee, the Government shored up the value of ageing flats by upgrading them.
Given its extensive reach, public housing also became a means of social engineering. The Government encouraged family formation by giving citizens who were married, or who chose to live near or with their parents, for example, more in housing subsidies. Singles, meanwhile, were not allowed to buy new HDB flats and could buy only resale ones when they reached 35 years of age.
It gave rise to a uniquely Singapore phenomenon of men proposing marriage to their sweethearts by asking them if they wanted to buy a flat.
Public housing was also used to encourage ethnic integration. The HDB introduced quotas for different ethnic groups in 1989 to prevent enclaves from forming. Although it subsequently lowered the prices of flats owned by ethnic minorities, Mr Lee said in his memoir: ‘This is a small cost for achieving our larger objective of getting the races to intermingle.’
The public housing system was something that Mr Lee took a special interest in, and returned to over and over again during his time in government.
Mr Liu Thai Ker, the HDB’s chief executive officer from 1979 to 1989, remembers how Mr Lee would visit public estates with HDB staff three to four times a year. Mr Lee, said Mr Liu, was willing to pursue unfashionable decisions based on logic. ‘The style of Mr Lee and his Cabinet is ‘clarity equals courage’,’ he said.
In the 1970s, for example, high-rise public housing was written off by many governments as slums in the making. But the HDB decided to forge ahead with highrise dwellings.
Mr Liu said: ‘If we could not go for that kind of density, we could not deliver on home ownership… We would have run out of land a long time ago.’
Today, quality, affordable housing continues to form a key part of the PAP Government’s promise to successive generations of Singaporeans.
While widely admired around the world, Singapore’s housing policy has its detractors. Academics have warned that the system encourages overspending on housing as well as an overdependence on it to provide for retirement needs. In an interview last year, housing economist Joseph Gyourko from the University of Pennsylvania argued that the extensive use of CPF funds for housing was akin to betting one’s retirement savings on the fortunes of a tiny country’s property market – a risky proposition.
A 2001 paper published by the Wharton-Singapore Management University Research Centre, meanwhile, shed light on the ‘asset-rich, cash-poor’ status of the average Singaporean worker, who would have three-quarters of his assets locked up in housing upon retirement.
In 2005, a paper released by the Department of Statistics noted that HDB flat owners were well-off in terms of the asset value of their flats, as even the bottom 20 per cent of households by income had an average of $138,000 in home equity. Respectable as this figure was, economists noted that the equity was hard to extract, because owners of HDB flats could not use their homes as collateral for loans to fund other life needs.
This constraint was also cited as a reason for the lacklustre state of entrepreneurship in Singapore, as funds tied up in CPF contributions and housing could not be used to start businesses.
Over the years, the Government has steadily reduced the amount of CPF savings that potentially can be withdrawn for housing. Still, in a 2007 paper entitled Singapore Model Of Housing And The Welfare State, economist Phang Sock Yong of Singapore Management University noted: ‘The present concerns faced by Singaporeans, in particular the lack of unemployment safety nets and the possible inadequacy of personal resources for retirement and health care in the future, serve to highlight the risks of over-emphasising housing in the welfare system for too long.’
Policymakers, she wrote, would have to grapple with the difficult trade-offs to ‘reduce dominance of housing welfare without adversely affecting housing asset markets’.
Depending on how one looked at it, Singapore’s housing system is a policy straitjacket or a multi-function social welfare instrument. The tightly woven nature of each aspect of the housing system meant that even small changes have major implications down the line.
Recent moves to introduce a reverse mortgage scheme for elderly flat owners and allow more owners to sublet flats to counter the ‘asset-rich, cash-poor’ phenomenon created greater demand for flats. This, coupled with an influx of foreigners and a growing economy, pushed up property prices, much to the detriment of families starting out.
In recent months, while the HDB has been churning out new flats, it also has had to guard against releasing too many units lest it depress the resale flat market – which would, in turn, shrink the retirement savings of hundreds of thousands of retirees and would-be retirees.
Despite various changes to CPF and housing policies over the years, National University of Singapore’s Associate Professor Sing Tien Foo, from the department of real estate, wonders if there continues to be a systemic bias towards housing in the CPF system. He tells The Straits Times: ‘Is the current low interest rate of 2.5 per cent for the ordinary CPF account a factor that creates disincentives for households to keep the money in their accounts instead of using the CPF savings to finance a bigger house?’
That said, most would agree that Singapore’s housing policy has done immeasurably more good than harm, providing not just shelter but also a bulwark against social division and political upheaval.
In the HDB’s 50th anniversary book Our Homes, released last year, Mr Lee was quoted as saying: ‘Without this scheme, Singapore could not have been as politically stable as it has been.’
After independence in 1965, I was troubled by Singapore’s completely urban electorate. I had seen how voters in capital cities always tended to vote against the government of the day and was determined that our householders should become home owners, otherwise we would not have political stability. My other important motive was to give all parents whose sons would have to do National Service a stake in Singapore their sons had to defend.
‘If the soldier’s family did not own their home, he would soon conclude that he would be fighting to protect the properties of the wealthy.
‘I believed this sense of ownership was vital for our new society which had no deep roots in a common historical experience.’
Mr Lee Kuan Yew, in his memoir From Third World To First
‘(Without the housing scheme) the disparities between the property owners and the non-property owners would have led to great antagonisms and governments would have been voted out. Here, they have got something valuable, and if you change a good government for a dud one, the economic growth slows, confidence flows out, your properties would go down in price.’
Mr Lee Kuan Yew, in the HDB’s 50th anniversary book Our Homes
Source: The Straits Times © Singapore Press Holdings Ltd
Singapore Real Estate Highlights 
Posted on May 28, 2011
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