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Home Ownership Policy
Housing and Development Board
Singapore

The Problem

When Singapore attained self-government from Britain in 1959, it faced serious problems of a rapidly growing post-war population (4.3% per year or 60,000 citizens), high unemployment rate (about 13.5%) and a critical shortage of sanitary housing. Public housing provided by the colonial government was grossly insufficient to meet a booming population. Basic housing was out of reach to large majority of Singaporeans. Only 9% of 1.6 million people were living in public housing.

The city was mostly occupied by dilapidated shophouses and overcrowding was common. Due to postwar rent control, landlords allowed these buildings to sink into disrepair, while their chief tenants benefited by endlessly sub-dividing cubicles to maximize large number of sub-tenants to collect rent. At the city periphery, racketeers made quick profits on unauthorized shelters in squatter settlements and in vacant land that were not properly controlled, to ignorant citizens. Such overcrowded slums and squatter colonies with no sanitation, water or basic facilities were homes to more than half a million people. They became breeding grounds for disease, crime and fire hazards. Social disharmony and frustration among the different communities of ethnic groups were strong; riots and strikes were common.

It was estimated then that about 14,000 new housing units annually were needed to cater to the rapid increase in population, relieve overcrowding in the city and to re-house poor families affected by slum clearance. Responding to the crisis, a new housing authority, the Housing & Development Board (HDB) was set up in February 1960 to spearhead provision of sanitary and affordable housing to the population. Public housing took top priority under the newly-elected government, and HDB was given full financial and legislative support to carry out its tasks.

An immediate task of HDB was to provide as many low-cost housing units as possible, within the shortest time. The apartments, known as HDB flats, were designed to be self-contained units, with piped water, electricity, sewer discharge and adequate living space for families. In the first five years of its existence, the HDB built 50,000 flats, a remarkable feat, considering that the colonial Government took 30 years to provide only 23,000 flats. Within 10 years, the severe housing shortage was largely resolved.

Initially, the flats were let at low rents to low-income families. However, to forge nation building and community development for a multi-racial society, the government decided to move away from rental housing to leasehold ownership flats by encouraging Home Ownership. Owning a home will instill pride and rootedness among the people which also enable them to have a stake in nation-building.

Solution and Key Benefits

 What is the initiative about? (the solution)
The “Home Ownership for People Scheme” was introduced in 1964 to help Singaporean families own their HDB flats. Today, there are more than 800,000 HDB flats in Singapore, housing over 80% of Singapore’s resident population of about 4 million. Almost all (95%) HDB households own their homes. An equally high proportion (94%) of HDB residents are satisfied with their flats (based on HDB’s 5-yearly Sample Household Survey). Homeownership has become an indistinguishable norm from Singapore’s public housing programme. Beyond providing physical shelter, the home ownership scheme, buttressed by community-focused housing policies, has played an important part in Singapore’s nation-building and contributed to the overall economic, social and political stability of Singapore.

First, owning a home meant that Singaporeans were more committed to the country’s long-term survival and interests. Since each family has an asset to defend and benefit from enhancement in value of their home, homeownership contributed to both social well-being and stability.

Second, home ownership helped to build strong work ethics. Homeowners were more likely to work hard to finance the purchase of their home, thereby contributing to greater productivity and economic growth for Singapore.

Third, with Singaporeans owning their homes, this helped to root the people physically and emotionally, as there would be a greater sense of belonging and identity with the nation.

Fourth, home ownership helped to instill a sense of pride among homeowners for their living environment. Problems of poor maintenance and upkeep of the housing estates would be less likely to occur. This prevented public housing estates from degenerating into urban slums.

Finally, home ownership reduced the need for heavy government financing to provide public rental housing. This ensured the sustainability of Singapore’s public housing to the benefits of Singaporeans. HDB estates have become a common point of emotional reference for most Singaporeans. This “HDB Experience” bonds Singaporeans, in the same way that National Service and the education system have created a common experience among Singaporeans of all races and from all walks of life. Singaporeans of different races and socio-economic groups could have the opportunities to mix and interact with one another, thereby fostering ethnic integration and social cohesion.

ATogether with the Central Provident Fund scheme, healthcare support and “Workfare” principle, the home ownership scheme through public housing has become a key pillar of Singapore’s social security framework. With home ownership, each Singaporean family has an asset to hedge against inflation and as a store of value that can be monetized in times of need. In a recent survey, each HDB household was estimated to have an average housing equity worth about SGD$154,000. Home ownership also facilitated upward social mobility and fulfilled the housing aspirations of Singaporeans. Lower-income families could look forward to becoming homeowners, instead of being entrapped in rental housing.

Actors and Stakeholders

 Who proposed the solution, who implemented it and who were the stakeholders?
The Home Ownership Scheme was mooted by the then Prime Minister of Singapore, Mr. Lee Kuan Yew. Mr. Lee firmly believed that home ownership was vital for a migrant society like Singapore. Home ownership would give Singaporeans something to work for and to protect which would reap long-term benefits for our then young developing nation.

The home ownership scheme is driven by HDB, a statutory board under the Ministry of National Development. At its inception, HDB was responsible for the entire process of public housing provision, from planning and design to the removal of squatters, land assembly, construction (with building works by private building contractors) and equitable housing allocation. Upon completion of the flats, HDB followed through with the flat allocation, management and maintenance of the housing estates. In 1989, Town Councils were formed to takeover the management and maintenance of the common areas in HDB estates. In 2003, with the corporatisation of the Building & Development Division of HDB (comprising architectural, engineering and project management expertise), the design and development of HDB flats, implementation of upgrading programmes, procurement of construction services and resources, project management, etc. were outsourced to private consultants, including Surbana, the corporatised body. In 2005, the Government launched the “Design, Build and Sell Scheme” which allowed private developers to develop and sell a proportion of new public housing on same eligibility conditions as HDB to provide more options to meet growing housing aspirations.

An important partner of HDB in the home ownership is the Central Provident Fund (CPF) Board, the statutory body that administers Singapore’s mandatory pension contributions. In 1968, CPF Board allowed its members to pay for their HDB flats using the savings in their CPF accounts. This provided a low-cost home financing solution to bring home ownership within the reach of most Singaporeans. It is a major factor underlying the success of the home ownership scheme.

As public housing is in fully integrated and self-contained towns with a full range of commercial, educational, recreational, transport and other communal facilities, HDB also works closely with various public agencies e.g. Urban Redevelopment Authority, National Parks Board, Land Transport Authority, Ministry of the Environment and Water Resources, Ministry of Education, Singapore Land Authority, and Ministry of Community Development, Youth and Sports, on comprehensive planning for township development.

(a) Strategies

 Describe how and when the initiative was implemented by answering these questions
 a.      What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
Singapore’s achievements in public housing and home ownership can be attributed to an interaction of several policies as briefly described below.

Land Acquisition Policy: In the early years, to assemble sufficient land at a reasonable cost, the Government had to acquire private land for the development of new public housing. Landowners, given fair compensation for land acquisition, were initially aggrieved but accepted it for national interests, as demonstrated by the Government’s massive and successful execution of the public housing programme.

Central Provident Fund Policy: The CPF, a compulsory savings scheme whereby up to 34.5% of a worker’s salary is set aside by the employer and employee, has enabled Singaporeans to fund the purchase of their homes. Today, over 70% of Singaporean HDB flat owners service their housing loans from their CPF account without the need for outright cash payments. Housing SubsidiesAll HDB flats are sold on a 99-year lease at subsidized prices. Every flat is sold by HDB at below their market value to ensure that HDB flats are affordable to citizen families. First-time citizen buyer have a choice of buying a flat at a subsidized price from HDB, or an HDB flat at market value in the secondary market with a housing grant of SGD$30,000 to SGD$40,000 from the Government. Lower-income families (with monthly household income not exceeding S$4,000) are assisted with more subsidies in the form of Additional Housing Grants of up to S$30,000, at graduated scale so that the lower the household income the higher the subsidy they would enjoy. This is on top of existing housing subsidies given to first-time buyers.

Affordable Pricing: To ensure that the large majority of Singaporeans have access to quality housing, HDB is guided by the Government’s commitment that 90% of Singaporean households will be able to own at least a basic flat. HDB closely monitors the Debt-Service Ratio of the target segments, comparing the monthly mortgage payments of the flats they buy with their income levels. Today, the Debt-Service Ratios of its flat buyers are generally below 25% of their monthly household income, well within international benchmarks on affordable housing expenditure.

To keep public housing affordable, development cost is carefully managed through land use optimization, cost-effective building design (high-rise, high-density) and enhanced construction efficiency. Latest innovations in building technology, such as prefabrication and pre-casting, are adopted to raise construction productivity and quality, while lowering construction cost. The concept of a sole agency in charge of public housing enables more effective resource planning and allocation. HDB is able to secure land, raw materials and manpower for large-scale construction to optimize results and achieve economies of scale.

Home Financing: Besides the availability of CPF savings for flat purchase, HDB also provides housing loans at concessionary interest rates to eligible home buyers. HDB flats can also be mortgaged to approved banks and financial institutions for competitive home loans.

(b) Implementation

 b.      What were the key development and implementation steps and the chronology? No more than 500 words
Eligibility conditions: As public housing is heavily subsidised, appropriate eligibility rules and policies are necessary to allocate limited housing resources and subsidies to deserving applicants. Since home ownership was implemented in 1964, HDB flat buyers need to meet the eligibility conditions of family nucleus, citizenship, household income ceiling and non-ownership of private property. To deter speculation of public housing, HDB flats are sold for owner-occupation. Each eligible household can own only one HDB flat at any one time. Flat owners need to occupy their flats to satisfy a minimum occupation period before they can sell them in the open market or sublet their entire flats. Each family can buy subsidized flats twice. Those who buy a second new flat from HDB must have occupied their first flat for 5 years and pay a levy to reduce the subsidy of the second flat.

Planning Concept and Ethnic Integration Policy: Being a multi-ethnic and religious society, HDB recognizes the importance of racial and religious harmony. HDB public housing estates are physically designed to promote interaction among residents of different income levels, races and religions. HDB estates are developed with facilities such as places of worship, eating and marketing facilities that cater to the needs of all ethnic groups. Flats of varying types and sizes are provided within each precinct and block, so that households of different income and social profiles can live together and interact with each other. Common spaces and shared facilities e.g. open spaces and children’s playground, are provided for residents to mingle. The Ethnic Integration Policy, implemented in 1989, seeks to prevent the formation of racial enclaves by setting the maximum allowable proportion for each ethnic group in every HDB neighbourhood and block. Today, every public housing estate is a microcosm of multi-racial Singapore.

Physical Design: To build an inclusive society, public housing accommodates various groups of people. Flats built in the early years were utilitarian, comprising uniform blocks of mainly 1-room, 2-room, and 3-room flats (from 35 to 60 sqm). Progressively, in response to changing lifestyles and growing affluence, bigger flat types, 4-room, 5-room and Executive flats (90 sqm to 145 sqm) were introduced in the 1970s and 1980s, and Premium flats with better quality finishes in the 1990s. To encourage private sector participation in public housing and to inject greater variety for flat buyers, the Design, Build & Sell Scheme (DBSS) was introduced in 2005 whereby private developers undertake the entire public housing development process - from tendering for the land, design and construction, to the pricing and sale of the units to eligible buyers. The Government continued to provide housing grants to eligible flat buyers of DBSS flats.

With an ageing population and a widening income disparity in Singapore, greater attention is now paid to elderly and low-income flat buyers, through the provision of Studio Apartments, a special form of public housing customized for elderly living and sold on shorter 30-year leases for affordability); and the construction of more smaller flat types.

(c) Overcoming Obstacles

 c.      What were the main obstacles encountered? How were they overcome? No more than 500 words
Clearance of Squatters: A mass housing programme of this scale faces several major obstacles. In the initial years of the programme, the first problem to be tackled before building construction was clearance of squatters from the sites. Although affected squatters would be given new housing and fair monetary compensation, some were not easily persuaded to make way for a new housing project. Public education and persuasion were needed to overcome their ignorance and conservatism to vacate from sites. Monetary compensation was reviewed and adjusted periodically as part of enhanced resettlement benefits to move squatter families to new HDB dwellings.

Supply of Building Materials: Indispensable to the success of the Building Programme is the constant, uninterrupted supply of building materials. Realizing that the supply of building materials by local manufacturers was unable to keep up with the demand in view of the accelerated building programme in the earlier years, HDB built its own quarries, brickworks and piling plants, and imported materials from overseas to supplement local production. It also carried a stockpile of certain building materials as a buffer to meet any shortages of supply due to unforeseen circumstances.

Financing for Home Buyers: When the home ownership scheme was introduced in 1964, the response was muted, even though the flats were attractively priced at almost cost levels and housing loans (of 5-, 10- or 15-year terms) were offered to help home buyers.In 1968, applicants were allowed to use their CPF savings to pay for both the initial down-payment as well as the monthly mortgage installments for their HDB flats. As a result, a family could own a flat without suffering any reduction in their monthly disposable income. The effect of the scheme was tremendous – the number of flats sold surged from 1,500 units in 1967 to 8,500 units in 1968 after the scheme was implemented. Consequently, home ownership soared.

Managing Demand and Supply of Flats: HDB’s flat allocation system has undergone changes over the years to meet changing circumstances and housing needs of the population. In 1994, new HDB flats were allocated via a queuing system called the Registration for Flats System (RFS). Demand then was strong and HDB's building programme was planned based on this RFS queue. However, because of the poor economic conditions after the Asian Financial Crisis in 1997, housing demand and property prices were severely affected. Demand for new HDB flats fell sharply and many existing applicants dropped out from the RFS queue.

To better manage the supply and demand of flats, HDB introduced the Build-To-Order (BTO) system in 2001 with the aim of making it more responsive to HDB flat applicants’ preferences. Unlike the RFS, the BTO links the building of flats with actual demand such that development of flats will proceed only when there is sufficient take-up. Moreover, as flat buyers apply for flats in specific sites under the BTO system as opposed to application zones under the RFS, the

(d) Use of Resources

 d.      What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
The home ownership scheme succeeded with strong government support in the form of legislative and financial commitment. Public housing is financed mainly by internal savings within the Republic. The capital expenditure for land purchase and construction of public housing was met by loans from the Government in the initial years. HDB obtained from the Government two types of loans: (1) a 60-year loan at 7¾ per cent interest to finance public housing for rental, and (2) a 10-year loan at 6 per cent interest to finance public housing for sale. Funds are drawn from the Government mortgage financing loans to finance the mortgage loans granted for the purchase of flats under public housing schemes. Presently, HDB issues bonds and make borrowings from banks to finance the capital expenditure for its development programmes.

HDB’s income comprises mainly interest income from mortgage loans, rental and related income from commercial and industrial properties and car park charges. Expenditure comprises mainly payment of interest on loans, expenses on upgrading works and improvements, and expenses on administration. As the flat rentals are heavily subsidized and the selling prices of home ownership flats are generally fixed below cost, the resulting deficit is fully reimbursed by the Government annually in the form of a housing subsidy in the State budget. The Board’s annual deficit subsidized by the Government has increased from SGD$2.1 million in 1960 to SGD$740 million in the financial year 2006/07. The cumulative government grant to the HDB since its establishment in 1960 amounts to almost SGD$16 billion. The funding and disbursement of subsidies are subjected to internal and external audits and conform to public accounting standards.

Sustainability and Transferability

  Is the initiative sustainable and transferable?
Sustainability: As home purchase requires long-term financial commitment, it is important that flat buyers are credit worthy and purchase flats within their means, so that they can sustain long term ownership of their homes. HDB carries out credit assessment on home buyers, taking into account the buyers’ age, income and other financial commitments. Flat buyers are also required to make full use of their CPF savings first before HDB grants them an HDB mortgage loan. For borderline cases, HDB conducts financial counseling sessions so that flat buyers are aware of their financial commitments before the flat purchase. Home buyers are also required to take up Home Protection Insurance to help family members pay off the mortgage loan in the event of demise of the flat buyers. Those who face temporary financial difficulties in repaying their mortgage loan due to a reduction or loss of income, retrenchment or business failure etc., are assisted through various financial assistance measures.

With 95% of flat dwellers owning their flats, it is important that the asset value of public housing is sustained and enhanced where possible. Since the 1990s, HDB has implemented an Estate Renewal Strategy to bring older HDB estates to the standards of newer ones. This programme improves and upgrades the physical conditions and facilities of ageing estates and flats. The programme is heavily subsidized by the Government, with citizen flat owners co-paying only a small amount of the cost.

With more people living in HDB flats coupled with more extensive and better amenities to be provided in the future, there will be increasing pressure on the State budget to fund the public housing programme. This can be sustained only if the State continues its economic growth.

Going forward, HDB will continue to ensure that the home ownership scheme remains relevant and responsive to changes, by taking into consideration public feedback through various channels such as grassroots meetings or the media, conducting surveys among public housing residents, and engaging in inter-agency consultations. New concepts and areas of focus will be adopted in line with the changing demography and life-cycle housing needs of the population.

Transferability: Singapore’s public housing programme has generated keen overseas interest. HDB has received numerous visitors from developing and developed countries in various continents, to learn about the HDB public housing programme. HDB also conducts training courses for public officers from some of these countries. In 2003, the Building & Development Division of HDB was corporatised. Today, the corporatised body, under the brand name of Surbana, has successfully exported its wealth of technical expertise and experience in HDB’s township development and building consultancy services to more than ten key markets, including China, India, Vietnam and the Middle East.

Lessons Learned

 What are the impact of your initiative and the lessons learned?
There are at least 4 key lessons to be drawn from Singapore’s home ownership scheme.

Importance of Home Ownership: When HDB was formed in 1960, the original intention was to build flats for low-cost rental housing. However, soon after, the Government decided to help the people to own homes. By owning their flats, HDB residents are committed to take care of their property and housing environment. This in turn helps to preserve their property asset value. More importantly, owning a home has given the vast majority of Singaporeans a tangible stake in the country, something to protect and defend. The home ownership scheme has therefore contributed significantly to our nation-building efforts.

Continuous Renewal & Rejuvenation of Towns: Public housing has often been associated with slums and poor social conditions after its initial years. This in turn breeds neglect, fear and despondency. It is therefore important to maintain our public housing estates in good condition to prevent them from degenerating into slums. This can be achieved by upgrading the physical environment of older HDB estates and flats to the standards of new estates, and replacing old blocks with new developments where possible. Besides renewing and rejuvenating the existing towns, such physical upgrading also helps to preserve and enhance the value of older HDB flats.

Focus on Building Communities: There are many examples around the world today of racial tensions and conflicts between different ethnic groups and religions. These usually originate from socially or racially segregated ghettos and slums of their cities. Once racial enclaves are formed, people of different races do not have opportunities to interact with each other, resulting in mistrust with one another and misunderstandings flaring up into altercations easily.

In a multi-racial society like Singapore, the Government implemented a policy to integrate different races and income groups in our HDB estates. Through the design of public housing and policies e.g. Ethnic Integration Policy, we have been able to maintain racial harmony and social cohesion, despite the diversity of our population. This has been critical to Singapore’s national development.

Forward-looking & Responsive Housing Policies: Public housing policies should be forward-looking to meet the ever changing needs of the population. In planning HDB towns, HDB takes a long-term and comprehensive planning approach, working closely with other public agencies to ensure that all necessary infrastructure and facilities are in place. Our housing policies and programmes are formulated and regularly reviewed/refined to ensure that they move with the times even as the population and its expectations change, and that both immediate and long-term housing objectives and the needs and aspirations of Singaporeans are met.

Contact Information

Institution Name:   Housing and Development Board
Institution Type:   Government Agency  
Contact Person:   Leong Chok Keh
Title:   Deputy Director (Policy and Property)  
Telephone/ Fax:   6490 3501
Institution's / Project's Website:  
E-mail:   lck2@hdb.gov.sg  
Address:   HDB Hub 480 Lorong 6 Toa Payoh
Postal Code:   310480
City:  
State/Province:  
Country:   Singapore

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