Singapore Democrats | YourSDP.org
In a dialogue session with Singaporeans, Minister for National Development Mr Khaw Boon Wan said that the HDB lost "hundreds of millions" of dollars every year.
This is counterintuitive to Singaporeans who pay hundreds of thousands of dollars for their flats, many of whom take out huge housing loans which they spend 20 to 30 years to pay off. Much of the mortgage payments are taken from our CPF which deplete our retirement funds.
So how is it possible that while Singaporeans pay such large amounts for our flats, HDB reports such large annual losses?
The reason, as Mr Khaw says, is that HDB spends money on items such as "acquisition costs". However, he doesn't reveal how much these costs are.
What Mr Khaw means is that HDB buys its land from the Government (see HDB statement here). The land is acquired by the Government at little or no cost. It then sets a price for this land and sells it to the HDB.
So this seems to be a case of the HDB losing money paying the Government. In the end, it is still the Government making all the money.
Mr Wong Pak Shong remarked that when it comes to the compulsory acquisition of land, the Government "is a terrific moneymaking machine". Mr Wong is no ordinary Singaporean, he was a former top official at the Monetary Authority of Singapore.
Profiting from Singaporeans through public housing is wrong.
This is why the SDP proposes the Non-Open Market (NOM) scheme for HDB flats in our housing policy paper Housing A Nation: Holistic Policies For Affordable Homes. Under this scheme, Singaporeans can choose to buy flats that are significantly cheaper ranging from $70,000 for 2-room flats to $240,000 for 5-room flats.
Singaporeans who purchase these flats will take an estimated 9 to 15 years to pay off their housing loans (based on an interest rate of 3 percent).
The prices reflect the true cost of building the flats: material, labour and administrative costs. They do not include the "cost" of the land.
In return, NOM flat owners cannot sell their flats on the open market. They must sell it back to the HDB at a discounted price if they don't want to continue living in it.
The advantage of the NOM scheme is that homeowners do not have to spend all their retirement savings on their flats or taking out huge loans that require a lifetime to pay back. They can use the savings for retirement or other investments such as education, healthcare or starting a business.
Under the SDP's plan, current HDB owners who want to convert their flats to NOM ones can do so and the Government will return the difference of their purchase price and the NOM price to their CPF accounts.
Singaporeans who want to have the option of selling their flats in the open market can continue under the present system or purchase new BTO flats at the prevailing rate that HDB offers which includes the "cost" of the land.
In other words, HDB buyers will have an added NOM option under the SDP's proposal.
Read also SDP proposes non-open market flats in housing policy
The benefits of the SDP's NOM scheme is obvious as they will make public housing for Singaporeans genuinely affordable and save homeowners much funds.
The HDB will also benefit from the scheme as it will not have to "purchase" land from the Government and report losses of hundreds of millions of dollars every year.