Saturday, March 9, 2013

Executive Condominiums

The key to assessing the success of any policy is to distinguish the will from the deed. In other words, do not look at what the intention behind the policy is, but what its effect is. Nowhere is that more relevant than in public housing.

As the salaries of Singaporeans, especially professionals, rise, and as they marry later, a good number of couples will have combined salaries which will disqualify them from buying a new HDB flat. But at the same time, they find private properties out of reach. Executive Condominiums are intended to help this growing group.

The problem is that ECs are also an attractive financial proposition. Minister Khaw recently described the scheme as offering residents a Lexus for the price of a Corolla . That is a good analogy. But because it is such a good deal, those who could otherwise have afforded to purchase private property, are buying ECs as well. Some who cannot afford it are doing it with the help of parents or others.

The critical question therefore is whether ECs are only being sold to the class of people they are intended to benefit. The selling prices of ECs suggest that they are not. This is best illustrated by the recent sale of $2m EC penthouses. And even for more regular-sized units, prices have risen in tandem with the private property market.

You cannot blame Singaporeans for taking advantage of a good deal. Neither can you blame developers for high prices – they bid competitively for the land, they take the risk and therefore, they want to maximize their profits. Developers are not the least bit concerned that their units may not be affordable to couples who earn up to $12k a month, because that is not their only pool of buyers.

This also means that tax payer’s monies are effectively being used to subsidise the purchase of ECs for those who do not need a subsidy, and no doubt in some cases, to make a profit. Subsidies should be used to help Singaporeans buy homes, not make windfalls.

The Ministry has implemented measures to deal with some undesirable aspects, such as capping the size of EC units. However, that does not address the problem I have highlighted.

I accept that it would be difficult for MND to investigate the financial backgrounds of purchasers to assess if they belong to the class of Singaporeans we are trying to help. But if we cannot ensure that the objectives of the EC policy can be met, perhaps we should reconsider having the policy in the first place.

The problem is this concept of hybrid housing – public in some respects, private in others, and in the case of ECs, public evolving to private. Again, I understand the intention behind these policies to give Singaporeans more choices, and better quality of housing if they can afford it. But what is the result? In my division, there is a running battle between the residents and the developers of The Peak (DBSS) over quality issues. One of the residents’ complaints is that HDB is not more active in resolving matters. I can understand why HDB is not – because the contractual relationship is between the purchaser and the private developer, and HDB has limited powers to intervene. But as far as the purchasers are concerned, they bought these flats under HDB rules and restrictions, and deserve more help by the HDB.

The intention of DBSS was to provide Singaporeans with better quality of flats. What is the result? They pay high prices for flats, but end up angry and disillusioned; unhappy with their homes. They end up blaming those who were trying to help them.

I therefore urge the MND to government to focus on providing good quality public housing for the masses – for the benefit of most, Singaporeans. MND can offer a suite of choices with different sizes and amenities, but retain ownership of the process and the legal relationship with the purchaser. Let us keep separate private and public housing, and not have one morph into the other, so that everyone functions and benefits at the same level. Those who aspire something different should look to the private market.

At the same time, Singaporean couples who earn more than $10,000/mth should also have the option of public housing. To prescribe salary limits is too blunt a tool, as different people have different circumstances. Some couples have to take care of children and up to four elderly parents. There are medical and other costs to consider. Committing themselves to a large loan forces both to continue working, and does not allow the option of one of them stopping work or working part-time to spend more time with family. It also assumes that both will be able to keep their jobs for the tenure of the loan, which may not happen.

I therefore repeat the call I made some years ago to lift the salary limits for public housing, or at least set the upper limit at a much higher level. Since then, MND has raised it from $8,000 to $10,000. I urge it to go much further. Give more Singaporeans the choice of going public. Some may prefer to keep their expenses low. And at the same time, prescribe conditions which discourage gaming of the system. We have introduced measures preventing owners of private properties from purchasing HDB flats. The rule should work both ways. Any person who decides to purchase and live in public housing to take advantage of subsidies, should not at the same time complain that he is being shut out of the private market.

1 comment:

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