University of Chicago Law SchoolChicago Unbound

International Immersion Program Papers Student Papers

2017

A Tale of Two Cities: Comparative Study of PublicHousing Policies of Hong Kong and SingaporeRichard Junqi Zhang

Follow this and additional works at: http://chicagounbound.uchicago.edu/international_immersion_program_papers

This Working Paper is brought to you for free and open access by the Student Papers at Chicago Unbound. It has been accepted for inclusion inInternational Immersion Program Papers by an authorized administrator of Chicago Unbound. For more information, please contactunbound@law.uchicago.edu.

Recommended CitationZhang, Richard Junqi, "A Tale of Two Cities: Comparative Study of Public Housing Policies of Hong Kong and Singapore" (2017).International Immersion Program Papers. 71.http://chicagounbound.uchicago.edu/international_immersion_program_papers/71

DRAFT

1

ATaleofTwoCities:ComparativeStudyofPublicHousingPoliciesofHong

KongandSingapore

I.Introduction

BothlocatedinthewesternendofthePacificrim,HongKongandSingapore,

thoughover2,500kilometersapart,arefrequentlycomparedfortheireconomic

and housing developments. Both cities are renowned for their successful

economicandsocialdevelopments–transferringfromunderdevelopedtonewly

industrializedeconomiesinaspanofjustovertwodecades.

Given the tension between the density of population and the limited size,

housinghasbeenaproblemthatbothcitiesneedtofaceseriously.However,the

two cities are telling quite different stories in terms of the affordability and

conditionsoftheirhousingmarkets.AccordingtotheDemographiaInternational

HousingAffordabilitySurvey,1 HongKonghasleastaffordablehousingamong92

majorhousingmarketsaroundtheworldforallthesevenyearssinceithasbeen

includedintheSurvey,withaMedianMultiple2 of18.1in2016,whileSingapore

1 Demographia,13thAnnualDemographiaInternationalHousingAffordabilitySurvey(2017),availableathttp://www.demographia.com/dhi.pdf. 2 Id.MedianMultiplereferstomedianhousepricedividedbygrossannualmedianhouseholdincometoassesshousingaffordability.TheMedianMultiple(ahousepricetoincomeratio)iswidelyusedforevaluatingurbanmarkets,andhasbeenrecommendedbytheWorldBankandtheUnitedNationsandisusedbytheJointCenterforHousingStudies,HarvardUniversity.Similarhousepricetoincomeratios(housingaffordabilitymultiples)areusedtocomparehousingaffordabilitybetweenmarketsbytheOrganizationforEconomicCooperationandDevelopment,theInternationalMonetaryFund,internationalcreditratingservices,mediaoutlets(suchasTheEconomist)andothers.

DRAFT

2

seemstoenjoyamuchbetterpositionwithaMedianMultipleof4.8.SeeFigure1

forhousingaffordabilityinmajorhousingmarketswithover1millionpopulation.

Figure1:HousingAffordabilityinMajorHousingMarketswithOver1Million

Population(2004-2016)3

Singapore’spublichousingmodeloffersoneexplanationforhowtheisland-

cityhasbeenabletokeepatightleashonprices.Homesownedunderaprogram

runbytheHousingandDevelopmentBoard(HDB)accountedfor80percentofall

dwellingsasoflastyear(Figure2).4 HongKong’spublichousingaccountsforonly

about21percentoftotalhomeownership,andthereisanaveragewaitinglistof

3 DemographiaInternationalHousingAffordabilitySurvey(2017),supranote1.4 Housing&DevelopmentBoard,PublicHousing–ASingaporeIcon,availableathttp://www.hdb.gov.sg/cs/infoweb/about-us/our-role/public-housing--a-singapore-icon.

DRAFT

3

morethan4yearstogetagovernmentflatinthecity.5

Figure2:DifferentModelsofHousingMarketsinHongKongandSingapore

(2015)6

This paper will first look into the geographical information and social

economicdevelopmentandcharactersofHongKongandSingaporesoastodraw

abackgroundofthetwocities.Thenacomparativereadingofthetwocities’public

housingpolicieswill bepresentedwitha focuson sourcesof land, size, rental,

pricingandapplication-decisionprocess.Basedonthecomparison,SectionIVwill

illustrate several key factors contributing to the different outcomes of the two

5 NaomiNg,WaitingtimetogetintoHongKongpublichousingshootsupafullyearoverpast12months,SouthChinaMorningPost(February14,2017),availableathttp://www.scmp.com/news/hong-kong/education-community/article/2070493/waiting-time-get-hong-kong-public-housing-shoots. 6 Source:HongKongHousingAuthority,http://www.housingauthority.gov.hk/en/home-ownership/hos-flats/general-sales-information/index.html,andDepartmentofStatisticsSingapore,http://www10.hdb.gov.sg/ebook/ar2015/key-statistics.html.

DRAFT

4

publichousingpolicies.

II. Geographical and Social Economic Comparison of Hong Kong and

Singapore

1.LocationandBasicGeographicalInformation

BothSingaporeandHongKongare strategically locatedat theheartof the

Asiancontinent,withmostAsiancountriesaccessiblewithinafivetosevenhours’

flightradius.Thetwocitiesareonly2,560kilometersapart,butthereisalotof

difference,andsimilaritiesatthesametime.HongKonghasapopulationof7.2

millionwithlandsizeof1050sq.kilometers,consistingofaneclecticmixoflocals,

Chinese, and expats from all over the world. 7 Singapore has relatively less

inhabitants,around5.78millionwithlandsizeof707sq.kilometers,and74%of

thetotalpopulationareChinese,13.3%Malay,9.2%Indianand3.3%others.8 The

averageage inHongKong is42years,9 compared to the40.7yearsof those in

Singapore.10 Thepopulationgrowingratesinthesetwocitiesare1%and1.2%,

respectively.11

2.SocialandEconomicDevelopment

7 Government of Hong Kong SAR, Hong Kong Fact Sheets, available athttps://www.gov.hk/en/about/abouthk/factsheets/.8 Department of Statistics Singapore, Singapore in Figures 2016, available athttps://www.singstat.gov.sg/docs/default-source/default-document-library/publications/publications_and_papers/reference/sif2016.pdf.9 Supranote7.10 Supranote8.11 Supranote7&8.

DRAFT

5

Intermsofsocialandeconomicdevelopment,SingaporeandHongKonghave

beencompetingfordecadestogaindominanceasAsia’sBestPlacetoLive,toDo

Business, toVisit, oralmosteverythingelse.Both the regionshavebeen luring

foreign investors with their tax friendly policies, easy company incorporation

proceduresandexcellentinfrastructure,amongstseveralotherfactors.HongKong

has a longer history as a center for business but Singapore has fast caught up

underminingHongKong’sdominanceintheregion.Singaporehasbeenquickand

nimble to adopt business friendly policies that continue to attract bulk of the

foreigninvestorstoestablishtheirAsianpresenceonitsshores.

Averagesalariesinbothcitiesarefairlyequal–althoughthoseinSingapore

earnaround2.5%moreonaverage.Bothoffergoodemploymentopportunities

withlowunemploymentrate(3.4%inHongKongand1.9%inSingapore).

SelectedEconomicandSocialIndicators

HongKong Singapore

RealGrowthinGDP(%) 2.6 4.7

PerCapitaGNI(US$) 39,220 53,929

UnemploymentRate(%) 3.4 1.9

LaborForceParticipationRate(%)

Males 69 76

Females 55 58

InflationRate(%) 4.3 2.4

Population(million) 7.2 5.4

LifeExpectancyatBirth(years)

Males 81.1 80.1

DRAFT

6

Females 86.7 84.5

InfantMortalityRate(per1,000live-births) 1.8 2.0

TotalFertilityRate(perfemale) 1.12 1.19

DoctorsPer10,000Population 18 20

HomeOwnership(%) 51.2 90.5

Figure3:ComparisonofSelectedEconomicandSocialIndicatorsofHongKong

andSingapore12

III.AComparativeReadingoftheTwoCities’PublicHousingPolicies

It is generally agreed that Singapore has amore successful public housing

policythanHongKong.Actually,thesaleofresidentialflatsbuiltbyHDBSingapore

was in fact modelled after Hong Kong’s Home Ownership Scheme (HOS). The

current statistics demonstratewhy Singapore’s public housing policy has been

successfulindealingwithitscitizens’needofhomeownershipinthepast30years

whileHongKongatthesametimeisfacingincreasinglydensityandtensioninits

housingpolicies.

Some80percentofSingaporeansliveinpublichousingflats,whilethefigure

forHongKongin2015stoodat45.6percent. Intermsofowneroccupierrate,

some90percentofSingaporeanhouseholdsliveintheirownhousing.InHong

Kong,thatfigureisabout50percent.Thereisalsoaninterestingcomparisonin

12 Department of Statistics Singapore, Singapore in Figures 2016, available athttps://www.singstat.gov.sg/docs/default-source/default-document-library/publications/publications_and_papers/reference/sif2016.pdf.Government of Hong Kong SAR, Hong Kong Fact Sheets, available athttps://www.gov.hk/en/about/abouthk/factsheets/.

DRAFT

7

thatonlyabout5percentoflandinSingaporeisclassifiedasprotected,notfor

development,whereasinHongKongtheuntouchablecountryparklandoccupies

40percentofthetotallandarea.13

Tobeginwiththecomparisonofthetwohousingpolicies,thegeneralmarket

conditions shouldbe studied first. InHongKong, in accordancewith theHong

KongHousingAuthority(“HKHA”)’sstatisticsin2015,approximately29%ofthe

population stays in public rental housing and 16% resides in flats that are

subsidizedbythegovernment,whiletherest55%ofthepopulationoccupiesthe

privatehousingmarket.14 Aroundhalfofthepopulationhasnoownershipofany

realproperty.Inanutshell,theHongKongGovernmentisnotactiveinintervening

thehousingmarketactively,leadingtoadominationofthemarketbyprivatereal

properties. 15 In Singapore, in accordance with the data provided by the

Departmentof Statistics in2015,more than80%of thehousingwas inpublic

nature.Morethan90%ofthepopulationownsrealpropertyandonlyaverysmall

portion of population dwell by renting. 16 Compared with Hong Kong, the

Government of Singapore tends to have stronger intervention and play an

importantroleofdetermininginthehousingmarket.Tohaveamoresystematic

13 Chin,T.,&Strand,J.B.(2008).HongKongvs.Singapore:Acomparisonoftworealestatemarkets.CornellRealEstateReview,6,26-36. 14 Id.15 BeeLinAng,HongKongRealEstate:IstheLackofLandAMyth?,Forbes,April3,2015,availableathttps://www.forbes.com/sites/beelinang/2015/04/03/hong-kong-real-estate-is-the-lack-of-land-a-myth/#6dd16efb6689. 16 Department of Statistics Singapore, Singapore in Figures 2016, available athttps://www.singstat.gov.sg/docs/default-source/default-document-library/publications/publications_and_papers/reference/sif2016.pdf.

DRAFT

8

housingpolicycomparison,thepubliconesweretobeanalyzedhere.Asdominate

publichousingtypes,thepoliciesforbothpublicrentalhousingandpublichome

ownershipwouldbeanalysescomparatively.

1.ServiceProviderstothePublicHousingofHongKongandSingapore

andFinancingSources

InHongKong,thepublichousingprogramwasdevelopedandimplemented

bytheHousingDepartmentofHKHA.Inotherwords,publicsectorprovidespublic

housingservicestopeople.ThemainfinancingsourcesofHKHAincludetwoparts,

publicandprivate.Thepublicsourcesaregovernmentbudget,directinjectionof

capitalandindirectsubsidiesofland.Theprivatesourcesaremadethroughselling

andleasingofproperties,aswellasthepremiumandinvestmentincome,since

HKHA is the biggest landlord with the largest housing stock in Hong Kong.17

Similarly,theHousingandDevelopmentBoard(“HDB”)isresponsibleforplanning

anddevelopingthepublichousing.Thispublichousingauthorityisalsofinanced

by both governmental sources and other incomes through leasing, selling and

investment.Onethingthatisdifferentisasovereigncontrolledsocialsecurityfund

fortheworkingpopulationcalledCentralProvidentFund(“CPF”),whichwasused

asa fundingsourcetoconstructpublichousingandpaythemoneybackat the

17 Hong Kong Housing Authority, Housing Authority, available athttps://www.housingauthority.gov.hk/en/about-us/housing-authority/index.html.

DRAFT

9

timeofthepurchasefromHDB.18

2.ProvisionsofthePoliciesandEligibility

Despitethesimilarframeworkintermsofmanagementandfinancialsources,

thedifferenceinprovisionsofthepoliciesshouldbenoted.Inpublichousingof

HongKong,anaveragesubsidyof1,700HKDwasprovidedindirectlytotenants,

whichwaslessthanonefifthoftheiraveragehouseholdincomeasof2015.19 The

provision for public housing in Hong Kong is through indirect subsidy. In

Singapore,peoplewereprovidedwithCPFtopurchaseflatsinalowerpricewith

apossibilityofobtainingaconcessionaryinterestratefromHDBformortgages,

andatleastasubsidyof$20,000isprovidedtothosewhopurchasepropertyfor

the first time. 20 After repaying the loans or buying the public housing, the

ownershipwasgivensoastobuilduptheassetportfolioofpurchasers.

AlthoughbothpoliciesforpublichousinginHongKongandSingaporehave

similareligibilitythresholdinaccordancewithHKHAin2015andHDBin2015,

e.g.theagelimitof18and21yearsoldrespectively,citizenshiprequirement,no

prior ownership of any kind of property, income ceiling, etc., different

18 CentralProvidentFundBoardofSingaporeGovernment,PublicHousingScheme,available athttps://www.cpf.gov.sg/members/schemes/schemes/housing/public-housing-scheme. 19 Hong Kong Housing Authority, Housing in Figures 2016, available athttps://www.housingauthority.gov.hk/en/common/pdf/about-us/publications-and-statistics/HIF.pdf. 20 RachelAu-Yong,Resaleflats:First-timebuyersgethighersubsidies,TheStraitsTimes, February 21, 2017, available athttp://www.straitstimes.com/singapore/resale-flats-first-time-buyers-get-higher-subsidies.

DRAFT

10

requirements were set forth in two policies in income limit for public rental

housing. HongKong has tight restriction on the limit of income and net asset,

whichisaround14%belowthemediumhouseholdincome,inordertoallocate

thelimitedhousingresourcesonlytothoseinneed.Singapore,ontheotherhand,

hasa limitofabout45%abovetheaveragemediumhouseholdincomewithan

incomeceilingof first-timepurchaserforthreerooms,whilenorestrictionwas

puttopurchasethesecond-handflatofHDB,whichwaslessstrictthanthelimit

requiredinHongKong,coveringlargergroupwithvariousincomelevels.

IV.KeyFactorsContributingtotheSuccessofPublicHousingPoliciesin

Singapore

Similar toHongKong,Singapore’spublichousingprogramstartedwiththe

provisionof relatively lowcost rentalunits.However, itmovedswiftly towards

homeownershipshortlyaftertheeaseoftheseverehousingshortageintheearly

1960s.21 Since1964,anincreasingemphasiswasplacedonhousingqualityand

homeownership. Thedemand for homeownership far exceed thedemand for

rentalhousinginthetwodecadesduring1970sand1980s.22 Thenationalgoalof

achieving a full homeownership society by the turn of the century was by no

means an easy task. It required strongpoliticalwill, and tremendous financial,

21 NationalLibraryBoardofSingapore,IntroductiontoHousingandDevelopmentBoard, available athttp://eresources.nlb.gov.sg/infopedia/articles/SIP_1589_2009-10-26.html. 22 Id.

DRAFT

11

landandhumanresources.Theaffordabilityofboththegovernmentandresidents

hadtobeconsideredcarefully.Therewereseveralmajorfactorscontributingto

Singapore’sachievementsinpublichousingprovisions,especiallyduring1970sto

2000s, i.e. 1) political commitment and efficient administration; 2) land

acquisitionpolicies;and3)thehousingfinancesystem.

1.PoliticalCommitmentandEfficientAdministration

Public housing in Singapore is not just a socialwelfare programproviding

shelterforthepoorwhoareunservedbytheprivatehousingmarket.Italsoaims

atimprovingtheoveralllivingconditionsofthewholepopulationandultimately

achieving thegoalofa fullproperty-owningsociety.23 It ispartof thePeople’s

ActionPartygovernment’sstrategytofightforsurvivalandbuildastablesociety,

surrounded by much larger neighbors in terms of population and area like

IndonesiaandMalaysia.IthasbeenusedasatooltotransformtheoldSingapore

intoanewsocietyasenvisionedbythePartyleaders.Bycontrollingthedemand

andsupplyforhousinganditsrelatedservices,thegovernmentcanmaintainthe

economic viability and sustain the ruling party’s political legitimation and

domination. The public housing program and the provision of related services

werebasicallyanationaldevelopmentstrategybywhichsocio-economicchange

andpoliticalcontrolareexercisedtothemajorityofthepopulation.24

23 Housing&DevelopmentBoardofSingapore,PublicHousing-ASingaporeIcon,available at http://www.hdb.gov.sg/cs/infoweb/about-us/our-role/public-housing--a-singapore-icon. 24 Id.

DRAFT

12

The strong political support and institutional commitments are important

ingredients for theHDB’s efficient implementation andmanagement of such a

large-scalepublichousingprogram.Theywereexpressedintheformofextensive

legislativepowersoftheHDBandtheallocationofhugefinancial,landandhuman

resourcesforthepublichousingprogram.Asthegovernmentconsideredpublic

housingasatoolfornation-building,economicdevelopment,socialintegration,as

wellaspoliticallegitimationanddomination,itthereforethrewitstotalsupport

behindtheHDB.

HDBwas established as a Statutory Board under theMinistry of National

Development to plan, build, and manage all public housing estates and their

relatedamenities.TheChairman,thedeputyChairemanandsixmembersofthe

BoardareappointedbytheMinister.TheChiefExecutiveOfficer,appointedbythe

Boardwithministerialapproval,headstheorganizationwhichisdividedintothe

administrationand financedivision,buildinganddevelopmentdivision,estates

andlanddivision,resettlementdepartmentandinternalauditdepartment(Figure

4).

DRAFT

13

Figure4:OrganizationalStructureofHDB,Singapore(2015)25

TheHDB’sstaffgrewfromafewhundredintheearly1960stoatotalof5,744

personsasof2016.26 Similartothecivilservice,quitealargenumberofstaffiin

theHDBarehighlyqualifiedprofessionals.Thehigh-levelpositionsarewell-paid

inordertoattractthebesttalents,discouragecorruption,andkeepacleanand

efficient administration. Consequently, HDB functions rather efficiently in

25 SingaporeHousing&DevelopmentBoard,OrganizationStructure,availableathttp://www.hdb.gov.sg/cs/infoweb/about-us/organisation-structure. 26 SingaporeHousing&DevelopmentBoard,AnnualReport2015/2016,availableathttp://www20.hdb.gov.sg/fi10/fi10221p.nsf/arxvi/our_people.html.

DRAFT

14

producingalargenumberofhousingunitsannuallyandmanagingandmaintain

thehugehousingstockingoodconditions.

2.LandAcquisitionPolicies

Another factor contributing to the public housing development was the

effective implementation and enforcement of the compulsory land acquisition

policies.TheLandAcquisitionOrdinanceofSingaporewasfirstenactedin1920to

enablethegovernmenttoacquireprivate landforpublicpurposes. Ithadsince

amendedseveraltimesbut,moresignificantly,itwasrepealedandreplacedbythe

LandAcquisitionActof1966afterSingapore’sfullindependencein1965.TheAct

empoweredthegovernmentanditsagencies,i.e.theHDB,tocompulsorilyacquire

anyprivatelandneededforitsdevelopment,urbanrenewalandrelatedprograms

atpriceswellbelowwhatprivatedeveloperswouldhavepaidfortheirland.This

land acquisition policy had limited land speculation and made large scale

comprehensivenewtownandpublichousingdevelopmentspossible.Inpractice,

whenasiteisdeclaredunderHDB’sacquisition,thepropertyownerswillreceive

anoticeandanofferofcompensationsbasedonthemarketvalueasatNovember

1973oratthedateofGazetteNotification,whicheverislower.Compensationwas

capped at 1973 levels for about 14 years between 1973 and 1987, with no

allowancebeingmade formarketvaluationor the landowner’spurchaseprice.

Exceptionsweremadeonacase-by-casebasis.Singaporehassincemoved toa

more market-based approach for compensation of acquired land. Subsequent

amendmentstotheLandAcquisitionActchangedthestatutorydateforpurposes

DRAFT

15

ofvaluationforcompensationto1Januaryof1986,1992,and1995.In2007,the

useofahistoricalstatutorydatewasremovedbyParliament,andcompensation

hassincebeenpeggedtofullmarketvalue.27

AlthoughtheActprovidesforcompensationat“marketvalue,”pricespaidby

theHDBforacquiredlandsare,inpractice,usuallymuchlowerthanmarketprices

(about20%ofvaluesassessedbylandassessor).28 Actually,thelandpolicieswere

viewed by the government as a forceful means of redistributing wealth and

resources.ThenPrimeMinisterLeeKuanYewdescribed theActasameansof

facilitating the redistribution of land with the primary aim of achieving a full

homeowningsociety.TheActhasbeenaverypowerfulinstrumentinthepublic

housingdevelopmentinSingapore.

3.HousingFinanceSystem

Another importantelementwhichmakesSingaporeanGovernment’spublic

housingprogrampossibleistheavailabilityoffundsfromgeneralgovernmenttax

revenueandtheCentralProvidentFund(CPF)forhousingdevelopmentandhome

purchase.Amajorpolicyinnovationin1968wasforthegovernmenttoutilizethe

CPFasavehicleforhousingfinance.In1968,anewlawwasintroducedtoallow

withdrawalsfromthefundtofinancethepurchaseofhousingsoldbytheHDB.

27 Sock-Yong Phang & Matthias Helble, Housing Policies in Singapore, AsianDevelopmentBankInstitute,ADBIWorkingPaperSeries(March2016),availableat https://www.adb.org/sites/default/files/publication/181599/adbi-wp559.pdf. 28 BelindaYuen,HousingPolicySystemsinSouthandEastAsia,editedbyR.Agus,J.Doling&D.Lee,p.41,2002.

DRAFT

16

Bothemployersandemployeescontributedacertainpercentageoftheindividual

employee’smonthlysalarytowardtheemployee’spersonalandportableaccount

inthefund.WhentheCPFwasestablishedin1955,thecontributionratewas10%

(5%eachbyemployeesandemployers)ofthemonthlysalary.Withthenewlaw

in1968,thecontributionrateswereraisedsteadily,andby1984,theywere25%

ofwages.Thecontributionratesin2016are20%ofwagesforemployeesand17%

ofwages for employers, up to amonthly salary ceiling of S$6,000.29 TheHDB

receivesgovernmentloanstofinanceitsmortgagelendingandpaysinterestatthe

prevailingCPFsavingsrate.TheHDBusestheloanstoprovidesmortgageloans

andmortgageinsurancetobuyersofitsleaseholdflats(bothnewandresale).The

typical loan represents 80% of the price of the flat. Themaximum repayment

periodis limitedto25years.Everyhouseholdcanapplyforamaximumoftwo

HDB loans. The mortgage interest rate charged by the HDB is pegged at 0.1

percentagepointabovetheCPFordinaryaccountsavingsinterestrate.(Thelatter

isbasedonsavingsratesofferedbythecommercialbanks,subjecttoaminimum

of2.5%.)30

The use of the CPF savings for the purchase of public housing is a very

29 For details, see the CPF web page athttps://mycpf.cpf.gov.sg/employers/employerguides/employerguides/paying-cpf-contributions/cpf-contribution-and-allocation-rates. 30 From1January2008,anextra1%interestperyearispaidonthefirstS$60,000ofamember’scombinedbalances.SeetheCPFwebpageondetailsofinterestratespayable for various accounts athttps://mycpf.cpf.gov.sg/Members/AboutUs/about-us-info/cpf-interest-rates.Historical interest rates can be found athttps://mycpf.cpf.gov.sg/Assets/common/Documents/InterestRate.pdf.

DRAFT

17

importantfactormakingthehomeownershipprograminSingaporepossibleand

successful.In1964,HDBinitiallyintroducedthehomeownershipschemewhich

aimedatprovidingpublichousingforpeoplewhosehousingneedswerenotmet

intheprivatesector.Theschemethengrewslowlybecauseofthesmallnumberof

flatsavailableandtherequirementofahandsomeamountofcashdownpayment.

In order to improve the situation, in September 1068, the CPF Act 1968 was

introducedtoallowmemberstowithdrawupto80%oftheirtotalCPFsavingsto

purchasehomeownership flats.TheAct also stipulated that the employers and

employeeshadtocontributeamonthlysumtotheemployees’CPFaccounts.As

the returns on CPF savings are low comparing to the price increase in public

ownershipflats,mostresidentschosetowithdrawtheirCOFsavingstopurchase

publicflatsinordertomaximizethereturnsoftheirsavings.Thisisparticularly

sowhenthegovernment furtherrelaxestherestrictionsontheresaleofpublic

housingflatsinthemarkets.Thisforcedsavingsdepositedwiththegovernment

had built up a huge capital reserve for the government to finance housing

developments and simultaneously enabled all CPFmembers to purchase their

housesandmeettheirinitialandmortgagepayments.

Thesystemisnot,however,withoutitscriticsandrisks.Themandatorynature

of the CPF, together with the dominance of the HDB, could have resulted in

overallocationofresourcestohousing.TheCPFcollectsfrommembersmorethan

whatisrequiredforhousing.Thiscouldhavecrowdedoutconsumption31 and,as

31 Sock-Yong Phang, House Prices and Aggregate Consumption: Do They Move

DRAFT

18

CPFsavingsareilliquid,ithasbeencitedasareasonbehindaweakdomesticstart-

upsector.32 The largeallocationof savings forhousingand the riskofhousing

pricedeclinesposerisks forretirement financing.33 Thephrase“assetrichand

cashpoor”neatlycapturesthebasicproblem,andpoliciesinthepastdecadeto

helpaginghouseholdsmonetizetheirhousingequity,providehealthsubsidiesfor

the elderly, and workfare for lower-income workers represent steps toward a

morecomprehensivesocialsecuritysystem.

TheaffordablerentalsegmentofSingapore’shousingmarkethasalsobeen

marginalized by the deliberate and long-standing policy bias toward

homeownership. The small proportion ofHDB social rental housing comprises

mostlyone-andtwo-roomflatsthathouselow-incomefamilies.Thereisgenerally

ashortageofaffordablemarketrentalunitsintheHDBsectorasevidentbythe

higher rental yield for HDB flats as compared with private housing. With the

increase in the foreign population in Singapore, there is a need to expand the

affordable rental sector. One suggestion is to establish housing real estate

investment trusts to help cater to the rental housing needs of an increasing

numberofSPRsandforeignersinSingaporeaswellasSingaporeanhouseholdsin

Together?EvidencefromSingapore.13JournalofHousingEconomics101(2004).32 MukulG.Asher,TheRoleoftheGlobalEconomyinFinancingOldAge:TheCaseofSingapore.ADBIResearchPaperSeries37.AsianDevelopmentBankInstitute,available at https://www.adb.org/sites/default/files/publication/157176/adbi-rp37.pdf. 33 McCarthy,Mitchell & Piggott,Asset-rich and Cash-poor: Retirement ProvisionandHousingPolicyinSingapore,1JournalofPensionEconomicsandFinance197(2002).

DRAFT

19

transition.34

While the Singapore model has attracted much interest from other Asian

countries,thetransferabilityofSingapore’sexperiencetoothercountriesneedsto

be juxtaposedwith the local political and social context. In the housing policy

sphere, ahousingprovident fund is relatively simple to setup if designedas a

savingsandpaymentsinstitution.Themorecomplexinstitutiontoreplicateisthe

HDB, in particular its resettlement, town planning, and estate management

capabilities,aswellasattentiontodevelopinggood-qualityaffordablehousingon

alargescale.Moreover,thetacticsonwhichSingaporerelies—compulsorysavings,

state land ownership, and state provision of housing—can easily spawn

widespreadinefficiencyandcorruptioninothersociopoliticalcontexts.

V.Conclusion

HongKongcandrawtwolessonsfromthecomparisonwithSingapore.One,

Singapore’shousingpolicyisheavilystate-dominated,andisfocusedoncatering

forthehousingneedsofitscitizens,whileinHongKong,housingpolicyhasbeen

to a very large extent dictated by residential property market fluctuations.

Abandoning the 85,000-unit program after the propertymarket crash and the

suspensionofHOSflat-buildingduringDonaldTsang’stermareclearexamplesof

market influence on policies that were supposed to fulfil the long-term basic

34 Sock-YongPhang,DoSingaporeans SpendTooMuchonRealEstate?, KeynotepresentationatInstituteofPolicyStudies,LeeKuanYewSchoolofPublicPolicy,NationalUniversityofSingapore(May10,2013).

DRAFT

20

housingneedsofHongKongcitizens.Second,therehasbeenanalmostcomplete

absenceof land supply strategy inHongKong, particularly since the changeof

sovereignty. This contrasts with the massive land reclamation carried out in

Singapore in the past 20 years. In that time, the SAR government halted land

reclamationandhasbeenhesitantinproposingdevelopmentofthefringeareas

ofthecountryparksduetooppositionfromenvironmentalprotectiongroups.