Singapore, the city where everyone can afford housing.

  1. Not everything is as good as it sounds
  2. Singapore's Housing Remains a Challenge for the LGBT Community: Here's Why
  3. The economic invoice dilemma
  4. HDB’s deficit fell to $2.34b as fewer units completed, dip in upgrading works
  5. Follow me on Instagram: @edgarrk22

Singapore is one of the freest and most deregulated economies and probably the most capitalist country in the world. In 2022 it ranked first in the economic freedom index, however, more than 80% of the population in the city-state live in public housing. How is this possible?

The Asian country, famous for being one of the largest financial centers in the world, has developed a public housing system that is globally unique.

Many highlight the public housing model of Vienna and Singapore as the solution to the rising housing problem in many western countries, however, there’s a big difference between the two models. The greatest difference between them lies in the percentage of property owners, the Viennese model is oriented towards rentals, three-quarters of the population rents city council-owned homes, and the Singapore model is just the opposite. More than 90% of Singapore’s citizens own their own homes, 80% of which own homes promoted, built, and granted by the state. In summary: ownership-oriented public housing, ownership with a few catches

Why does Singapore reject the free-market real-estate model?

How can they develop a property-oriented public housing system?

How has this model affected private real estate developments?

Is this model replicable in other countries?

Small land and a huge population

Singapore is the world’s second most dense country, just after Monaco, 70% of the country area has already been urbanized, with the remaining 30% being either protected areas or terrain where it’s almost impossible to build anything. The city, similar to the size of Las Vegas or Barcelona (Spain), has an extension of around 728 sq. km or 281 sq. miles, and it’s the host of more than 5,6 million people.

You may be asking yourself: It would be an impossible mission to get a house, right? Well, strangely enough, it isn’t. The reason has a lot to do with Singapore’s unique urban development model.

In 1960, the Singapore government created the Housing and Development Board, also known as HDB, a public housing company that’s responsible for regulating and managing the land, as well as building and developing real estate projects. And that’s because since 1967 most of the land in Singapore has been publicly owned. In that year the so-called Land Acquisition Act was approved, which enabled the government to take back ownership of all the land. That means the land marketed for real estate development is made available under the HDB, so there isn’t a price system for land commercialization. In other words, this public body determines how many homes it will build, and at what price and under what conditions they will be marketed, evidently always below the potential market price. On the other hand, it’s the same organization that draws land for auction so private developers can build completely private real estate projects.

In every case, the land continues to be publicly owned, the homeowners can’t do whatever they want with it (for example, sell their homes to build a hotel), and the property is more a concession than a property.

When a citizen of Singapore (foreigners can’t buy new public housing) gets one of these homes, they aren’t really acquiring the land’s ownership nor the house itself, but only the right to stay in it, a kind of lease that lasts for 99 years, after that period, the house returns to the state.

In private developments, this period may be even shorter.

Of course, during the lease period, “the owners” can do whatever they deem appropriate with the house, if they don’t want to live in it, they can sell it or rent it. In fact, it isn’t uncommon, if things are going well, for those who own older homes, to sell or rent the “public” homes, which tend to be very austere (especially the old ones) in order to move into private developments, which in Singapore’s case are far more luxurious. But the peculiarities of this curious system don’t end there.

The housing system, a social engineering tool

Since the body that builds and sells most homes is public, the government uses it as a social policy instrument, or rather, an instrument of social engineering.

For example, to avoid the formation of ghettos given that Singapore’s population has a certain racial diversity, a building or development’s dwellings are allocated in such a way that the proportion of owners has an ethnic distribution that reflects the distribution in the whole country. Singapore's population is largely Chinese (75.9%), followed by a Malay and Indian minority (15% and 7.5% respectively). 1.6% of the population of Singapore are of another ethnicity, with westerners from Europe and the United States making up a significant portion.

The newly made apartments are distributed considering the ethnical distribution of the country, in other words, in a 100-apartment building, about 76 of them are going to be given to Chinese people, 15 to Indians, 7 to Malays, and the remaining 2 will be occupied by the remaining ethnic groups.

This strategy has proven to greatly reduce and even eliminate the totality of the ghettos in the country, often at the cost of reducing the liberty of individuals to choose the location of their homes.

Not everything is as good as it sounds

The worst aspect of this model is that the government uses the granting of homes to promote certain life models. For example, traditional couples are able to access the public housing program easily, while singles and same-sex couples have great disadvantages to do so. This also applies to the mortgage field as well, as traditional couples face advantageous conditions compared to alternative styles.

This results in an economic system that combines free market and paternalistic policies (often seen as authoritarian).

A 50-year program, how has it turned out?

This system has experimented a great success, as it made housing in the city-state greatly affordable in comparison to other cities such as Hong Kong, Seoul, or Sydney, as well as allowing buyers to use less than 25% of their income for mortgages. However, all of this isn’t free.

The economic invoice dilemma

If the government of Singapore is known for one thing, it’s for keeping taxes and public spending at bay. However, things are different with this whole housing issue.

1,5 billion USD, that’s the difference between urbanization and construction work costs the state and the income it receives from selling the homes. That’s 1,5 billion dollars that are financed from the public budget. The whole housing scheme is basically financed with taxes.

Regardless of land ownership, this is the annual allocation that the Singapore government devotes to its housing policy, a perfectly acceptable amount for an economy as big as Singapore’s.

Should all the countries do the same?

Now does this mean that the governments of other countries should take back ownership of city lands and oversee housing development, just like the Singapore government does?

Singapore’s case is very particular, we’re talking about a city-state with huge economic success, a state which is managed almost like a business and where land limitations are more than evident. The differences with other countries are quite obvious, nor is it clear that if it was operating as a free market (a truly free one) the results would be much different not to mention the enormous power that such systems grant politicians to design societies at will.

But what Singapore has really achieved with this model, and I think it’s undeniable, has been to develop an urban planning and real estate price scheme that favors the development of many other activities with greater added value. For example, given that housing prices are capped, Singaporean citizens have a greater capacity to save and invest in, for example, new businesses.

Anyway, this is Singapore’s unique model, yet another model up for debate. So now it’s your turn, what do you think of the Singaporean housing model?

This article has been made possible thanks to Jessica Ghaney

Follow me on Instagram: @edgarrk22