Defining “Affordability” for Public Housing

Ben Leong
8 min readOct 10, 2022


Disclaimer: Opinions expressed herewith are strictly mine as a private citizen and has nothing to do with my employer, the National University of Singapore.

I stirred the hornet’s nest over the weekend.

A number of people messaged me to thank me for helping them air their frustrations and concerns. 2 broad categories of people: (i) young people who felt stressed; and (ii) parents who were genuinely worried about their kids.

However, looking through the comments, I fear that I might not have stirred the nest thoroughly enough, so I thought I would provide an addendum to make sure that people have the *right* information to have a proper conversation.

Why HDB is currently affordable

First, some of the establishment folks are likely upset that I might have “spread fake news” that HDB is currently unaffordable. Allow me to clarify that I did no such thing.

More precisely, what I did was only to express the fears of some that HDB could potentially become unaffordable because we have seen many rounds of cooling measures in the past yet prices kept going up, so it is fair and reasonable for people to worry about future affordability.

It is not my job to do so, but as a show of good faith, I will help MND/HDB explain why HDB is currently affordable(!).

The logic is very simple.

MND has been v careful to ensure that the prices (after subsidies) are such that the mortgage payments make up approximately 1/4 of the monthly salary. In fact, this is a somewhat of a magic number because in many (most?) cases, CPF contributions fully cover the mortgage installments. No cash payments!! How cool is that!

In fact, this is a brilliant feat financial engineering probably never achieved anywhere else in the world. Our bureaucrats are v proud of this and they rightfully should be.

This is also a lesson in comms for MND/HDB: why not just *tell* people this directly to keep them off your back? :-)

But hold that thought, while proffy tells you a story.

Prof’s Ben’s Magic ’Old Changkol

For some strange reason, this proffy likes to sell shovels. But they are not just any shovels. They are magic shovels.

SAF really needs to buy some ‘cos they are so shiok to use that if SAF will issue one to every recruit on Tekong, the recruits will happily run off to dig fire trenches in the morning for breakfast!!

Don’t you want one too? Cheap cheap. For you, bro, just $2,000!

Unaffordable you say?

No problem, because proffy likes you, he offers you a deal!

You just need to pay $1 a day for the next 30 years(!). Hey, your daily kopi fix is already more than $1 man.

Now hand me that dollar …..

How exactly do we actually want to define affordable?

This story is a little ridiculous, but I hope you found it amusing and it makes point abundantly clear: affordability is not just how much you have to pay every month, it is actually about how much the whole damn thing costs!!

The government’s current definition of affordability is that every month you don’t die, which is actually not an entirely unfair definition and it has served us well for many decades. We should give credit where credit is due.

What has happened is that many Singaporeans are starting at look at affordability as a package competing with everything else that we need to pay for in life: education, marriage, raising kids, leisure, retirement, etc.

It is also important to understand an implication of the current definition of affordability: CPF OA is more or less depleted by design(!). :-(

Suppose one decides to marry at 28. BTO takes 4 years. By 32, the BTO purchase will likely wipe out all CPF OA balances. For the next 30 years, most the CPF contributions will mostly go to paying for the house. How much do people have left in their CPF by 62?

How many more years left to build up CPF before retirement?

Then when retirement comes how? No money in CPF how? OK, downgrade to smaller apartment to cash out cash proceeds! Don’t get me wrong, cashing out is a perfectly fine and legitimate thing to do.

But allow me to ask all the parents out there: is this the life that you envision for your kids? Slog n years in school, find a job and effectively become a mortgage slave (房奴) for 30 years and then be forced to do a reverse mortgage?

Is this going to be our new Forward Singapore Dream? Is this the Dream we want? Or does it sound more like a nightmare?

Important Caveat

I mentioned that I thought the government did a fabulous job in the past (think 1990's-2000) with this scheme. Why then? What changed?

Some folks will say that everything is fine because the rate of salary growth will keep up with the rise in property prices. Well, I say that is *not* fine.

In fact, the rate of salary growth has to exceed(!) the rise in housing prices. If the rise in property prices merely keeps in pace with salary growth, all our hard work to make that salary growth happened would all be in vain. :-(

I didn’t think housing was a huge issue in the earlier years for 2 reasons:

(i) Housing prices weren’t so crazy;

(ii) I expected salaries to increase faster than the property market.

I am speaking up now because neither of these conditions are now still valid. And I think even if moving forward our wages keep up with an unmitigated property market, our global competitiveness will be impacted. Today, we are *already* very expensive, aka wages are already v high. How much more expensive as a cost centre do we really want to get?

A year ago, we hear of a $1 million resale, people can claim fluk; today, we hear about 3 or 4 $1 million deals in succession and people can claim only the jumbo flats. But would anyone bat an eyelid when $1 mil HDB transactions become the norm?

Is the 4G government prepared to give Singaporeans the assurance that such a day will never come?

On Social Equity

I think as Singaporeans, we are all resigned to the fact that Bukit Timah and Sentosa Cove will be exclusive playgrounds for the rich. It is what it is.

However, when it comes to public housing(!), for it to come pass where some places will henceforth become out of reach because of wealth (or rather lack thereof) is particularly jarring.

The government has also come to realize the problem of gentrification. But why should it be a surprise? Who do we think can afford to buy a place at the Pinnacle?

The truth is the rich kids will happily cough up $700–800K for a BTO immediately after graduation because their parents can chip in, while the poorer kids are still struggling to pay off their education loans.

The most dastardly thing is that many of these (rich) people will outright tell you that once the MOP is up, they will flip and make a quick buck.

I don’t believe that MND/HDB is not aware that this is happening and that many bid for the BTO just to do this. The 5-year MOP does not keep prices down. It merely delays the inevitable. :-(

Giving Credit Where Credit is Due

To be fair to the government, Singapore almost certainly still has the best public housing programme in the world. The house is a good house. Even though we have a fire on the roof, we’re not *yet* suffering from smoke inhalation.

Also, I also want to address the elephant in the room.

While I have been speaking about public housing, the truth of the matter is that public and private markets are not independent. One of the big problems in recent years is that private property downgraders are cashing out and squeezing out the heartlanders.

And to be fair to me, I am not advocating that we will crash the market either and neither would the government want the market to crash. The ideal outcome would be a long term say 15-year horizon where the price index will be “forced” to a level somewhat lower than what we have today. This will help create the “gap” between property prices and salary increases to hopefully reduced the overall stress and increase retirement adequacy. As for the policies that should be applied to create that gap, those are just details.

Maybe we can have a moratorium of 3 years before anything kicks in to give the market time to adjust. Basically, if you believe the government, then you quickly find some sucker to offload to minimize your losses. If the government has enough credibility maybe nothing needs to be done in the 3rd year and the property market will behave?

The point I want to make again is this: if what I am proposing comes to pass, most property owners public and private alike will likely see losses. The good news is that for those who don’t move, the losses are only paper losses.

What is clear is that if the PAP thinks that it will get voted out for this, it would not be rational for the government agree to it. I think this fear is not without basis. My sense is that there are many out there who are opposed to what I say and want property prices to keep going up. I am probably public enemy #1 of the property agents.

Finally, I hope that the conversations around this housing issue can be kept as a national issue, not a political one. The Opposition supporters seem to want to lay claim to the problem like they own it. But if the government listens and acts to rein in the property market, you will vote PAP meh? If not, then stop politicizing this issue and maybe we might get a good outcome!

Forward Singapore, but Forward to Where?

I haven’t been too careful about following the news, so I am not entirely clear about the objectives of this latest Forward Singapore Exercise.

Ostensibly, it is to renew the Singapore Compact?

I am not sure what this means but supposedly Singaporeans are going to tell 4G what they want and at the end, the 4G PM will tell us what we will get?

For one, I would like to understand where the property prices will be going.

Allow me to add that based on what we have seen in the US, as property prices and costs of living continue to creep up, the talented and able will migrate. We saw migrations from the valley to Seattle and then from Seattle to Texas.

I am speaking up at this juncture, not because I think the situation is unsalvageable, but precisely because I think this is our last chance to get our act together.

Once our system goes beyond the critical region, I fear that this country will become one where our younglings will find it too stressful and expensive to marry and have kids— and people will start leaving.

For the sake of our children and our children’s children, I pray that people will tell 4G the right things so that DPM Lawrence decides to choose the golden bust.


In case people want to post comments, the discussion is here.