The rise of the public flat as an asset

By Janice Heng, The Straits Times, 31 Mar 2014

PUBLIC housing in some countries often takes the form of rental homes for the less well-off, such as Britain's council estates or "the projects" in the United States.

Although owning such property is an option, it is not seen as the default there - unlike in Singapore.

Singapore's model of home ownership allows people to buy such property as an investment which they can sell or let out.

As well as being an option for those on low incomes, the public flat here is also seen as a source of income too.

Yet it was not always thus. The public flat's role as an asset is one that emerged gradually.

When the Housing and Development Board (HDB) was set up in 1960, its role was to provide basic permanent housing for people previously living in slums and squatter settlements.

Initially, rental housing was provided but within half a decade, the HDB moved to encourage home ownership instead.

Having a nation of home owners, rather than tenants, opened up more possibilities.

In 1971, public flats were allowed to be resold for the first time. Previously, they could only be sold back to the HDB at fixed prices.

A resale market was created and, as property prices rose, selling one's HDB flat at a profit became a possibility.

Another avenue for income opened up in 2003, when HDB home owners were allowed to sublet their whole flat. Residents could upgrade to private property while letting out their HDB flat for additional income.

Previously, subletting was allowed only under special circumstances, or for those aged at least 65 who had lived in three-room or smaller flats for at least 25 years.

Schemes have also been set up to let elderly flat owners tap the value of their homes for retirement income.

Introduced in 2009, the Lease Buyback Scheme allows people over 63 to sell part of their flat's lease back to the HDB.

The proceeds go towards topping up the owners' Central Provident Fund Retirement Accounts, with any excess up to $100,000 being paid to them in cash.

The Government has made it clear that its top priority is providing homes. But the role of the public flat as an asset is inescapable.

As Prime Minister Lee Hsien Loong put it in last year's National Day Rally speech: "The HDB programme is not just about the roof over our heads. It is also a valuable nest egg."

This is the second of 12 primers on various current affairs issues, published in the run-up to The Straits Times-Ministry of Education National Current Affairs Q