PUBLIC HOUSING IN SINGAPORE: CATERING TO THE LIFE CYCLE NEEDS OF ITS RESIDENTS

Good Morning. It is my honour and pleasure to be here today at the International Housing Conference, in celebration of the 60th anniversary of the Hong Kong Housing Society.

2 The theme of the conference - "Achieving Quality Living in an Ageing Community" - is a relevant and timely one. Many countries today are faced with a rapidly ageing population. It is a challenge for all governments and policy makers around the world to meet the needs of the fast growing elderly population. This is particularly so for this part of the world where fertility rates have been falling rapidly.

3 The housing circumstances and challenges for Hong Kong and Singapore are similar in many aspects. Hong Kong's population and density are larger. Both of us operate extensive public housing programmes. Nearly half of the Hong Kong population lives in public housing. In Singapore, the proportion is about 85%. Our populations are rapidly ageing, at rates that are among the fastest in the world. About one in four Hong Kong residents will be aged 65 and above in 2030 . In Singapore, the corresponding ratio will be one in five.

4 Because our circumstances and challenges are similar, there is much that we can learn from each other. I have made it a point to visit Hong Kong every two to three years. My visits to the Hong Kong Housing Authority and Hong Kong Housing Society yesterday gave me a good understanding of recent developments in housing here. This morning, I would like to share with you Singapore's experience in public housing and how we seek to cater to the life cycle needs of our population, not just for the elderly but also for young couples. I will also briefly touch on the latest policy developments - not just housing - in the area of retirement adequacy in Singapore.

5 I am mindful that I am speaking from a Singapore perspective and with our policy objectives in mind. So I want to caveat my presentation by saying that our approach may not be relevant to your unique circumstances. Nevertheless, I hope that my presentation will provide some food for thought as you address the challenges in your own societies.

Public housing in Singapore today

6 Singapore's public housing authority - Housing & Development Board or HDB, was set up in 1960, shortly after we achieved self-government. We were then facing a serious housing shortage. People stay in squatters with poor hygiene and fire safety. Today, 48 years after HDB was set up, there are almost 900,000 flats across Singapore which house 85% of our population. This means that public housing touches the life of virtually every Singaporean. They come in different designs and sizes to suit the different income and lifestyle requirements of Singaporeans. Most importantly, nine in 10 Singaporeans own their own homes today.

Home Ownership Policy

7 The high home ownership rate in Singapore is the result of a deliberate policy. Home Ownership is the cornerstone of our public housing programme. Started in 1964, the Home Ownership Programme aims to give Singaporeans a tangible stake in the country and its future. Don't forget that we started as a nation of immigrants. When we first gained independence in 1965 the political imperative was to give our people a sense of nationhood.

8 Minister Mentor Lee Kuan Yew gave the rationale for this policy in his memoirs: "I had seen the contrast between low-cost rental flats, badly misused and poorly maintained, and those of house-proud owners, and was convinced that if every family owned its home, the country would be more stable… I believe this sense of ownership was vital for our new society which had no deep roots in a common historical experience."

9 The home ownership flat provides the incentive for Singaporeans to work hard to own a flat, and to defend it. National Service (NS), the conscription of able-bodied male citizens to serve in Singapore's military defence, would not be possible if Singaporeans did not feel that they had such a tangible stake to defend.

10 Our public housing estates are often said to be the microcosm of Singapore society, in terms of demography and way of life. All our estates are multi-racial in character, and contain a mix of different flat types. Buying a HDB flat to start a family has become the norm for young Singaporean couples. Therefore, when a young man asks his girlfriend, "Shall we apply for a HDB flat?" - she knows distinctly that it is a marriage proposal.

Role of Public Housing - Catering to Life Cycle Needs

11 Public housing in Singapore is not just about bricks and mortar. It is about people. So, the HDB flat is first and foremost a roof over the heads of the population and a shelter to bring up our children. But, our public housing scheme has also evolved over time to meet other social objectives. HDB living promotes community cohesion. It allows Singaporeans to share in the country's progress through heavily subsidized upgrading programmes. The HDB flat can also supplement our retirement income when we are old.

12 As we all know, households at different stages of their life cycles have different housing needs and aspirations. In Singapore, our public housing policies attempt to cater to these lifecycle needs and aspirations. First, we seek to help Singaporean couples to buy their first flat when they get married. Second, we seek to build up the value of their flat. At the local level, we do this through upgrading the flat and the neighbourhood. At the macro-level, the flat value rises in tandem with the economic growth of the nation. Third, we put in place options to help them to cash out on their flats in old age. Let me elaborate on them.

13 The housing lifecycle begins when young couples get married and start a family. To help them own their first home, HDB offers new flats at subsidised prices. Alternatively, the household can buy a resale flat from the open market and enjoy a housing grant of up to HK$220,000 (S$40,000). Lower income households are given Additional Housing Grants of up to HK$170,000 (S$30,000). If you add these up, the cash grant can amount to almost HK$400,000. To further ensure affordability, the government offers housing loans at subsidised interest rates. With these various assistance measures, most young households are able to own their own homes even when they are just starting out. The first-time flat buyers who purchased new flats from HDB last year used, on average, around 20% of their monthly household income to service their housing loans. This is very affordable by international standards. In fact, most can service their loan through their Central Provident Fund alone. They need not come up with further cash payments.

14 The next stage of the life cycle will typically see the incomes of these households rising in tandem with career advancement. This leads to higher housing aspirations. Many of them will have children and need larger flats. To cater to rising aspirations and needs, HDB offers a second concessionary housing loan to help these families upgrade to bigger flats. There is a range of housing options to cater to higher aspirations, from four-, five-room or Executive flats, to executive condominiums. We have also recently invited private developers to design, build and sell public housing flats in a few projects.

15 In short, the public housing programme plays a key role in facilitating upward social mobility, by helping Singaporeans to move up the housing ladder when their circumstances improve. This provides hope. Anyone who works hard can, with some help, improve his life and that of his family. It motivates Singaporeans to work hard so that their flat can grow in value, and they can upgrade to a better home.

16 As the households mature, their HDB flats also age. For the older estates, the focus then switches to rejuvenation. HDB has a range of upgrading and renewal programmes to bring the older HDB estates to the standards of newer ones in terms of facilities and amenities. It is a bit like a makeover: nip and tuck, but sometimes there can also be more substantial improvements. There are different improvement programmes to upgrade the neighbourhood, block and even within the flat.

17 With these in place, many of HDB flat owners will see their flat appreciate in value over their lifetime, in line with economic growth of the country. For many Singaporean households, the HDB flat is their largest single asset. It is estimated that HDB households each hold an average of HK860, 000 ($154,000) in net equity (i.e. assets net of outstanding loans) in their HDB flat . That was two years ago, before prices rose in 2006 and 2007.

18 The final stage of the life cycle is old age. Having planted the seeds of home ownership, grown the value of our homes over our lifetime, we must be able to harvest this valuable asset in our old age. There are several options for the elderly to monetize their flats. The first option is to sell their existing flats and downgrade to smaller flats or Studio Apartments. Studio Apartments are smaller flats specially built for the elderly. They are equipped with elderly-friendly fittings and sold on a 30-year lease. Alternatively, to supplement their retirement income, the elderly can also rent out one or two rooms. Or, they can sublet their entire flat and live with their children while realising a comfortable rental income.

Lease Buyback Scheme

19 We have also put in place a new scheme called the Lease Buyback Scheme.

20 The Lease Buyback Scheme is targeted at elderly lessees, aged 62 and above, living in two-room or three-room flats, two of our smallest flat types. In Singapore, our new flats come with 99-year leases. So, these flats typically have about 60 to 70 years of lease remaining if the elderly had bought them when they were working adults. Under the scheme, HDB will buy back the tail end of the flat lease, and leave the elderly lessees with a shorter lease of 30 years on the same flat. This unlocks housing equity for the elderly flat owners. There is a sense that reverse mortgage is still culturally not well-accepted in Singapore, and with the Lease Buyback Scheme there may also be some resistance. So to incentivise the elderly to sign on, the government provides a HK$56,000 (S$10,000) subsidy. The total amount - equity plus subsidy - will be given to the household in two parts. First, they will receive an upfront payment of HK$28,000 (S$5,000) to help them meet their immediate needs. We decided not to give the full payment upfront as it may not be financially prudent. The remainder will be used to buy an annuity which, providing them with a monthly income for as long as they live, even as they continue to live in the same flat. This allows them to "age-in-place" and enjoy the familiarity of their home and community".

21 The amount of monthly income will depend on the market value and remaining lease of the flat. Also, it will differ by age and gender of the lessee. Let me give an illustration. A couple jointly owns a three-room flat worth HK$1.1 million (S$200,000) with a 70-year remaining lease. They are both 62. If they sign on to the LBS, they will get: 30-year flat lease; HK$56,000 (S$5,000) upfront lump sum and a combined payout for life at around HK$2,700 (S$490) per month. This is the basic amount for the elderly, who will also have his CPF savings and children's allowance. He can in fact continue to rent out a room for income. We plan to start the Lease Buyback Scheme next year, and I believe that it will be an important pillar in our housing policies for the elderly.

Retirement Adequacy

22 No discussion on public housing or the elderly in Singapore is complete without touching on the role of the Central Provident Fund or CPF. The CPF is a compulsory savings scheme whereby up to 33% of a worker's salary is set aside each month by the employer and employee jointly. CPF monies are managed and guaranteed by the government. CPF members can use the their savings for housing, investment and medical purposes..

23 Besides ensuring retirement security, the CPF system has been instrumental in allowing Singaporeans to fund the purchase of HDB flats. Over 70% of Singaporean flat owners are able to service their housing loans from their CPF accounts without cash top-ups.

24 We are in the midst of transforming in our CPF system, with the increased emphasis on retirement adequacy. We have recently announced a low-cost national annuity scheme that allows the individual's CPF savings to be stretched over his entire lifetime after retirement, no matter how long he lives. We call it the National Lifelong Income Scheme, or CPF LIFE. CPF LIFE will protect Singaporeans from what some experts call "longevity risk" - not the risk of living too long, but the risk of running out of money while living a long life. The LBS I mentioned earlier, will supplement this annuity scheme to provide an additional lifelong income stream. Together they will form a strong base of income for the elderly.

Social and Infrastructure Support for the Elderly

25 Let me now move on to share with you our other housing policies and measures to prepare for an ageing society. They focus on two other areas - namely, enhancing family and community support, and improving the physical environment.

Family and community support

26 Family support is key to the well being of the elderly. This is a policy parameter that we subscribe to. Hence, we want to encourage the families of the elderly to live with or near them for mutual care and support. We provide an additional housing grant for married couples to buy a HDB flat near their parents, or to parents buying a flat to stay near their married children. An extended family - that is a married couple and their parents - applying to buy a new flat to stay together will qualify under a higher income ceiling.

27 To foster community engagement, Studio Apartments for the elderly are integrated within the public estate. Common spaces and shared facilities are built to facilitate interaction among residents, both young and old. One example is the three-in-one fitness centres. There are fitness facilities, children's playground elderly exercise equipment put together.

28 In 2006, we did a survey on elderly households who applied for Studio Apartments. An overwhelming 80% were keen to live in blocks that are mixed with other flat types, not just Studio Apartments. They were looking for a lively environment - living amongst neighbours of all ages, and helping each other out in times of need. It is clear that our elderly want to be socially integrated into the community.

Improving the physical environment

29 As highlighted earlier, we have been actively making improvements to the physical environment - both within the flat and in the surrounding areas. In older estates, we improve the facilities and living environment will enhance their attractiveness to young households. The continual inflow of young residents will help in balancing the age profile and in rejuvenating the local community. To support mobility of the elderly, we are also working towards a Barrier Free environment in all public housing estates. One of the key upgrading programmes today is the Lift Upgrading Programme where the older HDB blocks are retrofitted with lifts to stop at every floor instead of only certain floors. Costing over HK$30bn (S$5.5bn), it is a massive upgrading programme to retrofit our housing estates for an ageing society. We expect to finish the programme by 2014. At the same time, we are also introducing more ramps and linkways to our estates, so that all our housing estates will be barrier-free by 2011.

31 New residential units in our estates will also be designed to be elderly-friendly using Universal Design features, for example, in the design of the switches and corridors.

32 Just a few days ago on 1 April, a revised Barrier-Free-Accessibility or BFA code came into effect in Singapore. This will apply to both public and private buildings. This revised code will enhance the provision of BFA features including Inter-building connectivity.

Challenges ahead

33 I have spoken about key thrusts of Singapore's approach in preparing for an ageing population namely retirement adequacy and enhancing social and infrastructure support. Let me conclude by talking about the challenges ahead for Singapore.

34 First, there is the issue of the low-income elderly. We have a segment of the population who are in poor-paying jobs. They might not have been able to obtain an education in the earlier years. This is why we have 5% of our public housing as public rental flats. We will be raising this to about 10%.

35 At the same time, we want to ensure that the family and the community must work closely with the Governmentto help them. Our philosophy is that the family needs to stand first in supporting the elderly.

36 The second and related challenge is that of changing family values. We see an increasing trend of young families wanting to live apart from their parents. This is a social problem because at that stage the seniors will have only very little savings and have no one else to turn t. Some children may actually even ask their parents to move out.

37 What can the Government do? Should the Government intervene? If we do intervene as a policy measure then there will be a moral hazard. For this reason, we try to get the community involved.

38 Singapore is a firm believer of family values. We believe that strong families make for a strong society. The elderly can play a key role in the inter-generational transmission of values that the society stands for. On the flip side, dysfunctional families will weaken our society, create a dynsfucntional environment to raise children and cause social problems. Therefore, our public policies are designed to support the family. In our public housing policy, subsidised flats are reserved mainly for family units. We do not provide housing subsidies to young singles. Moving forward, this is something we need to manage - to continue to make a distinction between families and singles while recognising also the contributions of singles.

Conclusion

39 In conclusion, Singapore's public housing programme has transformed the country both physically and socially. Besides providing basic shelter, our public housing has played a critical role in providing "stakeholdership" in the country for its citizens. Over the years, our public housing programme has evolved beyond just providing a roof over the head, to cater to the life cycle housing needs and aspirations of Singaporeans. We have to remain nimble and keep up with the times.

40 Retirement adequacy is a key priority in an ageing society. We will continue to explore means and ways to allow the elderly to unlock the value of their flat.

41 Ultimately, the family, community and the government need to work together to address the financial, socio-emotional and infrastructure needs of the elderly. The Government develops policies to help the elderly, the community provides the structure within which the elderly will live in, while the family is the basic unit of our society. In this way, our will then be able to lead meaningful lives and continue to contribute to society, drawing on their years of experience and wisdom.

42 On this note, I want to thank the Hong Kong Housing Society for this opportunity to share on Singapore's perspective on the ageing issue. I look forward to hearing other views on this very important topic.

43 I wish you all a fruitful conference. Thank you.

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