The SDP has proposed a new Non-Open Market, or NOM, scheme in public housing to help reduce prices of HDB flats. Under the scheme a segment of new HDB flats will be priced at cost minus the land “cost” that is currently factored into HDB prices.
As a result, prices of flats will be substantially lower, ranging from $70,000 for 2-room flats to $240,000 for 5-room flats.
As stated, the prices reflect only the cost of building a flat (that is, administrative, material, labour costs only).
As the name implies, however, flats bought under this scheme will not be allowed to be re-sold in the open market. Owners wishing to dispose of their NOM flats will have to sell them back to the HDB.
This innovative idea was introduced at today’s launch of SDP’s alternative housing policy,Housing A Nation: Holistic Policies For Affordable Homes. The paper was presented by Mr Jeremy Chen (pictured below), a decision science expert, who is currently pursuing his PhD at the National University of Singapore.
Others involved in the SDP’s housing panel include Mr David Goh, an accountant and property consultant; Dr Leong Yan Hoi, a medical practitioner and member of the SDP’s healthcare panel; and Dr Toh Beng Chye, also a medical practitioner and another member of the SDP’s healthcare panel.
Singaporeans who purchase these flats will take an estimated 9 to 15 years to pay off their housing loans (based on an interest rate of 3 percent) using no more than 20 percent of their gross income. This further reduces the financial burden of home buyers many of whom currently service their loans on a 30-year basis.
The lowered housing expenditure will free up capital for homeowners to save for their retirement or use it for other purposes such as starting a business, paying for education or medical care, investing in other instruments, etc.
NOM flats will only be available to Singapore citizens. Owners of such flats will not be allowed to own private property and will only be allowed to rent out their flats under strict restrictions such as when owners are posted overseas in their work.
The rationale behind this scheme is that the Government should not profit from Singaporeans when it comes to public housing and Singaporeans should not use it as a means of investment for capital gain. Public housing is a social good and should be used to meet the housing needs of the population, not profit-making for the government or citizens.
Existing HDB owners of flats can continue to sell their flats in the open market, hence they will be termed Open-Market (OM) flats. In addition, OM flat-owners can simultaneously own private property or rent out their flats. In other words, policies regulating OM flats will remain relatively unchanged.
However, owners who wish to dispose of their OM flats to take advantage of the NOM scheme can simply convert the status of their existing flats.
The Government will return the difference between the original price of their flats (as purchased from the HDB) and price of an equivalent NOM flat subject to a cap. This money will be credited back to the owner’s CPF account or used to pay any outstanding housing loan that one may have taken.
The converted flats will then be subjected to rules governing NOM flats.
The NOM scheme essentially gives Singaporeans an added option of buying a home at a greatly reduced price. Current HDB owners also have the choice of converting their flats to an NOM one if they so wish. As mentioned this will free up capital for use for other purposes. However, the trade off will be that they are bound by the restrictions under the scheme.
Those who wish to remain on the OM scheme can continue to do so and be able to sell/rent their properties on the open market. Of course, they are subjected to the vagaries of the open housing market.
First-time HDB buyers can choose to buy an OM or NOM flat.
Under the SDP plan, there are enough restrictions/disincentives under the NOM scheme coupled with existing incentives under the OM system that will discourage homeowners from making an exodus out of the OM market into the NOM scheme.
In addition, the NOM scheme will be introduced in a gradual manner to prevent a shock to the existing system and a sudden market correction.
This will provide stability to the OM prices while making NOM flats affordable for those who want it. This is the strength of the SDP plan. We envisage that if there is going to be a market correction of prices (which is the desired outcome), it will take place in a gradual and measured way that will not cause financial distress to current homeowners.
Other policy initiatives
Housing a Nation also makes the following policy recommendations:
1. Implement the Young Families Priority Scheme (YFPS), a targeted priority scheme that grants balloting priority for first-timer families with children or couples who are expectant for Balance Flats or new Built-To-Order Flats in non-mature estates.
2. Increase the inclusiveness of public housing by enabling single-parent families with children as well as singles to purchase and own their flats. The SDP plan will also increase the range of lower-income Singaporeans for housing rental.
3. Enhance the Lease Buy-Back Scheme to more effectively assist needy senior citizens to have a secure retirement.
4. Bar Permanent Residents and non-citizens from buying or renting NOM flats.
Under the SDP plan, the NOM system will increase the affordability and access to public housing for all
Singaporeans. While our suggestions for young families and Singaporeans with special needs will ensure our public housing system is caring and inclusive.
Collectively, these SDP policies can contribute towards resolving some of the major problems affecting public housing in Singapore today.
The full document of the paper can be viewed here. As this paper is offered for public consultation, we welcome comments and suggestions. Please send your feedback to:[email protected].