90% of Singapore’s residents own a home. What’s their secret?

A mandatory government savings program may be the secret to Singapore's high home ownership rate

SINGAPORE (HawaiiNewsNow) - Hawaii leaders are looking across the Pacific Ocean for possible solutions to help ease Hawaii’s housing pinch.

An affordable housing delegation from Hawaii ― made up of lawmakers, state and city housing officials, developers, architects, entrepreneurs, and community advocates ― traveled to Singapore last month to learn how the island nation overcame a major housing crisis and now touts one of the highest home ownership rates in the world.

"The fundamental reason why Singapore's housing model works is because supply and demand are in balance," said State Sen. Stanley Chang, who led the delegation. "In Hawaii, we have demand (up) and supply (down), so the problem gets worse and worse and worse every year."

A 90% homeownership rate

Singapore is about the size of Molokai, but it’s population is close to 6 million people. That’s more than five times the population of Hawaii.

Before the 1960s, hundreds of thousands of Singaporeans were living in slums and overcrowded settlements. But today, more than 90 percent of residents own their home thanks to the government’s Housing and Development Board.

“There are many benefits to homeownership, not only for the people, but also for the country as a whole,” said Jenny Foo, a communications manager with HDB.

For decades, HDB has been building huge public housing projects on government-owned land, selling each flat with a 99-year lease, below market value, and with generous government subsidies.

Strict rules for owning, renting

Only residents are allowed to participate in the public housing program, and HDB officials say the lower the family’s income, the higher the government subsidies.

Foo says a family earning less than $1,500 a month could qualify for an $80,000 housing grant.

Today, the agency has built more than a million units and more than 80 percent of Singaporeans live in those projects.

"A household can own only one HDB flat at any one time. They would have to occupy the flat for at least five years before they can rent it out or sell the flat in the open market," said Foo.

Inside HDB, the lobby is packed with families anxiously waiting for their numbers to be called, so they can begin the process of buying a new home.

Monitors show the available units at each housing project and what ethnic groups ― Malaysian, Chinese, Indian, and other ― are allowed to buy there.

"Every HDB estate is a mini Singapore in terms of its resident mix," Foo said.

Upstairs are the model homes, ranging from two bedrooms to five.

Fabian Ho, 27, and his wife are getting ready to move from her parents’ house into their brand new three-bedroom flat, which they bought for under $200,000.

"We've been waiting for this unit for about three and a half years," said Ho. "This is the first time we're officially owning a place on our own, so we are really looking forward to it."

Mandatory savings program

Many Singaporeans are able to afford a home, thanks to a mandatory government savings program called the Central Provident Fund.

Working residents below the age of 55 are required to put 20 percent of each paycheck into their CPF account. Employers must contribute another 17 percent.

That money is then distributed into three different buckets -- for housing, healthcare, and retirement -- with generous interest rates of up to five percent.

There are income caps and the contribution rates change as residents age.

“Members can actually use these savings to buy their homes,” said Jeslyn Su, CPF’s Deputy Director of Housing Schemes. “They can use that money to pay for their down payments, their housing loans.”

Those who are self-employed can opt-out of the program.

The program is somewhat controversial. Some residents say they don’t like to be told by the government how to spend their money.

But Su says saving is necessary to ensure a secure retirement.

“It’s the discipline to have to put away a sum of money to own your home. Having mandated savings can actually help Singaporeans afford the homes that they wish to live in,” Su said.

Hawaii lawmakers say it’s an idea that would be almost impossible to implement back home.

“We’d have to have serious conversations with the business community,” said State Rep. Justin Woodson, member of the House Committee on Housing.

“I think that’s one thing that might be hard to sell in Hawaii where we have very little discretionary income,” said State Sen. Sharon Moriwaki, member of the Senate Committee on Housing.

Safe, quality ‘public housing’

The public housing developments across Singapore range from upscale to basic.

Located in the city center, the Pinnacle at Duxton is not only the tallest public housing project in Singapore, but the world.

The development is made up of seven 50-foot skyscrapers connected by sky bridges.

The property has more than 1,800 units and features amenities such as workout facilities, gardens, and daycare centers.

“On the Level 3 communal deck we have little pavilions where people can rest, we have a basketball court where the children can play,” said Nina Loo, director of RSP Architects who worked on the project.

Units here were first sold at around $250,-000 with 99-year leases, but some flats are being listed on the secondary market at over $1,000,000.

Members of the Hawaii delegation say the project is inspiring.

“It’s beautiful," said Hakim Ouansafi, executive director of the Hawaii Public Housing Authority. “I think it gives a sense of encouragement that this can be done and it should be done.”

“With public private partnerships, I think we’re still in the infancy stage to see how those work, but examples like here at the Pinnacle show that they can work," said Todd Apo, Senior Vice President of Community Development for Howard Hughes Corp. “We just need to put our minds to it and figure it out.”

Over in the ethnic district called Little India, the public housing developments are much more modest, but safe.

Police security cameras are posted around the property and residents leave their belongings outside, even if the buildings are open to the public.

“No matter where you are on the spectrum, it’s a very attractive living option for everybody," said Chang. “82 percent of the population lives in public housing here, which would not be possible unless it were well maintained.”

The ‘ALOHA Homes program’

Chang says his housing proposal, the ALOHA Homes program, is a hybrid of the Singaporean model.

“We can have extremely high quality public housing. (The state) can pay for it, we don’t need a taxpayer subsidy, and it can be a place for all the people of Hawaii,” said Chang.

Under his plan, he estimates a condo for family of four would be around $300,000.

The state would build dense condominiums on state land near rail stations, then sell each unit with a 99-year lease.

Skepticism abounds

House leaders are skeptical of Chang's proposal, but agreed to at least study it.

"We have specific and strict zoning laws," said State Rep. Sylvia Luke, chair of the House Finance Committee. "We have strict environmental assessment laws, we have to make sure that health and safety are taken in account, and so just an outright adoption of something that's ok in a foreign country is not something that we should entertain until its fully vetted."

Members of the delegation say the trip opened their eyes to what's possible and what's not.

“I think everyone’s been committed to seeing what other models are out there,” said Apo. “And we know we can’t just pick it up and bring it back to Hawaii, but find the right pieces, see what can work.”

Ouansafi says in order for a program like this to be successful in Hawaii, the stigma surrounding public housing needs to be eliminated.

"That's what I like about the Singapore model, public housing is not something bad, it's something to be proud of because you take ownership of it," said Ouansafi.

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