Policy Innovations for Affordable Housing In Singapore

229 Pages·2018·2.64 MB·English

by  Sock-Yong Phang

POLICY INNOVATIONS
FOR AFFORDABLE
HOUSING IN Palgrave Advances in
Regional and Urban
Economics
SINGAPORE
From Colony to Global City
Sock-Yong Phang
Palgrave Advances in Regional and Urban
Economics
Sock-Yong Phang
Policy Innovations
for Affordable
Housing In Singapore
From Colony to Global City
Sock-Yong Phang
School of Economics
Singapore Management University
Singapore, Singapore
Palgrave Advances in Regional and Urban Economics
ISBN 978-3-319-75348-5 ISBN 978-3-319-75349-2 (eBook)
https://doi.org/10.1007/978-3-319-75349-2
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For my husband Andrew and
our daughters Rachel and Christine
Foreword
An ancient Chinese proverb asserts that while a government has strate-
gies, citizens have counterstrategies. Those words concisely frame the
challenge society faces in choosing from among the range of possible
government policy regimes. In a market economy, equilibrium prices and
quantities as well as the distributions of wealth and income that they
generate depend on a government’s tax and regulatory policies. The chal-
lenge is to choose a policy regime that produces equilibrium prices and
quantities that maximize an accepted measure of social welfare. Designing
policy well requires a good understanding of how citizens’ counterstrate-
gies depend on government strategies: it requires an economic theory
that works.
This book tells how public authorities in Singapore designed and
adapted policies for allocating land, capital, and labor in order to create
good places for Singapore citizens and residents to live and work, setting
the infrastructure for people in Singapore to create a poster-child East
Asian economic miracle of the late twentieth century. The book describes
economic models underlying policy makers’ strategies, their purposes,
and their expectations. It sorts through intended and unintended conse-
quences, and how policy makers adapted to unintended ones. The book
is, among other things, a fascinating analytical economic history about
how Singapore purposefully deployed a suite of interrelated public
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viii Foreword
policies about land use, life-cycle savings, taxation, regulation, and ethnic
toleration.
A personal note: because Harvard’s late John R. Meyer advised both of
our PhD theses, Professor Sock-Yong Phang is my (much younger) aca-
demic sister. John Meyer was a master at combining economic theory,
data, and econometrics to discover how things worked. In Sock-Yong
Phang’s book, I think I see a part of John’s legacy that he would like. John
was very interested in US economic history and, with Alfred Conrad,
wrote a founding paper about the economics of slavery in the United
States. I think that the striking contrast between how the US federal gov-
ernment gave away vast holdings of lands or sold it at below market prices
and Sock-Yong’s detailed account of the very different way that Singapore
has managed its land would fascinate John. I know that it fascinates me.
New York, NY, USA Thomas J. Sargent
February 19, 2018
Preface
As a global multiracial city-state with a land area of 720 square km and a
population of 5.6 million, Singapore has managed to develop a framework
for affordable housing that has resulted in a high homeownership rate of
91%. How did Singapore manage to achieve this in a fiscally sustainable way?
What were the roles of land acquisition and land use planning policies? How
was homeownership subsidized and financed? How did market deregulation
impact house prices? What policy instruments were used to contain housing
price bubbles? How did policymakers deal with ethnic preferences for segre-
gation? What has been the impact of housing policies on wealth distribution?
How do elderly homeowners extract home equity for retirement financ-
ing? What can other countries learn from the experience of Singapore?
I have spent much time over the past three decades researching the
above issues from the perspective of an urban economist. This book is the
culmination of my previous publications and current research on
Singapore’s housing policies. In this book, I distil the key housing policy
innovations, provide implementation details, analyse the impact of these
polices, explain the local context as well as necessary conditions for these
policies to work, and conclude with an assessment of their transferability.
In the process, I provide the answers to the above questions by presenting
the history and policy innovations introduced into Singapore’s housing
policy framework over five decades. The reader should note that part of
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x Preface
Singapore’s housing history has already been covered in some of my ear-
lier publications (as well as by other authors); however, repeating part of
the history is necessary for this book as it would not tell the full story
otherwise.
In sharp contrast to the situation in Singapore, the availability of
affordable housing for low- and middle-income households is a challeng-
ing social problem that many countries and cities continue to grapple
with. Recent rapid house price inflation has further deepened the divide
in urban societies between those who own properties and those who do
not. New housing sector regulations to curb housing demand by foreign-
ers have been recently implemented in several hot-spot cities across the
world.
Although it is a small city-state, Singapore’s experience in transforming
its housing sector since independence can be relevant to larger countries
as the urban housing market is a highly localized market. Singapore’s
experience has also been of particular interest to Commonwealth coun-
tries, as it inherited a western institutional structure from the British
colonial government when it gained independence. Developing as well as
former socialist economies that are exploring alternative systems of
affordable housing can also draw useful lessons from Singapore’s experi-
ence. This book provides an in-depth economic analysis of Singapore’s
housing policies and it is my hope that it will be a useful reference for
policymakers, city leaders, students and academic researchers in universi-
ties, think tanks, and international organizations who work on affordable
housing policies.
Singapore, Singapore Sock-Yong Phang
Acknowledgements
In the process of researching and writing this book, I have accumulated
many debts along the way. First, I would like to thank Mr Liu Thai Ker
(Chairman of the Centre for Liveable Cities, CEO of the Housing and
Development Board between 1979 and 1989, and CEO and Chief
Planner of the Urban Redevelopment Authority between 1989 and 1992)
who suggested that I write a book on the economics of Singapore’s hous-
ing system in 2014. This prompted me to sketch the first outline for the
book. However, numerous other commitments in the intervening years
led me to put off embarking on a book-length project. In the interim, I
accepted several invitations to write and speak on Singapore’s housing
policies from the Asian Development Bank Institute, China Executive
Leadership Academy in Pudong, Fudan University, Hong Kong University,
Korea Development Institute, Korea Research Institute for Human
Settlements, the Lincoln Institute of Land Policy, the Singapore Economic
Review, Southwestern University of Finance and Economics, Tsinghua
University, and the World Bank Institute. I would like to thank these
organizations for their interest in my research on Singapore’s housing
policies and my co-authors during this period, David K.C. Lee, Kyung-
Hwan Kim, and Matthias Helble for helping to shape my views.
I am also grateful to Zhi Liu for the invitation to give a series of lectures
on real estate policies at the Peking University-Lincoln Institute Center for
Urban Development and Land Policy in the summer of 2017. Preparing
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