Is The Singapore Housing Miracle Over? - Professor Chua Beng Huat

Professor Chua Beng Huat is a Singaporean Sociologist and is an Emeritus Professor at the National University of Singapore.

He is also currently a Visiting Fellow at the Singapore Management University.

He is the author of two books:

1) Public Subsidy, Private Accumulation: The Political Economy of Singapore's Public Housing (https://amzn.to/3Wf6uhz)

2) Liberalism Disavowed: Communitarianism and State Capitalism in Singapore (https://amzn.to/40py26m)

This conversation with Professor Chua Beng Huat explores the imperfect miracle of Singapore's public housing.

We delved into Singapore's disavowal of liberalism, the nation’s distinctive state capitalism model, and the transformative role of public housing in its development.

We explored the implications of government land ownership, examining how public housing serves as both a practical utility and a financial asset while addressing challenges like inequality and affordability in the tightly regulated Singaporean housing market.

Chapters:

00:00 Teaser
00:40 Liberalism Disavowed
08:14 Varieties of Capitalism
09:46 Singapore's Approach to Land Management
25:10 Public Housing as a Tool for Political Legitimacy
27:22 Public Housing and Private Accumulation
37:22 The Problem with Public Housing in Singapore
44:03 Political Implications of Singapore's Housing Policies
47:19 Addressing Inequality in Housing
49:42 Why Study Sociology
52:56 Working as a Sociologist
56:34 Advice To The Young

Transcript

Keith 00:40

The first question I had was on the question of liberalism. I think most people today have many different definitions and ideas of what it means. But what I would like to ask as a starting question is, what does liberalism mean from your perspective as a sociologist?

Professor Chua 00:56

There is about 300 years of history of liberalism, so there are multiple versions accumulated by now. But the version most relevant to Singapore politics is actually liberal individualism, where the emphasis is on liberal rights and freedom—freedom of the press, freedom of expression, freedom of beliefs, freedom of assembly.

The idea is that individuals should be free to express their opinion without constraint. In the marketplace of ideas, different perspectives would work each other out and ideally come to some rational conclusion. But in the real world, it doesn't quite work that way. Currently, opinions have become much more divided, with people locked into their positions rather than listening to rational reasoning. So the ideal situation of liberal individualism is, as we can see now, highly problematic.

The Singapore government, the PAP government, from the very start has been anti-individualism. Partly because of the history of the party itself. The party started as relatively left-leaning social democrats. By the 1970s, they had economically become more capitalist, but in how they imagine society is organized, they've always been much more collectivist in their orientation, believing in community. Even now we see a very high emphasis on family, community and social cohesion rather than this atomized individualism, particularly of the American version of liberal individualism.

So in our context, liberalism is a particular post-war American version that the government confronts. That's why we have constraints placed on the different freedoms that are taken for granted in American institutions.

Keith 02:31

There was this idea that America would become the unipolar power. Many of the American elites kind of saw liberal democracy as the natural endpoint for most developing economies.

Professor Chua 02:42

I think it's fairly understandable because America clearly won the Cold War. Ronald Reagan focused on destroying the Soviet Union. He characterized the Soviet Union as an evil empire and was out to destroy it. And they actually succeeded because by the late 70s, China had already marketized their economy, so capitalism had succeeded.

When Russia liberalized both economically and politically, it destroyed the Communist Party of Russia, and most of the Soviet Union members started to break away, with some immediately joining NATO. So in the early 90s, there was a euphoria about the triumph of liberal democratic capitalism, and the imagination was that the whole world would move that way because capitalism had no alternatives. Margaret Thatcher famously said, "There is no alternative."

Even at its most euphoric moment, Francis Fukuyama, who announced the end of ideology and the end of history—because everything would become liberal democratic capitalism—noted that East Asia would be the challenge to liberal democracy. East Asian economies had been able to develop capitalism without the presumed liberal democratic politics. This was clear in China, followed by Vietnam, and in Singapore's case, we emphasized what we called Asian values, which are not particularly liberal.

So even at its most euphoric point, there was recognition that Asia would be marching to a different beat. Soon after, liberalism was challenged by the rise of Islam with the September 11 bombing of the World Trade Center. Since then, America has been very involved in trying to contain Islam, not only in the Middle East but wherever Islamic fundamentalism exists.

By the second decade of the 21st century, we've seen the rise of populist nationalism in the West, starting with Brexit, followed by Trump, followed by the increasing rise of right-wing nationalist parties in Western Europe—the very flag bearers of liberal democracy. So in the home of liberal democracy, there is now a counter-ideology of nativist populist nationalism.

The euphoria was actually very short-lived, perhaps about a decade, and now there's no more celebration or assurance that the whole world will turn to liberal democratic capitalism. Capitalism will continue as the economic system that runs the world, but different countries have different ways of organizing capitalism, such as state capitalism in Singapore. State capitalism is now in practice in many countries, especially China, which most concerns Americans. Their complaint about China is always about how the state backs enterprises and doesn't play by the rules of the free market.

Capitalism will be the only system, but there are different ways of organizing capital. It's not always about free market capitalism that liberals assume to be the case.

Keith 08:14

There are many ways to project or to have a different take from liberalism. In your book, you say that Singapore disavowed itself. We disrupted property rights, which is maybe heresy to political liberals, and as you shared, we had a very different way of managing race, housing, land, and even state capitalism.

Professor Chua 08:33

One of the most fundamental tenets of liberalism is the right to property. It goes all the way back to Mills in the argument that land becomes private property when an individual labors on the land, because land is given in nature. So when does natural land turn into private property? The liberal theory of labor is that those who work on the land are entitled to its produce, and the land becomes privatized that way. Land has always been this very central value of liberalism.

But one of the most important ideas in communism as practiced is the nationalization of land to revert it to collective ownership. The PAP government was first elected into power in 1959. The British government already had a law that allowed the government to acquire land for public purposes. The PAP intensified that land acquisition and appropriated privately held land that was not utilized or under-utilized in the early 1960s at a very low price set by law.

So the government, in addition to the "crown land" it received from the colonial government, plus the land it appropriated and reclaimed since then, ended up owning almost 90% of the land in the entire country. Effectively, land in Singapore has been nationalized.

There were objections against the Land Acquisition Act. When we became independent in 1965, we took the whole Malaysian constitution instead of writing a new one. But the one clause that was left out was about the rights to property, and soon after, the Land Acquisition Law was changed to allow government to appropriate land.

One interesting instance was the Bukit Ho Swee fire in 1961 that left a large chunk of land in the city center. The government acquired that land as if it was free of residents, and because it was unencumbered, the compensation rate was very low.

By nationalizing land, the government essentially rejected a very fundamental right in liberalism, which is the right to property. Even now, with the exception of 10-15% that is freehold land, everyone is actually leasing land from the government, and a lease is rental. So the government essentially owns all the land.

That's against liberalism, but it's also what makes public housing at a national scale possible. If the government had to pay for land at market value, as in most liberal countries, it would not be possible to have a national housing system that provides for nearly everyone.

Keith 09:46

That was the conclusion I had from reading your book as well—that it's in our land policy where you find the PAP government's ideology to be most antithetical to liberalism. What did they use the land for? Because you consolidate 90% of the land. The obvious answer would be to build public housing and infrastructure, but why do you need so much land?

Professor Chua 10:05

Apart from the obvious public goods like schools, roads, infrastructure, housing, military installations, and extensive use of the waterfront for our super port and Changi Airport, land ownership allows the government to comprehensively plan the entire island. If you go to the URA, you'll see a whole 3D map of Singapore. Almost every square inch is planned for.

It allows the government to control the physical development of the country. We are one of the most planned cities in the world with very little confusion of mixed-use. If you go to older areas like Jalan Besar, you might see a restaurant next to a tire shop, but that's legacy. Now it's completely planned.

Land ownership then allows the government to continuously deal with redevelopment as economic contingencies develop. For example, the Selective En bloc Redevelopment Scheme—early HDB estates built in urban areas like Queenstown are now being demolished to intensify usage. If these were privately owned, the redevelopment process would be very difficult.

One feature of Singapore is the rapid renewal of buildings, sometimes wastefully, and sometimes disruptive of people's memories of the country. But all that is the result of owning land that gives the government the freedom to do that. In other cities, because lands are privately held, negotiating to build a road could take years due to local objections and owners refusing to sell their land.

So the Land Acquisition Act and land ownership are really powerful tools at the disposal of the government to deal with the physical development of the country.

Keith 25:10

Especially when you are such a land-scarce economy, then you would, as the government, have every incentive to try to control as much of the factor input as you can. The consolidation of land allowed Singapore to essentially build up a very successful public housing program that many countries with more capital and more land couldn't do. I know there are some contradictions that come with the housing program, but I would like to first ask from your perspective, what has been the remarkable thing that has emerged out of this public housing policy experiment?

Professor Chua 25:36

Land is absolutely essential for the housing program. Once the land is owned, the government could use it according to its plans. The other important component in housing ownership is the availability of loans or mortgages. In a normal capitalist economy, not everyone can borrow money from the bank. Not everyone has credit reliability, which is why home ownership is stratified.

What we have in Singapore, through the CPF system, is a mortgage system available to every working Singaporean regardless of income level. That is really important because it makes home ownership possible across the board, not just for those who qualify. In most countries, public housing is only for those unable to pay their own way in the market, so they need subsidies for rental or mortgage interest rates. Public housing tends to be a residual welfare category.

Whereas in Singapore, public housing is technically for the entire nation, largely because everyone can pay for their housing monthly as long as they buy a flat within their income bracket through the CPF system. That's why the home ownership rate—or 99-year lease rate—is so high. The government has the land to build, and citizens have a means to buy the 99-year lease as long as they have continuous employment.

I think the availability of loans to every citizen is a very important component that doesn't exist in a normal capitalist society. On the supply side is the land. On the demand side is the availability of a mortgage system. The dovetailing of these creates this high 99-year lease home ownership system.

Keith 26:37

It seems to me that when I was reading through the history of HDB and Singapore's political history, public housing was high on the agenda because there was a bundle of incentives the government wanted to put together. For example, when Lee Kuan Yew and Goh Keng Swee were conceptualizing national service, they knew that if they could guarantee people public housing or ensure they had an asset to defend, citizens would likely buy into the conscription system because now they had something to fight for as opposed to migrating elsewhere.

Professor Chua 27:04

Housing needn't have been the top priority policy for the PAP government in 1959 or the early 1960s. The PAP got elected in 1959, and by 1960 they had already enacted the Housing Act, showing how much priority they placed on housing.

It's true that a large population was living in informal housing, kampungs, or what were pejoratively called slums or squatter areas. But people were housed—they weren't homeless on the streets. Given the economic conditions, living in a kampung actually offered flexibility because employment was irregular and incomes were inconsistent, largely from the informal sector. Rent in a kampung was very low and flexible, with landlords willing to accept arrears until tenants had money to pay.

Admittedly, the public hygiene conditions weren't great. The colonial government had already identified poor housing conditions as a public health problem, which is common in most government thinking even today when looking at developing countries with large squatter areas.

So the government picked up on one of the British colonial government's agendas, which was to improve housing quality and public hygiene conditions in the congested urban shophouse areas and urban fringe kampongs. There's a kind of path dependency there.

But more importantly, in the 1959 election, the PAP made a clear promise to improve the physical living conditions of the nation. Housing was a way of carrying through that election campaign promise. Additionally, improving physical housing conditions is one of the most concrete illustrations of the government's efficiency.

Because it shows that the government is doing something visible, and if it improves living conditions, it's also undeniably materialistic. So on both symbolic and practical levels, housing is an area where a new government can generate political legitimacy for itself. I always claim that public housing is one of the key constituents of political legitimacy for the PAP, both symbolically and materially.

Keith 27:22

The forward question I had was that you had this idea of "public housing, but private accumulation." It's interesting because Singapore is probably the only country in the world with such a high occupancy rate in public housing. Housing has a dual function: its use function where you live in it, but also its asset function where you use it as an investment. You're making it from a private good essentially into a very much subsidized good.

Professor Chua 27:48

From a subsidized good to a private good.

Keith 27:52

So the question I have is, what are some of the downstream effects of having HDB, and why did you come up with this idea of public housing and private accumulation?

Professor Chua 28:00

In a certain sense, the public housing system has become a victim of its own success. Public subsidy is supposed to be socioeconomically redistributive. The government giving grants and subsidizing housing is a way of making housing available for all, creating a social redistributive effect.

But because there's a secondary market where you can sell public housing to willing buyers and sellers, built into the sale is a profit. Being able to sell a subsidized welfare good in the market turns it into a commodity like any other object. Once it's a commodity, there's a profit motive. Owning a 99-year lease on a flat and being able to sell it in the market makes public housing a vehicle of wealth accumulation. If you buy at $300,000 and sell at $500,000, you're pocketing $200,000 in gains.

The question is why the government allows a secondary market to develop. Why allow a public subsidized good to be made a profitable commodity? That is the big question.

Because it has become a vehicle of private accumulation, it introduces a factor of inequality into society. The wealthy, higher income groups are the ones who buy the top-end HDB four and five-room flats. Lower income groups will buy three-room flats or smaller. The bigger flats will inflate at a higher rate in value, accruing greater value. So when sold, those already in the upper income bracket make more money than those in the lower market. The wealth effect actually increases income inequality.

If you look at all the million-dollar flats that we're now making noise about, they're all at the top end—executive condos, five-room flats, or four-room flats in good locations with panoramic views. They're not three-room flats. So a publicly subsidized good has become a vehicle of private accumulation.

As a consequence, unintentionally, the HDB is one of the factors that intensifies wealth inequality. In terms of political or public justice, that's a bit of a problem. It's a dilemma, which is why you have a lot of public forum discussions calling for re-emphasizing public housing as residence rather than as asset. The idea of public housing as an asset is actually an idea actively promoted by the government from the 1990s onwards.

Keith 37:22

Is that perception real?

Professor Chua 37:24

Whether it's real or not is a difficult question. If you think of the HDB flat not in terms of making money—if you think of it as residence, as use value—then it's very affordable.

Assuming you paid a million dollars for a flat with 70 years left on the lease, your cost in one year would be around $15,000-$16,000 a year. Broken down to monthly rent, it's very cheap—you'd pay no more than $2,000 a month for 1,000 square feet in a highly developed city like Singapore. You can't find that anywhere else in the world. You can't even rent a sidewalk space in New York for that kind of money.

So in use value terms, it's inexpensive. But if you're thinking of paying $600,000-$700,000 and trying to make money off it, then the upfront cost is very high with no guarantee you'll make that sum back. It depends on how you calculate.

Unfortunately, most Singaporeans now don't think of HDB flats as merely for living. Most are thinking about how to resell their flat, and not just resell, but resell with a profit. If you think that way, then the HDB is no longer a welfare good. It's more an investment good, and as an investment good, price becomes an issue.

Keith 44:03

And I think that gets to the central point of the dilemma, which is that property or housing is a good with a dual function. When you look at a stock equity, you know it's purely investment because there's no real utility function. But in this case, you have both, and part of it is that the government is looking at it as, "I'm subsidizing it because there's a utility for it." But citizens have a different view. How do we then encourage people to see public housing more as a utility good than an investment good?

Professor Chua 44:31

The interesting thing is this: if you put your money in equity, you accept there is a risk of loss. How many people do you think are willing to accept an HDB flat as a possibility of loss?

That's a problem, because property investment in the private sector carries risk. If you can't rent it out for two years, you are continuously paying mortgage. If there's a downturn—Sentosa properties were selling at half their price during COVID. But with HDB, no one assumes they're going to lose money.

There is no such thing as a risk-free investment good, but the expectation is that it's risk-free. And to an extent, that expectation is quite real, because the way the pricing works keeps HDB flat prices up.

After the 2011 election, the government changed certain policies. Prices did come down slowly by 1%-1.5% until COVID, losing about 10% cumulatively. But as soon as COVID was over, prices shot up. This past year, HDB prices have gone up by close to 10%, which is a really high rate of increase against wage growth.

The problem is that resale flat prices will not be allowed to drop radically, because if they did, it would affect the potential retirement needs of older homeowners—particularly wage earners who have put most of their CPF into housing. They need to recover their investment in cash to fund their retirement. If prices drop radically, the ability to fund retirement years would be jeopardized.

So resale flat prices will not be allowed to drop radically. The way to maintain that is to price new flats at an appropriate distance, but as new flat prices go up, what does the government do? They increase the grant portion to new buyers to enable them to handle the down payment, but it doesn't bring down the price.

Then there are other cooling measures like reducing loan quantum from 80% to 75%, discouraging second home ownership by increasing stamp duty to 30%, and so on. These are soft mechanisms that aren't very radical in terms of trying to ameliorate housing issues while maintaining a humane provision principle.

Keith 47:19

So it's about increasing the options that maybe these 50,000-60,000 households have in terms of access to public housing.

Professor Chua 47:25

There's quite a large chance for singles—one room is okay. But when you get into family, then I think needs-based housing is probably a better principle in the long run because it helps family life.

Keith 47:38

It helps them definitely be more productive as well, because now you're not that constrained and worried about the space you have.

Professor Chua 47:44

Exactly.

Keith 49:42

You're an educator, you're a sociologist yourself. Why should people take an interest in sociology?

Professor Chua 49:50

Studying sociology is interesting because it trains you to look at society itself and understand your own position within the social structure. Most people think about family in terms of emotional connections, but at a certain level, family is a structure of inequality—parents as one generation with resources, children as a younger generation without resources and dependency. That dependency can become antagonistic, which is how family problems develop.

Sociology allows you to think about where you stand within the contexts you're in, whether it's family, the company you work for, or vis-à-vis the state—how you think about yourself as a public housing owner in relation to the HDB and the government.

There's an education of the self and simultaneously an understanding of how society functions. Theoretically speaking, that kind of analytical ability, if learned correctly, gives you certain skills for navigating your life.

In terms of occupation, sociologists work in almost every category except for specific fields like engineering and medicine. You find sociologists in human resource management, media, service industries, and advertising because these are all areas of study. One of my areas of study is pop culture. So the analytical skill is professionally useful, in addition to being able to look at both your position and the larger society with greater critical insight.

Keith 52:56

And I'd like to ask about your personal experience, because you were the first sociologist working at HDB as a sociologist. What was the kind of lens that you took or what was the contribution that you were seeking to make then?

Professor Chua 53:09

My first degree is actually in chemistry and biology, and I was going to pursue biomedical sciences as an undergraduate. But by the time I finished, I realized I don't have the personality to be a scientist. Scientists' lives are quite tough—very lonely because you're tied to the lab, tied to the experiment, and you cannot tell whether it's going to succeed. It's a pretty tough situation, and I don't have the personality for it. That's when I switched.

In the HDB, one important thing is that because they're building housing for the entire nation, they need to know how people use the spaces created and what kind of interaction patterns take place within residences. All that is now Town Council business, but in the '80s it was all part of HDB's business. HDB in the '80s was also managing housing estates—they were housing estate managers, not only developers building housing and doing planning.

At that time, the CEO, Liew Thailker, realized they needed more information about how places were being used and what kind of neighborly interactions were taking place. Much of our research was spent in housing estates, not in HDB headquarters. We were out there all the time, observing and asking questions.

We also did three projects looking at people from kampongs who had been resettled into HDB housing estates and how different ages were adjusting to high-rise living, since they had always lived on the ground. So there was quite a lot of sociological and anthropological work to be done.

Keith 56:34

My last question for you is, any advice you'd give to fresh grads coming out of school, especially those who are considering getting an HDB?

Professor Chua 56:42

First of all, the ability to buy a private property, if you're not going to inherit one, is going to be extremely difficult. I wouldn't encourage anybody to set that as an aim.

My best advice to my students is: if I were buying a flat right now, I would buy a BTO flat in what is now called a prime location, and I would buy the top end of prime location. It would be the most expensive in the HDB offer, but I would do that, I would not think about moving, and I would think of it as my permanent home.

Whatever equity or cash I might have for so-called upgrading, I would take my risk in the equity market. If you think seriously, investment in housing is very illiquid. If you are interested in money, then the stock market will probably give you better chances in terms of return.

If I had owned the flat in Dawson that sold for $1.7 million, I wouldn't have sold it.

Keith 57:43

So the key is to enjoy the housing that you get. Just enjoy it.

Professor Chua 57:47

Exactly.

Keith 57:48

Well, with that, thank you, Prof, for coming on to help me dissect the Singapore housing miracle, and hopefully in the future we can continue to keep our housing prices affordable.

Professor Chua 57:58

Thanks for having me. It's been fun.

Keith 58:01

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