Policy Innovations for Affordable Housing in Singapore

View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Institutional Knowledge at Singapore Management University Singapore Management University Institutional Knowledge at Singapore Management University Research Collection School Of Economics School of Economics 6-2018 Policy innovations for affordable housing in Singapore: From colony to global city Sock Yong PHANG Singapore Management University, [email protected] DOI: https://doi.org/10.1007/978-3-319-75349-2 Follow this and additional works at: https://ink.library.smu.edu.sg/soe_research Part of the Asian Studies Commons, Public Economics Commons, and the Urban Studies and Planning Commons Citation PHANG, Sock Yong. Policy innovations for affordable housing in Singapore: From colony to global city. (2018). 1-215. Research Collection School Of Economics. Available at: https://ink.library.smu.edu.sg/soe_research/2203 This Book is brought to you for free and open access by the School of Economics at Institutional Knowledge at Singapore Management University. It has been accepted for inclusion in Research Collection School Of Economics by an authorized administrator of Institutional Knowledge at Singapore Management University. For more information, please email [email protected]. 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 Library of Congress Control Number: 2018935537 © The Editor(s) (if applicable) and The Author(s) 2018 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and trans- mission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: Ivan Nesterov / Alamy Stock Photo Printed on acid-free paper This Palgrave Macmillan imprint is published by the registered company Springer International Publishing AG part of Springer Nature. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland For my husband Andrew and our daughters Rachel and Christine Foreword An ancient Chinese proverb asserts that while a government has strategies, 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 challenge 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’ counterstrategies 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 vii 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) academic 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 government 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 ix 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 countries, 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 experience. 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 housing 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.

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