Are HDB Flats Affordable For Low-Income Singaporeans?

Can a Singaporean who earns $850 a month afford to buy a Housing Board flat?

Mr Mohammad Charlie Jasni says yes.

The odd-job labourer earns that amount, and he and his family will be moving into a new two-room HDB flat in Punggol by the end of the year.

He had successfully balloted for the 45sq m build-to-order unit in August 2009.

It cost $99,220, but because he earns less than $5,000 a month, he qualifies for a government housing grant that gives him $40,000 to offset the flat’s price.

This means he has $59,220 left to pay, which he will do using his Central Provident Fund (CPF) savings.

He and his wife already have about $40,000 in their CPF accounts, and this will grow as he continues to work.

Based on HDB’s calculations, he needs to pay a monthly housing instalment of $83 over 30 years.

‘By paying the $83 out of my CPF, it means I have that little more for daily expenses,’ said Mr Charlie, 33.

He is currently living with his wife and two children in a two-room rental flat in Beo Crescent. They pay $44 a month for that flat.

They are excited about their upcoming home and are already discussing renovation ideas and shopping for furniture.

‘It is good to have a home of our own,’ he said.

Mr Charlie’s story puts a face to a statistic that has been debated in the last week.

In Parliament last Thursday, Deputy Prime Minister Tharman Shanmugaratnam revealed that ‘a family with $1,000 income can now, through our housing subsidies, purchase a small flat’.

He was responding to Workers’ Party member Gerald Giam’s comments about Singaporeans being unable to afford a flat.

The minister’s remarks sparked off much discussion in both cyberspace and coffee shops alike. Some wondered how $1,000 could buy anyone a flat, given that sum was hardly enough to support a family’s daily living expenses.

The next day, National Development Minister Khaw Boon Wan explained that Mr Tharman was referring to a new two-room flat.

He added that the subsidised price of such flats was about $100,000 if the applicant was a first-time buyer. He would also be entitled to housing grants of up to $60,000.

The net selling price would thus be $40,000, and the monthly mortgage payment can be fully paid from his CPF contribution, Mr Khaw said.

In response to queries from The Straits Times, the HDB said it was unable to say how many households earning $1,000 a month own two-room flats. But it pointed to how that it has two schemes that target low-income, first-time buyers.

The Additional CPF Housing Grant Scheme (AHG) benefits households whose income is not more than $5,000 a month. The maximum grant quantum is now $40,000, and it benefits 8,000 households every year, said the HDB.

The Special CPF Housing Grant (SHG) is given to first-timer families earning up to $2,250 a month to buy a small flat. Those earning $1,500 or less get a $20,000 grant. SHG is over and above regular housing subsidies and the AHG.

The HDB estimated that about 700 tenants currently renting flats under the Public Rental Scheme can benefit from the SHG if they decide to buy a flat. To date, the scheme has benefited 53 households who have bought two-room flats.

The HDB also gave The Straits Times five recent case studies of households with monthly income of about $1,000 who bought two-room flats. Four managed to buy new flats with the help of both housing grants. The fifth used only AHG as SHG had not been implemented when he bought his flat.

Out of the five families, three were rental tenants who have bought a new flat without taking any loan because they used the housing grant and their own CPF savings. The other two were families currently living with relatives who have bought new flats using both grants and their CPF savings.

In one case, a couple who lived in a rental flat bought a new flat in Bukit Panjang. At the point of applying for a flat, their monthly income was $900.

The flat cost $106,350. They got the maximum total housing grant of $60,000 – $40,000 AHG and $20,000 SHG. This, together with their CPF savings, meant they did not have to take any loan.

In another case, a man and his mother bought a new flat in Sengkang for $117,750. They got $60,000 in grants, and took a 17-year loan with a monthly instalment of $131.

Schemes to help with expenses

THE Straits Times visited five blocks of two-room flats in the Woodlands and Ghim Moh areas this week and spoke to people in over 30 homes.

Most of the residents there were renting their units.

Of the four who owned their flats, one had downgraded from a four-room unit, while three others had downgraded after selling their previous flat in the Selective En Bloc Redevelopment Scheme.

Among those renting, many were in their 60s and 70s and retired. They said they do not have much in their CPF or bank accounts, which is why they cannot buy their own units.

Madam Tan Chui Eng, in her 70s, and her husband, Mr Teo Kim Wee, in his 80s, said they have been living in a two-room rental flat in Ghim Moh for six years.

Most of the money in their CPF accounts has been used for medical expenses, they said. They have three daughters who pay their monthly rental of $61 and utility bills. ‘Of course, we would like to buy our own flat, but we cannot afford it,’ said Madam Tan in Teochew.

MPs said that with grants and other assistance schemes, households earning $1,000 should be able to afford a two-room flat.

Mr Vikram Nair, an MP for Sembawang GRC, said he knows of such households who rely on CPF contributions to finance their purchases.

As to whether $1,000 is enough for a family to survive, he said there are public assistance schemes, such as GST vouchers and Workfare Bonus, which can help low-income families cope with daily needs.

Mr Liang Eng Hwa, MP for Holland-Bukit Timah GRC, said regardless of whether they buy a flat, low-income households have little cash on hand. But rather than use cash to pay rent, ‘why not use the CPF to pay for a flat?’

‘The cash they save by not paying rent may not be much, but still it gives them that little more for daily expenditure,’ he added.

For odd-job labourer Mr Charlie, every bit saved helps to pay for living expenses. His wife does part-time administrative work.

He did not think he could afford a flat ‘but when HDB re-introduced two-room flats again, I felt that perhaps I could afford one’.

In 2006, HDB resumed construction of two-room flats after 20 years, to give more housing options to low-income households.

He decided to wait a bit because he wanted to build up his CPF account first. Now that he has bought a home, he feels the pressure of maintaining his CPF account so that the flat can be paid off.

‘Some companies are cutting back on manpower and I’m scared that I may lose my job,’ he said.

But he does not regret buying the unit. He hopes to pass the flat – or a bigger one should they ever upgrade – to his children.

How he pays for his flat

Monthly income: $850

Total household CPF: $40,000

Cost of build-to-order flat in Punggol: $99,220

Additional CPF Housing Grant Scheme: $40,000

Remaining cost of flat: $59,220 ($99,220 less $40,000)

Estimated monthly instalment for payment: $83 for 30 years

Deduction from CPF: $83

Cash outlay: $0


Housing help for low-income families

THE Housing Board (HDB) offers two grants to low-income families so they can buy their own flats:


  • Additional CPF Housing Grant Scheme (AHG)


THIS was introduced in 2006 to help lower-income Singaporean families buy their first HDB flat. It is targeted at households with incomes of not more than $5,000 a month.

The size of the grant is based on the applicant’s average gross monthly household income. The grant varies between $5,000 and $40,000. Households earning $1,500 or less a month will get $40,000.

AHG is an additional subsidy over and above the regular market subsidy and CPF Housing Grant. Both new and resale flat buyers are eligible for AHG.

It offsets the purchase price of the flat, thereby further reducing the loan a flat buyer needs to take. It is estimated to benefit 8,000 households a year.


  • The Special CPF Housing Grant (SHG)


THIS was introduced last year as an additional grant for first-timer low-income families earning up to $2,250 a month, so they can buy a small flat from the HDB.

The SHG is given out over and above regular housing subsidies and the AHG. Households earning $1,500 or less a month will get $20,000 in SHG. About 700 tenants currently renting flats under the Public Rental Scheme can benefit from the SHG if they choose to buy a flat.



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