Housing Matters Part II: Does Changing the Income Ceiling Solve the Affordability Issue?
The income ceiling, which is a means test, by the HDB is very much debated by various people. In the past, PAP had been unyielding in maintaining that $8, 000 per month. However, due to widespread discontent on the affordability of housing, they have now suggested raising the income ceiling to $10, 000 monthly. However, is raising the income to $10, 000 based on solid research and good fundamentals or is the move simply a populist move to placate the crowd?
Firstly, we need to examine the role of HDB. HDB is meant to provide affordable and quality housing for Singaporeans. With limited land area, the Government is extremely stringent in deciding the purpose of each plot of land, be it commercial or residential. Hence, the Government’s policy has a direct effect on the type of residence our residents have. If the Government decides that 30% of our housing would be private, in effect, it would have to provide public housing for 70% of our residents.
Looking at the key indicators of resident households (click here), we can make some analysis. A majority of the residents stay in HDB (62.1%). Taking 62.1 percentile of the income for the various groups, I have the following figures from 2009 salary (2010 not available yet):
|Age 25-29||$3, 150|
|Age 30-34||$3, 890|
|Age 35-39||$4, 340|
These figures give us another insight. If the Government wish to maintain status quo for the ratio of public to private housing, then the affordability issue is certainly nothing to do with income ceiling. They would need to address the cost of HDB rather than tweaking income ceiling which clearly do not affect most of our citizens. In fact, the adjustment of income ceiling only masks the affordability issue. Using the same argument, a couple from the age group of 25-29 who are earning approximately $5, 000 would now be able to purchase a new HDB flat. These people according to statistic represent the top 8.3% of their cohort. Making HDB affordable for the top 10% earners is certainly nothing to be proud of.
However, if the Government decides that the prices of private housing is getting increasingly unaffordable and there is a requirement to build more public housing rather than private housing, then they should determine the new ratio and use the percentile to work out what the income ceiling should be rather than setting an income ceiling arbitrary.