The rise of U.S. home prices—which used to be mostly a coastal urban problem, but has swept the nation during the pandemic—has led to a predictable demand for more public housing. Some internet commentators, often working under the “DSA” or “NUMTOT” label, go so far as to say public or social housing should be the predominant form of construction. One example they often point to is Singapore, a quasi-socialized system that holds some positive attributes compared to the U.S. But those are largely due to unique circumstances which are unreplicable here, and as we will show, not all is rosy with Singapore’s housing situation anyway.  

The call for more public housing starts from the assumption that “the market” can’t provide affordable housing, so the government should. One activist told Los Angeles Magazine that the effect of new housing construction on overall prices—called filtering—is insufficient to decrease rents. This is not borne out by the evidence—in particular, because the examples cited all entail cities where up-zonings are limited—but it is worth exploring whether their preferred model would deliver lower costs and better outcomes.

In Singapore, nearly 80% of the population resides in housing that is developed and managed by the Housing and Development Board. Units are owned, however, by tenants. The government, following a land-lease system common in other city-states, owns the land and leases it out for 99 years to these unit owners.

Singapore’s policy has less to do with an embrace of socialism (its economic freedom rates are actually among the world’s highest) or even affordability per se than it does with other domestic policy goals.

As Bloomberg notes, the housing began getting built in the 1960s as a way to provide safe accommodations, following decades of rapid migration into Singapore’s unsanitary slums. Ng Kok Hoe, a Senior Research Fellow with the National University of Singapore, adds that it was as much a way to boost homeownership, as to spread wealth across the many racial groups. This is in contrast to U.S. public housing, which is generally rented.

In fact, Singapore’s land-lease approach is akin to a somewhat obscure model that is popular with urbanists: Georgism. Based on economist Henry George’s idea of a Land Value Tax, Singapore is, by owning land, able to collect economic rents through leasing. It also enables Singapore to make long-term land deals, whereas, in the U.S., this would require government land acquisition either through voluntary purchase or eminent domain.

Whether or not Singapore’s land-lease model sounds attractive depends on one’s ingrained attitude towards government, and their goals for the housing market. The pros I see as being the following:

• Land-leasing has incentivized the government to maximize land by building more densely (a slogan there is “limited land, unlimited space”). This has fostered a dynamic city and economy.
• Land-leasing has created the revenue needed to keep other taxes low or non-existent, turning Singapore into a tax haven.
• While the land is owned and leased by the government, actual units are owned by residents, giving Singapore one of the world’s highest homeownership rates.

The cons of the model surface from these same factors:

• Consumer choice is limited. In the U.S., if tenants are faced with the misfortune of a crummy landlord, they can move to a different building. But with HDB managing so many properties in Singapore, that option is less feasible. While American journalists claim that Singapore’s public housing is well-managed, that is tough to verify if one has not lived in it.
• While sizes can vary, the average Singapore apartment is about 1,000sqft, well under half the size of the average U.S. home. This might explain why Singapore has one of the world’s lowest fertility rates.  
• Singapore is not affordable—destroying much of the point of the public model. As Emily Hamilton writes for the Market Urbanism blog, mass homeownership there has created the same results as in the U.S. People purchase homes expecting them to increase in value, creating political incentives to constrain home supply. This means home resales can reap 6- or 7-figure windfalls onto owners, but locks out others who cannot access this housing and must live in slumlike conditions. She writes that Singapore home prices relative to median income are about the same as Salt Lake City—which does not have an extreme housing crisis, but is not considered a cheap market, either. Ng adds that only 6% of HDB housing is actually affordable to those at the lowest income levels—something of a reverse of the typical public housing situation.

To conclude, there are aspects of Singapore’s model that would appeal to capitalists—such as the fiscal solvency and mass homeownership; and some that would appeal to socialists—such as government ownership of land and management of buildings. But neither can claim that Singapore’s system has been good at producing affordable housing. Another counter-argument is that while the idea may work in Singapore—in that it presumably produces nice units—that does not mean it would work in the U.S. Singapore has a famously competent civil service that also manages to profit from its roads and mass transit. This is in contrast to, say, U.S. urban public housing authorities, which as I explained in a past Catalyst piece, are famous for patronage and corruption.

To sum up, Singapore’s housing policy is interesting because it is different. But it would be far-fetched to say this model would ever be applied in the U.S., much less that it would work.

[This article was originally published by the Independent Institute.]

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