Does This Look Like Public Housing to You?
By Monica Potts
This is part of a Weekly Wonk series, Globalization’s Canary: Singapore at 50. In the half-century since its independence, the strategically-located city-state has leveraged its access to the global economy, and a number of innovative policies on issues ranging from housing to savings and social cohesion, to become one of the world’s most affluent societies. As they prepare to celebrate their milestone, Singaporeans are in a reflective mood, taking stock of what’s been accomplished, while also expressing some unease about the sustainability of their current model going forward. In that same spirit, New America’s Asset Building Program Fellow Monica Potts breaks down whether Singapore’s public housing system could be transferable to the U.S.
Public housing in Singapore is no Fort Apache or Cabrini Green. Unlike in the United States, developments are designed for the masses, rather than the few. And they’re intended to confer homeownership rather than provide low-cost, short-term rentals. The newer apartments are bright and upscale, with Ikea-like infrastructure and a spacious sky deck that looks out at the small city-state.
Today’s system took root long before Singapore gained independence. The British government began building public housing to move low-income people out of slums and solve a housing shortage in the 1930s. After the devastation of World War II and the Japanese occupation, the housing shortages were even more acute. It was a bigger problem than the private market could solve. When Singapore gained partial independence, in the late 1950s, it established government entities to build housing for low- and middle-income families: In 1960, this became the Housing Development Board, which still exists today.
Unlike in the United States, developments are designed for the masses, rather than the few.
Today, the government owns 80 percent of the land in Singapore and is the largest real estate developer. Publicly built housing is available only to citizens or permanent residents, which make up about 3.6 million of the country’s 5.5 million population, but income limits are very high: $10,000 a month in Singapore dollars. (about $8,000 US). Private institutions provide mortgages, and buyers can borrow without penalty from their compulsory, government-managed savings account (to which their employer also contributes). There are also subsidies and other supports available for lower-income families, and the prices of units in public housing are informed by the market price but typically set at a lower level than what the private market would demand.
In exchange for such a huge transfer of wealth—which is essentially what this is—owners must remain on the property for five years. They retain any increase in property value on the secondary market. If they want to sell it, they must sell it to a citizen and the housing authority can intervene to make sure the buyer won’t alter the racial mix. Those limitations can depress the value of properties owned by Malays or Indians, the country’s two biggest minority groups. (Seventy-five percent of the island’s population is Chinese.)
Homeowners can also rent their properties on the secondary market. The private rental market in Singapore is uncontrolled, and the super high rents help make Singapore one of the most expensive cities in the world. This is, in part, because the secondary rental market is open to the city’s nearly 2 million foreign workers, who are unable to buy public housing and must fight for properties in the relatively small private market or on the secondary rental market. There is little help for low-income foreign workers, the people from developing countries like India or the Philippines who come to work in low-skill, low-wage jobs like construction. The government says employers build dormitories for them, but those dorms are subject only to building codes, and there’s no regulatory mechanism for making sure employers build enough space for their employees.
Could this large-scale public housing system work in a United States city? First, it’s important to note that, in Singapore, the city and country are one and the same, making the politics less complex. Second, the notion of that much subsidy for housing is a non-starter in the U.S. Congress, though the federal mortgage interest deduction helps subsidize home-buying across all income brackets. (Studies show, however, that most of those subsidies go to families with incomes in the top 20 percent, because they are more likely to receive tax deductions than lower-income families.) To build and subsidize that much public housing would be a massive development undertaking and subsidize homeownership on a bigger scale than the country has ever done. In the past few decades, state and local governments have shifted away from building and operating housing projects for low-income families and instead subsidize them in the private rental market. The largest is the federally-funded Section 8 program, which provides about $27 billion a year.
The notion of that much subsidy for housing is a non-starter in the U.S. Congress.
Three-quarters of it goes to families who make less than 30 percent of the median income of the area they live in. Outside of that program, rental housing is increasingly unaffordable, even for families who make more than that. Nationwide, a worker would need to earn $18.92 an hour to afford a two-bedroom apartment at fair market rates, more than two-and-a-half times the minimum wage. For homeownership, most federal, state, city, and nonprofit programs simply work to provide subsidies or financial counseling to help lower-income families buy a home on the private market with a private mortgage.
Governments of more liberal cities, along with nonprofits, have moved in to fill this gap. About 800,000 homeowners in the U.S. have homes through some sort of help from an economic co-sponsor. Among them are those granted deeds with provisions that ensure the property will remain affordable after they sell. One model is a housing trust, homes for which ownership is split between the owner and the trust. Schemes are set up so that ownership is heavily subsidized for the working class, but if the owner wants to sell after four years, most of the appreciation goes back to the trust and the home is kept affordable, so that the second buyer receives the same help and subsidies. So far, however, housing trusts are still only in a few cities and states, and with credit tight in the wake of the Great Recession, home ownership is out of reach for many Americans, and rents eat up as much as half of monthly incomes.
This story resulted from a trip to Singapore sponsored by the Singapore International Foundation, a public, non-profit institution.
http://weeklywonk.newamerica.net/articles/singapore/
By Monica Potts
This is part of a Weekly Wonk series, Globalization’s Canary: Singapore at 50. In the half-century since its independence, the strategically-located city-state has leveraged its access to the global economy, and a number of innovative policies on issues ranging from housing to savings and social cohesion, to become one of the world’s most affluent societies. As they prepare to celebrate their milestone, Singaporeans are in a reflective mood, taking stock of what’s been accomplished, while also expressing some unease about the sustainability of their current model going forward. In that same spirit, New America’s Asset Building Program Fellow Monica Potts breaks down whether Singapore’s public housing system could be transferable to the U.S.
Public housing in Singapore is no Fort Apache or Cabrini Green. Unlike in the United States, developments are designed for the masses, rather than the few. And they’re intended to confer homeownership rather than provide low-cost, short-term rentals. The newer apartments are bright and upscale, with Ikea-like infrastructure and a spacious sky deck that looks out at the small city-state.
Today’s system took root long before Singapore gained independence. The British government began building public housing to move low-income people out of slums and solve a housing shortage in the 1930s. After the devastation of World War II and the Japanese occupation, the housing shortages were even more acute. It was a bigger problem than the private market could solve. When Singapore gained partial independence, in the late 1950s, it established government entities to build housing for low- and middle-income families: In 1960, this became the Housing Development Board, which still exists today.
Unlike in the United States, developments are designed for the masses, rather than the few.
Today, the government owns 80 percent of the land in Singapore and is the largest real estate developer. Publicly built housing is available only to citizens or permanent residents, which make up about 3.6 million of the country’s 5.5 million population, but income limits are very high: $10,000 a month in Singapore dollars. (about $8,000 US). Private institutions provide mortgages, and buyers can borrow without penalty from their compulsory, government-managed savings account (to which their employer also contributes). There are also subsidies and other supports available for lower-income families, and the prices of units in public housing are informed by the market price but typically set at a lower level than what the private market would demand.
In exchange for such a huge transfer of wealth—which is essentially what this is—owners must remain on the property for five years. They retain any increase in property value on the secondary market. If they want to sell it, they must sell it to a citizen and the housing authority can intervene to make sure the buyer won’t alter the racial mix. Those limitations can depress the value of properties owned by Malays or Indians, the country’s two biggest minority groups. (Seventy-five percent of the island’s population is Chinese.)
Homeowners can also rent their properties on the secondary market. The private rental market in Singapore is uncontrolled, and the super high rents help make Singapore one of the most expensive cities in the world. This is, in part, because the secondary rental market is open to the city’s nearly 2 million foreign workers, who are unable to buy public housing and must fight for properties in the relatively small private market or on the secondary rental market. There is little help for low-income foreign workers, the people from developing countries like India or the Philippines who come to work in low-skill, low-wage jobs like construction. The government says employers build dormitories for them, but those dorms are subject only to building codes, and there’s no regulatory mechanism for making sure employers build enough space for their employees.
Could this large-scale public housing system work in a United States city? First, it’s important to note that, in Singapore, the city and country are one and the same, making the politics less complex. Second, the notion of that much subsidy for housing is a non-starter in the U.S. Congress, though the federal mortgage interest deduction helps subsidize home-buying across all income brackets. (Studies show, however, that most of those subsidies go to families with incomes in the top 20 percent, because they are more likely to receive tax deductions than lower-income families.) To build and subsidize that much public housing would be a massive development undertaking and subsidize homeownership on a bigger scale than the country has ever done. In the past few decades, state and local governments have shifted away from building and operating housing projects for low-income families and instead subsidize them in the private rental market. The largest is the federally-funded Section 8 program, which provides about $27 billion a year.
The notion of that much subsidy for housing is a non-starter in the U.S. Congress.
Three-quarters of it goes to families who make less than 30 percent of the median income of the area they live in. Outside of that program, rental housing is increasingly unaffordable, even for families who make more than that. Nationwide, a worker would need to earn $18.92 an hour to afford a two-bedroom apartment at fair market rates, more than two-and-a-half times the minimum wage. For homeownership, most federal, state, city, and nonprofit programs simply work to provide subsidies or financial counseling to help lower-income families buy a home on the private market with a private mortgage.
Governments of more liberal cities, along with nonprofits, have moved in to fill this gap. About 800,000 homeowners in the U.S. have homes through some sort of help from an economic co-sponsor. Among them are those granted deeds with provisions that ensure the property will remain affordable after they sell. One model is a housing trust, homes for which ownership is split between the owner and the trust. Schemes are set up so that ownership is heavily subsidized for the working class, but if the owner wants to sell after four years, most of the appreciation goes back to the trust and the home is kept affordable, so that the second buyer receives the same help and subsidies. So far, however, housing trusts are still only in a few cities and states, and with credit tight in the wake of the Great Recession, home ownership is out of reach for many Americans, and rents eat up as much as half of monthly incomes.
This story resulted from a trip to Singapore sponsored by the Singapore International Foundation, a public, non-profit institution.
http://weeklywonk.newamerica.net/articles/singapore/
