Singapore – Below the Surface

Singapore has one of the better subway systems that we’ve experienced, but I was much more impressed by what I learned about the city-nation that seemingly is also initially under the surface. The more one learns about Singapore’s short history, the greater appreciation for what has developed there in such a brief period of time. When most people speak of Singapore, they rightfully speak of its strong international economy, the rapidly ascending skyline, draconian rules (no chewing gum), and punishment (caning) for breaking them, but once one learns a little about its history it all starts to make a bit more sense.

The area where Singapore now rests has been a major shipping port for the majority of modern history. It wasn’t until European countries began colonizing the far East that the prominent location on the southern tip of Malaysia become the more defined area known as Singapore. The British colonized Singapore in the early 1800’s and it grew even more as a key colonial outpost and shipping hub from that point forward. It remained under British control until the Japanese took over in early 1942. Key to note that the Japanese attacked northern Malaysia a day after the Pearl Harbor attack. It took the Japanese less than two months to work their way down the entire length of the Malaysian peninsula and take Singapore. The British, consumed with the war in Europe, essentially had to let Singapore fall.

It seems that Britain’s failure to care more about Singapore during WWII was the impetus for the rise of the new, independent nation. Singapore remained as a colony of Britain following the war, but steps toward breaking away as an independent nation had begun. By the late 1950’s Singaporeans tried their hand as a territory of Malaysia for a few years, but by the early 1960’s there was quite a bit of civil unrest between Malaysian and Singaporean factions. In 1965, Singapore became its own self-governing nation. That was only a little over 50 years ago!

Before I go all gaga over Singapore, it’s important to note what anomaly it really is. It’s only one of three city-nations in the world…meaning the city is the country and the country is the city for all things related to government, infrastructure, and economy. The other two such examples in the world are the Vatican City and Monaco. Singapore has a land mass that is only 719 km², which is smaller than Las Vegas. That stated, it is one of the densest cities in the world with close to 8,000 residents per square kilometer for its total 5.7 million resident population. For comparison sake, Minnesota’s population is 4.6 million. The city -nation of Singapore is almost 4 times more dense than the Twin Cities metro and more than 300 times more dense than the state of MN.

What I’ve found to be the most amazing thing about Singapore’s history is how purposeful and future-thinking Singaporeans were about how to establish their new country. There has been much said about the impressive actions of our forefathers in writing the U.S. constitution and the establishment of the United States, but the intentionality and follow-through via policies are what really makes the Singapore stand out. Singapore is cited as “the” definition of meritocracy. For me it was tougher to pick up on the meritocracy attributes of the country in just a few days of visiting, but was easy to see the cultural and economic wealth that appeared to benefit the vast majority of the city-nation. It was also evident that Singapore set out on building a nation using a “growth with equity” framework that I’ve now seen referenced on several occasions.

Before becoming its own nation, it was a hodgepodge population up of people who self-identified as Singaporeans, Malays, Indians, Chinese, Brits, and other Southeast and Pacific Islanders. The country knew that if it was to be successful, it needed to create something that everyone could buy into in order to succeed. One aspect of this vision included housing its population.

One of my geeky goals while visiting Singapore was to visit the national public housing museum created by the Housing Development Board (HDB). I dragged Sarah there one early Monday morning only to find it was closed due to the Chinese New Year. Most people would probably have taken it as a sign that it wasn’t meant to be, but I was obsessed with better understanding this seemingly, perfect city and encouraged a repeat visit in the following morning. The museum itself seemed a bit more self-congratulatory and less history/policy focused than I had hoped, but the fact that there is a public housing museum is powerful in its own right. The museum was housed in the basement of a 20+ story office building north of the central business district. The bulk of the floors of the office building served as the headquarters for the HDB, the city-nation public housing authority that was established when the country birthed in 1965.

In the Singapore of the 1960’s, 1.3 million of its 1.9 million resident population lived in squatter shacks. These shacks were constructed out of corrugated zinc metal, sticks, cardboard, and anything else the household could get their hands on to build their makeshift homes on land they didn’t own. It was a place with some rich people and a whole lot of poor people. With the birth of the new nation, the HDB was established by (and supported by) the government to replace the “unhygienic slums” and “overcrowded squatter settlements” with better living conditions. With intensity and intentionality, they created 21,000 new living flats within 3 years. The growth of publically developed and supported housing continued to grow exponentially and the city now boasts over 1 million units of publically developed and supported housing units across the city-nation. Over 82% of Singaporeans now live in publically developed and supported housing today. And….90% of its residents are homeowners. While visiting the National Museum of Singapore, I saw a placard with the following quote related to their housing policy efforts:

Homeownership was considered the key to nurturing political stability so that every citizen would feel he or she had a personal stake in the country.

Homeownership is often (and wrongly) associated with wealth building, but in this case, the Singaporeans purposefully set up homeownership as a means for nation building. I’ve long understood that the value of homeownership is the stability of mind and place for the individuals and families who own their own homes. I had never given much thought about it as an intentional instrument of nation building. So what makes what has happened in Singapore so great?

Singapore economy is incredibly strong and the housing market is great. A quick search of 2-bedroom condos for sale in Singapore demonstrates how wicked expensive housing is in Singapore. Costs to purchase are consistently well over $2,000 per square foot in the downtown areas of the city and it’s tough to find a unit anywhere selling for less than $1 million. The HDB is able to sell these units (with financing, grants, and restrictions) for $200k-$300k. To say that housing there is expensive would be an understatement. Yet, this is a city-nation that is seeing huge immigration relative to the U.S. or Europe and they are somehow able to continue to house their people.

Singapore is a “land bank”. Similar to the ability for central governments to control monetary value by withholding or releasing currency, Singapore still holds a lot of undeveloped land. Instead of divesting or giving this land away to corporate interests, it releases it with the idea that affordable housing will be released to the community. This creates a de-commoditization effect on land values…to a certain degree and assists in keeping housing values in check.

The Singapore government established funding for funding – both housing development and residents. Along with the creation of the HDB, Singapore set up the Central Provident Fund (CPF). The CPF funds the development of new housing, reinvestment in existing housing, grants funding for lower-income households to purchase homes, and finances low-interest mortgages. This is now coming in at an annual investment of approximately $2 billion a year from the government.

Singapore views housing as infrastructure. Singapore sees its decisions made on housing infrastructure as important as its role as a banking center, international trade, shipping, economy, and overall success as a nation.

Singapore requires ethnic quotas in its housing. All of the housing developed and sold by the HDB has ethnic quotas for Chinese, Malay, and Indian populations to encourage mixed communities and discourage ethnic segregation. I realize some reading this may have an adverse reaction to racial and ethnic integration policies, but it works. I’m sure it doesn’t work perfectly, but it seems to work as well – if not better – than what I’ve seen thus far in my travels. From what I’ve seen in our own challenged situation of economic segregation and displacement in the U.S., I think there are some learnings that we could take from Singapore.

Singaporeans seem to like it. 82% of Singaporeans live in units developed and supported by the HDB. A recent survey demonstrated a housing satisfaction rate of 95%. For all of the Singaporeans together, the home ownership is 93%, which is the highest in the world.

Singapore allows access to self-financing by borrowing from pensions. Residents are able to borrow from themselves – without penalty – to purchase their homes. While this comes with some drawbacks (below), it does allow Singaporeans to borrow from themselves at zero interest to assist in the financing of the purchase of their housing unit.

Singapore housing has built-in resale restrictions. Those who know me realize I wouldn’t let an opportunity to expose the great and forward-thinking nature of these restrictions go without notice. There are several provisions within the initial sale of the HDB housing that restricts future sales prices. This keeps housing costs within relative reach of the incomes of the majority of the population.

So everything is perfect? Nah, there definitely are challenges in Singapore. What’s refreshing to see, however, is that the country acknowledges there are emerging issues. More importantly, they seem to be taking steps to address these emerging challenges vs. just talking about them like so many other nations.

Singapore’s changing demographics. Like much of the world, they are getting older, more ethnically diverse, and household makeup is changing. They are adapting by changing floorplans and square footages of new housing development. They are also making policy changes to make it easier to incent older populations to move to smaller units. They are also looking at the ethnic quotas on the housing as they’ve realized that more than just Chinese, Malays, and Indians live in Singapore.

Singapore’s housing costs are skyrocketing. Despite their best efforts to control costs in the development of housing and future costs through resale restrictions, the HDB is losing the battle with housing value increases. The economy and desire to live in Singapore is still pricing people out of quality housing. The country still has some tools in its toolbox such as additional grants and land, but it will only go so far and new strategies will need to be developed in order to keep its growing population housed.

Singaporean’s need for more rental options. Housing costs, changing demographics, and the realities of a more mobile world have made the HDB realize they need to invest in more rental options for Singaporeans. This realization has probably occurred later than it should have, but given the HDB has control interests in over 1 million plus units, they also have the ability to convert some of the ownership units to rental over time as well as can develop new rental options for the country.

The ability to tap into retirement pensions has some drawbacks. While this is an innovative way for residents to fund their home purchase, many Singaporeans now are regretting this use of funds as they near retirement. While investing in themselves, they missed the opportunity for the compound interest to grow their retirement funds and now have to work longer than they initially thought.

I’m not a socialist but definitely lean in a “pragmatic-socialistic” way of daily thinking. I think the people need be more of the drivers of the decisions made in society. I think Singaporeans have more of this ability than many other countries in the world. Already in my life, I’ve seen far too many private sector failures addressed with band-aid public sector short-term regulatory fixes that only result in unintended negative consequences. I suppose I would be ok with it if I felt I had a say in the matter. I believe the majority of the populous in the U.S. feels the same way. I can’t believe I’m stating this, but believe we need a greater public sector involvement in housing policy in the United States….with the explicit caveat that it is driven by populous….and not by the real estate and banking industry. I realize all of this it difficult to achieve mid-stream vs. the birthing of a nation like Singapore, but do think we have to afford ourselves the ability in the United States to hit the “reset” button because our housing policy is broken, getting worse, and no one is calling the question, let alone fixing it. When is the right time to create populous-centric housing policies to look as much to benefit housing households of tomorrow as well as the population of today?