Upgrading of ageing homes, more flats completed among factors leading to HDB's record $5.38b deficit

SINGAPORE — Upgrading work on ageing homes, the development of new flats and more keys being issued to buyers were among the factors that drove the Housing Development Board (HDB)'s deficit to a record $5.38 billion for the 2022 financial year (FY) from April 2022 to March 2023.

This was about 23 per cent higher than the $4.367 billion deficit the national public housing authority recorded the previous year.

The bulk — $4.68 billion — was attributed to the expected loss for flats being built, disbursement of Central Provident Fund housing grants, and a gross loss on the sale of subsidised flats under the home ownership programme, HDB said on Tuesday (Oct 31) in a statement on its annual report.

The losses incurred under the programme were 22 per cent higher than the $3.85 billion in the previous year.

HDB chief executive Tan Meng Dui said supply chain uncertainty, higher material costs and a labour crunch have caused construction costs to surge about 40 per cent since FY2019.

He noted that Singapore's property market remained buoyant in 2022 in the midst of the Russia-Ukraine war that began in February 2022 as well as the Covid-19 pandemic.

"These increased costs have largely been absorbed by HDB, as subsidies and grants are increased to keep flat prices affordable," he said.

Of the $4.68 billion deficit incurred under the home ownership segment, about $2.712 billion stems from the expected loss for flats being built.

HDB said it incurs significant losses each year, as the amount it collects from buyers from the sale of flats is less than the total development costs of Build-To-Order (BTO) flats and the housing grants disbursed.

It also incurred a gross loss of $1.2 billion for the sale of flats, which nearly doubled from $659 million the year before.

This was because more new flats were completed and handed over to buyers. In FY2022, 18,478 flats were sold, up 36.8 per cent from the 13,506 units sold in FY2021. These numbers exclude studio apartments and flats sold on short leases.

HDB said this was the highest sales figure in the last half a decade, noting that it was able to complete more sales with the recovery of the construction sector. This, said Tan, resulted in more losses incurred.

Meanwhile, CPF housing grants totalling $686 million were disbursed to buyers of HDB resale flats and executive condominiums, down from $849 million the year before.

This decrease was because resale transactions dropped to 27,900 cases in FY2022 from 30,400 cases in the previous year, HDB said.

Separately, the board spent about $141 million on the provision of rental flats, as more repairs and work were done to spruce up the units.

It also spent $558 million on upgrading programmes, up by more than 40 per cent from the $392 million in the previous year. HDB said this was due to construction work under the Home Improvement Programme gathering pace as Covid-19 controls eased.

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In FY2022, 33,704 flats were upgraded under this programme, which remedies common maintenance problems in ageing flats.

Of these households, more than half also chose to install elder-friendly fittings at subsidised rates under the Enhancement for Active Seniors programme. The improvements available are ramps for multi-step entrances, grab bars and slip-resistant treatment to toilet floor tiles.

Another $432 million was spent on works such as the upgrading of electrical infrastructure in public housing estates, lease administration, and the management of facilities such as carparks.

HDB incurs a deficit every year and receives a grant from the Ministry of Finance to cover it. In the latest financial year, it received a grant of $5.389 billion, up from $4.4 billion the year before.

National Development Minister Desmond Lee said the Government increased its expenditure to keep public housing affordable and accessible in FY2022.

"Moving ahead, the Standard, Plus, Prime framework will allow us to keep public housing — including those in choice locations — affordable to Singaporeans, ensure a good social mix, and keep the system fair and sustainable," he added.

Under the reclassification of HDB flats that will kick in from the second half of 2024, BTO flats in choicer locations will fall under the Prime and Plus categories, which come with extra subsidies and stricter resale conditions.

HDB said it does not price flats to recover costs and that nearly 90 per cent of families buying a flat for the first time have been able to service their housing loans using their monthly CPF contributions, with little or no cash spent.

It added that it is on course to launch up to 23,000 flats in 2023 to meet housing demand, and is prepared to launch a total of 100,000 flats between 2021 and 2025.

ALSO READ: HDB to launch up to 14,000 two-room flexi BTO flats to meet demand from singles and elderly: Desmond Lee

This article was first published in The Straits Times. Permission required for reproduction.