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How effective are HDB priority schemes and housing grants?

The various enhanced priority schemes introduced by the government since 2011 to help extended families live together or close to each other have produced good results, says Khaw Boon Wan, Minister for National Development, who gave an update in his “Housing Matters” blog on June 19.

About 24% of built-to-order (BT) flat applicants applied under one of these schemes and enjoyed higher success rates than those who didn’t, notes Khaw. When it came to mature estates like Bedok and Tampines, the proportion was even higher (up to 36%).

The most popular scheme was the Married Child Priority Scheme (MCPS), which accounted for 90% of these applicants last year. The scheme was enhanced in Nov 2014 with HDB setting aside up to 30% of the flat supply for MCPS first-timer families and up to 15% for second-timer families. Since then, 6,200 families have applied under the scheme.

Another scheme, the Multi-Generation Priority Scheme (MGPS) or 3Gen flats, saw the proportion of applicants double from 5% in 2013 to 10% in 2014. About 284 pairs of families (parents and married children) have applied under the enhanced MGPS since September 2013, and over 600 multi-generation families will be moving into their 3Gen flats.

The statistics show that more families would like to buy a flat with, or close to their extended families in mature estates. “We have tried to meet these needs, by launching more flats in mature estates,” says Khaw. “However, there is limited land for us to launch BTO projects in mature estates.”

The government has therefore offered an additional $10,000 under the higher-tier CPF Housing Grant of $40,000, to help first-timer families buy a resale flat to live together or close to their parents or married children, explains Khaw.

There is also an Additional Housing Grant (AHG) to help lower and middle income citizen families to buy their first subsidised home. The AHG amount is graduated according to income brackets, in favour of lower income households. It can be used to offset the purchase price of a new flat, resale flat or DBSS (Design, Build and Sell Scheme) flat. It is an additional subsidy over and above the regular subsidy and CPF Housing Grant that new and resale flat buyers receive respectively.

“As the resale HDB market is an open market whereby prices are set by the negotiation between sellers and buyers, the HDB is unable to set or differentiate the resale prices for first-timer households,” observes Eugene Lim, key executive officer of ERA.

Therefore one of the most direct ways for the government to help families would be to increase the higher-tier CPF Housing Grant amount and to increase the income ceiling to qualify for the AHG so that more families will be eligible, suggests ERA’s Lim.

HDB could also increase the radius from the existing 2km to 3km or 4km to broaden the qualifying coverage distance, adds Lim. “This can be done without having to increase the grant amount.”

As housing grants are only made available for households that meet the qualifying criteria, it is not an across-the-board measure unlike the relaxation of loan curbs that could cause home prices to inflate due to increased demand across the board, notes Lim. “By tweaking the housing grants qualification criteria, household that are eligible will receive the assistance needed.”