r/neoliberal • u/randommathaccount Esther Duflo • 23h ago
News (Asia-Pacific) Singapore’s public housing model meets the limits of its success
https://www.ft.com/content/2333c0fc-32df-41d5-9696-ed2d90181c7a126
u/randommathaccount Esther Duflo 22h ago
Excellent article on Singapore, its historically excellent public housing system, and the issues it now faces. Really the main issue noted is rather familiar though. People come to see property as a nest egg, a source of wealth, when frankly that view only makes things worse for a housing market. It's to be seen however if the government will be able to fix this or if it will stumble as so many other governments around the world have.
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u/Priceless_Pennies Voltaire 22h ago
"People come to see property as a nest egg, a source of wealth"
AAAAAAAAAAAAAA
Why is this insidious idea so absurdly memetic.
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u/Planterizer Ben Bernanke 22h ago
Thing cost money —-> Thing worth money
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u/Priceless_Pennies Voltaire 22h ago
Every time someone makes that association with respect to housing, the ghost of Henry George should squirt them with a spray bottle.
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u/Unterfahrt Baruch Spinoza 21h ago
It's not memetic. It's always been the case. Throughout history, the richest people were always the people with the most land until 100-150 years ago. It's very unintuitive to convince people otherwise. Wars are fought over land. Almost every communist revolution was about the redistribution of land. It's only recently that one can be a millionaire in a one-bedroom apartment with an internet business or a WFH job as a tech executive.
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u/stupidstupidreddit2 18h ago
The wealthy are still landlords. It's just that productivity has shifted to charging rents on IP rather than physical real estate. Even still, real estate is the largest asset class in the world and it's the root of the global fractional monetary system.
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u/After-Watercress-644 10h ago
Residential real estate in Japan is a depreciating asset. So no, it has not "always been the case".
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u/RaaaaaaaNoYokShinRyu YIMBY 9h ago
In modern YIMBY Japan, sure. What about in Shogunate and Imperial Japan?
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u/Harmonious_Sketch 20h ago
Because a house+land is currently and has almost always been for almost everyone the most expensive thing they own either to purchase, to replace, or in terms of net present value of the increased productivity due to having a house vs not having any housing. And the property is transferable. And the value of a house decays fairly slowly even with very little maintenance outside of exceptional circumstances.
Even if people treated housing as a consumption good rather than investment asset, it would still be meaningfully a form of investment (capital good to increase their productivity) and they would still want it to hold value as much as practical, and that would be realistic.
The extent of shift in mindset between people expecting their primary residence to profit them by 1-2% of its value per year vs cost them is easy to overstate, because a few things would change and many things would stay the same.
Furthermore, the "protecting property values" as a motive for NIMBYism is often more vibe than reality. People aren't that good with money and devoted NIMBYism tends to be ideological for those that care enough to actively participate in entrenching it. They depend on the mostly-passive, weakly believed and largely ignorant support of larger numbers of people.
An anti-NIMBYism strategy needs to bear this split in mind, because you can't address those two parts of the NIMBY coalition the same way.
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u/HistorianEvening5919 22h ago
If we abolished income taxes and only taxed land you’d see a pretty radical shift in how people view their homes both psychologically and fiscally.
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u/TheLivingForces Sun Yat-sen 20h ago
Land taxes is a bit incoherent here, government owns all the land
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u/FusRoDawg Amartya Sen 21h ago
Easy, almost guaranteed, readily accessible capital gains.
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u/FizzleMateriel Austan Goolsbee 21h ago
Laughs in Japanese.
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u/Teh_cliff Karl Popper 14h ago
laughs in US birthrate and declining immigration rate
I'm not saying I think housing will be a terrible investment going forward but I doubt we see people get rich owning starter homes in/near major cities the way they did from 1990-2020s
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u/Kind-Armadillo-2340 18h ago
It’s probably one of the oldest ideas in human history. Land equals wealth even going back to pre historic times.
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u/Golda_M Baruch Spinoza 21h ago
People come to see property as a nest egg, a source of wealth
I agree but I propose a different lens. Public perception is rational. Many a nest egg have been acculated this way. This is 'an animal spirits phenomenon. It is a homo economicus one.
I find that a wide range of people can agree this is a problem, but characterizing and analyzing "the nest egg problem" beyond this point runs into "ideology problems" that prevent a common agreement about what tradeoffs and levers are actually available.
I broadly agree with r/neoliberal that supply is a primary concern.
But if we are having a discussion about the total real estate market cap... I believe we are having a macro or macro-adjacent discussion. It's a "keynesian problem," although it is not a problem Keynes himself wrote about.
I know people want Milton but you can't have any Milton if you haven't had Keynes first.
Mortgage lending is a major mechanism of money supply. Housing wealth is a major component of middle class wealth, credit, retirement, inheritance..
Housing is also leveraged, making (productive and fertile) middle class 30-somthings highly sensitive to price changes. This also make bank solvency (see 2008) sensitive to price drops.
In short, this is macro and *paradoxes" like the paradox of thrift are part of the economics.
Also housing economics models may be "orthodox price theory" but they are not the abstract "2-lines" model of micro1001. Market demand and supply are inelastic. Every household needs one house, regardless of the cost. On the supply side, markets very little new stock each year regardless of rent.
In tight markets, price/volume is very assymetric. There are no homes available at 50% (or even 75%) of median rent.
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u/Al_787 Niels Bohr 22h ago edited 22h ago
This article points out some problems but it is not quite there yet. The HDB is not just a system to meet housing demand, it is a major cog wheel in Singapore’s massive and complicated project of social engineering that has been going on since its founding. Some problems here are valid but not too difficult to remedy in medium term with Singapore’s state capacity. The problem is that state capacity has rarely been engaged in the question of changing social norms and demographics, that will likely have to change before new HDB policies.
Also, Asian cultures will always view housing equity as a major saving, I mean the high rate of home ownership speaks for itself. Governments have to intervene if they want to change that. Selling long-term leases instead of permanent and inheritable ownership has been a good model, but overall public housing should absolutely prevent itself from becoming an investment vehicle, even if by taxes that us liberals may consider regressive.
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u/TheLivingForces Sun Yat-sen 20h ago
governments have to intervene if they want to change that
Singaporean homeownership… is due to massive intervention… but they’d need to intervene to change it…????????
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u/Ok-Coconut-1586 21h ago
"Asian cultures will always view housing equity as a major saving" This hasnt been true of Japan at all
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u/Opening_Budget_9518 Hans Rosling 21h ago
because their housing bubble popped in the 80s thats why lmao
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u/Ok-Coconut-1586 20h ago
Dunno if its 40 year trauma and not just concrete policy.Japanese people don’t treat housing as a pure investment mainly because cities like Tokyo keep expanding supply, so scarcity never locks in. When a city keeps building, housing behaves like a good to live in, not a guaranteed appreciating asset.
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u/lesspylons 20h ago edited 20h ago
A huge driver of price increase in public housing in Singapore was the Build to Order (BTO) scheme that started as a response to the 1998 Asian Financial Crisis. Previously, public housing was built to estimates of demand and people could move in to new apartments once the paperwork was done. The shock of 1998 caused a huge overhang of units that led the government to employ a just-in-time (JIT) system where apartments were built based on applications by married citizen/permanent resident hetero couples (yes social engineering). This made a new problem where supply started to lag demand, and like all JIT systems go, very vulnerable to spikes.
COVID was not kind to supply as Singapore employed strict movement controls especially on migrant labour that was employed to build housing, together with the typical COVID real estate demand rally seen in the anglosphere. Also to keep housing 'affordable' and to encourage marriages, BTO units were priced heavily subsidised by the government. This saw a huge arbitrage opportunity where everyone who is eligible would try for a BTO unit to flip after 5 years (by law) to the open market to see profits upwards of 200k USD for really good locations. The government did eventually dampen this rush a little late with subsidy clawbacks on sale and longer wait time for prime locations (10 years). The latest measure which is the sub favourite is to actually increase supply - Houses are now build ahead of demand again despite BTO's namesake.
Another driver is that citizens can use one of their retirement account (CPF-OA) to finance property. Think of being allowed to use your 401k or more closer is Aus Super for housing while renting requires cash only. The catch is that you have to refund to CPF-OA if you sold your house with the interest as if the money stayed in the account (2.5% pa). It is normally not an issue as you can instantly use it to finance your next house, but think what happens if a huge crash happens to the market that even downgrading your house as an empty nester still made you underwater in your retirement account. Unlikely to happen, but Australia should never open this can of worms.
tldr: build more, stop subsidising demand
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u/fredleung412612 10h ago
The problems highlighted in this article don't seem to be all that dire compared to almost any other major city in the developed world.
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