SINGAPORE — The Progress Singapore Party's (PSP) proposed "affordable homes scheme", where Build-To-Order (BTO) flats are priced primarily on construction costs, will take Singapore backwards to a time when flats served as just shelter and not an asset, National Development Minister Desmond Lee said on March 7.

"They want to go backwards, to the time (when) housing was a shelter and an expense, and did not serve as a store of value and assurance for retirement, where Singaporeans did not have a stake — when they leave, according to the affordable homes scheme, just return (the) keys and move on," said Lee, who questioned if this was really what Singaporeans wanted.

Lee said that this will be "a major change from the social compact we have had all these decades", noting that it was in the Housing Board's early years, from 1968 to 1987, that flat prices were fixed to recover costs.

Today, HDB prices BTO flats by determining their market value based on factors such as location and size, and then applies a discount to keep them affordable. It also gives out means-tested grants on top of the market discounts.

These flats are not priced to make a profit, or recover land and construction costs.

Lee was responding to Non-Constituency MP Leong Mun Wai, who compared the cost of buying a HDB flat in 1979 with present-day costs to argue that Singaporeans are worse off now than in the past. Leong made these comments during the debate on the Manpower Ministry's budget on March 6.

Speaking on March 7, Lee said Leong had been selective with his data by presenting the affordability picture for a minority of Singaporeans in 1979, and by failing to mention flat price increases in 1980 and 1981.

Leong had said that in 1979, the price of a new four-room flat was $27,100 — about 28 times the starting salary of a university graduate then and 43 times a VITB graduate.

He pointed out that the median starting salary of university graduates in 1979 was $957 per month, while that of a Vocational and Industrial Training Board (VITB) graduate was $633 per month.

The VITB was the predecessor of today's Institute of Technical Education (ITE).

In comparison, said Leong, the cheapest four-room flats launched in October 2024 were 64 times the present-day median starting salary of a university graduate, while five-room flats were about 95 times a university graduate's starting pay.

Lee said in response that only about 13 per cent of each cohort went to university and VITB in 1979, which means Leong did not present the affordability picture for the majority of Singaporeans back in 1979, "who were less well-educated, less skilled, and earned much less, in those early days of Singapore".

Almost all Singaporeans graduate from the university, polytechnic or ITE today.

Lee also said an HDB flat in 1979 was very different from an HDB flat in 2025.

"In the 70s, HDB flats were simple, functional homes in estates, with few amenities and very limited transport links," he said, adding that today, "flats come with modern amenities and far better transport connectivity, offering residents a higher standard of living".

Lee also pointed out that Leong was selective with his choice of 1979 flat prices, pointing out that a construction boom had led HDB prices to rise 20 per cent in 1980 and another 38 per cent a year after that.

He also said PSP's "affordable homes scheme" — first proposed in Parliament in February 2023 — is akin to HDB's system from 1968 to 1987, when flats were priced to recover costs.

"HDB flats back in those days were priced based on construction cost," he said.

He added that construction cost both then and now fluctuates based on economic factors, such as labour availability and prices of materials, noting that the challenge of pricing flats based on sharply fluctuating construction costs should also apply to the PSP's proposal.

Lee went on to say that the housing market has changed over the decades, and that the HDB has "long since moved away" from pegging flat prices to construction costs.

There was "almost no resale market to speak of" in the 1960s and 1970s, but changes in conditions for resale and mortgage financing policies allowed the market to mature in the 1980s and 1990s.

"Today, our HDB flats are both a home and a store of value for Singaporeans, which they can monetise in their older years for retirement by selling on the open market, renting out a room or a flat, or through our Lease Buyback Scheme, and so on," said Lee.

Instead of reverting to the pricing model of the late 1970s, Lee said the Government will continue to look forward, "to ensure that our policies remain relevant, effective in providing public housing as affordable, accessible, and inclusive for Singaporeans".

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