RECENT PRICE INCREASES FOR HOUSING AND DEVELOPMENT BOARD FLATS

7.45 p.m.

Mr J.B. Jeyaretnam: Mr Speaker, Sir, I have asked for or claimed this right to raise this matter on the Motion for the Adjournment because of the dissatisfaction that has been felt outside about the recent increases in the prices of HDB flats that were announced by the Minister for National Development on 23rd September, 1982, at a press conference.

Mr Speaker, Sir, the Minister, in announcing the price increases, quoted what, he said, were the costs to the Board in the construction of the flats. He also said that these prices at which the flats were being sold were lower than the costs to the Board itself, i.e. the prices paid by the Board for the construction of the flats. And he said that if this trend were to continue the, Board would become bankrupt. I do not think any Singapore citizen wants the Board to become bankrupt. But what I would commend to the Minister is that the Housing and Development Board is a statutory board, set up and financed by taxpayers. Money is provided by Parliament for the construction of low-cost housing for the citizens. And being a public body charged with the responsibility of providing low-cost housing, I would commend to the Minister that the Board must be fully accountable to the public, to the taxpayers, for the prices that the Board charges for its flats. As I have said, the Minister has quoted figures, in his press conference, of the construction of the flats, but he has not, in his conference with the press, explained how these figures had been arrived at. What was the costing system that was adopted by the Board before these figures were arrived at?

Mr Speaker, Sir, we fortunately have the Report of the Auditor-General on the Board's accounts and I will read from the Report of the Auditor-General on the 1981 accounts. This is paragraph 2 of his Report on the audit of the accounts. He says:

'The Board's existing accounting system does not provide for the costing of flats built by the Board and the leasing of land. There are no detailed records to show the unit cost of the flats and land. The Board has agreed to adopt a suitable costing system as soon as possible for the purpose of more informative reporting.'

Further down, he also refers to the policy of the Board in not showing certain items in the Income and Expenditure Accounts. In his Notes to the 1980/81 Accounts again, he says:

'The Board is unable to follow the desirable method of deducting the cost of flats and land sold from the long-term assets in the balance sheet because the existing accounting system does not provide for the costing of flats and land.'

So we have this report by the Auditor-General that the accounts do not show or cannot show the unit cost of the flats. He says:

"There are no detailed records to show the unit cost of the flats and land."

And he says, in paragraph 9 of his Report for the previous year, that as far back as 1978 consultants had recommended changes to the accounting system for implementation by the Board. I have asked questions, since I came into Parliament, as to when the Board was going to implement the recommendations made by the Auditor-General to its accounting system so that the accounts, as he said, reflected the true cost of the flats and land. The Auditor-General said this was necessary "for the purpose of more informative reporting." On 27th July at the Sitting of Parliament, the Minister said that the Board was consulting with several firms and would soon be appointing somebody to advise on the implementation of the Auditor-General's recommendations. I asked another question at this Sitting of Parliament. This was a Question for Written Answer. I have not got the answer with me at the moment, but I have looked at it shortly before I came here. It was delivered to my office. From there, what I gather is that no appointment has as yet been made but that the Board's officials are discussing the matter with a number of other accounting firms of international repute and, in consultation with the Auditor-General, will take steps to implement the Auditor-General's recommendations.

As I have said, the Auditor-General said that this recommendation was made in 1978. We are now at the end of 1982. Why is the Board dragging its feet over this? If there are to be any increases in the prices of flats, should not the Board present these accounts as suggested by the Auditor-General? And then go to the public, come to this House and say, "Look, these are the accounts prepared to show the true cost of the flats. We cannot go on building these flats and selling them at the prices that we are selling now, and that we need to increase the prices." As I have said, no one let alone just this House, would want the Board to go bankrupt in its operations. We need the Board. But the Board has to justify its increases.

In the press conference, the Minister talked to the press about most of the citizens or the flat buyers being able to afford the prices that are being charged. That is not the criterion. May I say to the Minister that, as a public body, the test should be how much does it cost the Board to build these flats, the cost arrived at after a true costing, and then the charges that ought to be made to the members of the public for the flats. The criterion is not that because the buyer is able to afford it, the Board can increase the price. That would be a completely wrong criterion to apply for the Board.

There is the other aspect of it, and that is this. I would commend to the Minister that before any prices are increased, he should first come to this House and present the statement and the accounts, so that they may be debated upon before prices are increased. I would ask the Minister whether he would consider now, quite seriously - this is a very serious suggestion on my part - that the prices that had been announced be suspended. They can take effect from 1st October but be suspended until the Board has prepared the accounts for these flats which are under construction and for which the new prices are to apply. I am not talking about the flats that have already been built but the flats that are to be built and for which the new prices are to be charged. That should not take the Board a long time. Would the Minister consider suspending the implementation of the increases until a true costing to the Board of the flats, block by block, is prepared, so that this House and the public know the true cost of these flats to the Board?. 7.58 p.m.

The Minister for National Development (Mr Teh Cheang Wan): Mr Speaker, Sir, this question of accounting has been heard in this House on many occasions, and I have repeatedly explained to the House the accounting system of the HDB. In fact, the HDB has discussed with the Auditor-General on the best way of changing the accounting system.

The hon. Member for Anson must understand that the HDB houses more than 70% of the population and it has more than 400,000 accounts with the people who are living in HDB flats. The HDB also has another 100,000-plus accounts of people who have applied for HDB flats. So altogether there are more than half a million accounts. The HDB spends almost half the Government's Development Estimates, as it stands. I think, by the middle of the year the HDB has borrowed from the Government more than $5,000 million, an outstanding loan. So the accounts is extremely complicating. It is not a simple account like some political party with $18.47. I read in the newspapers that, even then, it has found it very confusing. Just imagine, even with such a small sum, the hon. Member's party finds it very confusing. So the hon. Member should be the first one to understand the problem. When you are involved with more than half a million accounts involving millions of dollars, the accounting cannot be switched in a few months or to switch from one accounting system to another accounting system without creating a confusion.

The HDB is a going concern and it is handling millions of dollars every day. For construction alone, the HDB is spending something like $5 million or $6 million every working day, just paying to the contractors for construction. And receiving instalments from several hundred thousand people who are living in HDB flats and who have outstanding loans to pay, and receiving service and conservancy charges from more than 400,000 account holders. We have explained this to the Auditor-General and, in fact, he has been keeping a very close touch with the HDB, talking and discussing with the HDB on the best way to switch the accounting system. So the HDB is not trying to avoid switching the accounting system. This is the reason why the HDB has been taking such a long time to switch the accounting system. In fact, the Auditor-General himself is not able to say, "All right, I recommend that you select this particular accounting firm to switch the accounting system." In fact, we both are constantly in touch and constantly discussing, and we hope that we are able to arrive at the best way of changing the accounting system because it is very complicated. And if the accounting system goes wrong, I think it can create a very serious havoc for everybody.

I am not sure whether the hon. Member is really serious in suggesting that the selling price of HDB flats should be its true cost. What is the cost of the HDB flats? Is it the tender price of the flats that the HDB pays to the contractor and also the land cost, and charge the people? If the hon. Member is seriously suggesting that, then perhaps we carry out a pilot scheme for the people in Anson to pay the full cost. So that anybody in Anson who gets a new HDB flat, he pays the full cost. I am quite serious. And if the hon. Member for Anson is seriously suggesting that, then the HDB will charge the actual construction cost because the HDB calls tenders to build flats. There is nothing to hide. We have to pay the building contractor, so much, the sanitary contractor, so much, and the piling contractor, so much, etc. So there is nothing to hide about the construction cost. And also plus the land cost. Land cost, it is very simple. What is the market price of land? Let us take a piece of land which can build 100 flats, and we get the URA to offer it for sale. How many people are prepared to pay for the land to build 100 flats? If the people say they are prepared to pay $5 million, it means that the land cost for each flat is $50,000. Then we add the construction cost, maybe another $30,000 or $40,000. So each unit of 3-room flat to be sold to the people of Anson is $80,000, instead of what we sell in a New Town a 3-room improved flat for $21,000. So for Anson, to follow the hon. Member for Anson's suggestion, it is $80,000. If he is serious, I am prepared to carry out a pilot scheme for his constituents in Anson. They pay the full cost as suggested by the Member. And we can get public accountants to be nominated by the hon. Member, whatever name he suggests, to check or audit the accounts to say, "This is the actual construction cost paid by the HDB." As for the land cost, do not argue. The URA Sale of Sites can establish the actual land cost. So the full cost is the construction cost plus the land cost. The HDB will pay for the architect's fees, interest and other things. That will be a subsidy. The constituents in Anson will pay the full cost as suggested by their own MP. So I hope the hon. Member will consider seriously before we carry out a pilot scheme.

Some hon. Members: He is serious!

Mr Teh Cheang Wan: If he is serious, we will carry out a pilot scheme along these lines. These are the points raised by the hon. Member for Anson.

But I would like to add that the Government policy on housing has always been to charge the selling price that the people can afford. This has always been the policy of the Government. But since the hon. Member for Anson has suggested a different system, and as I have said earlier, maybe we can carry out an experiment for Anson Constituency along the lines suggested by him.

On the selling price, the Government has announced on the 23rd September that the selling price of HDB flats would be increased by only 5%. For the future years, i.e. up to the year 1984, the increase in selling price of HDB flats would not be more than 7 1/2 % for the years 1983 and 1984. When we say "1984", it means that this price will be carried up to June 1985. Also, the increase in price for the 5-room flats would not be more than 10% for the next two years. That was the announcement on the increase in prices made by the Government. By making this decision to peg the increase in the selling price, the Government is, in fact, taking a great risk because nobody really knows what will be the inflation cost in 1984 and 1985. But the Government has actually committed itself to the selling price up to the middle of 1985.

The policy of the Government has always been to price the flats within the means of the people. From our calculation of the incomes of the people, I think the selling price which Government has fixed up to mid-1985 is well within the means of all the applicants. The idea is that the CPF members need only pay the instalments for their flats from their CPF contributions. They do not have to dig into their savings. The monthly instalment payments for the loan which they borrow from the HDB for buying the flats will not affect their take-home pay.

I wish to assure the House that the Government has, in fact, repeatedly ensured that the price of HDB flats will always be within the means of the people. Let us look at the lower income group who cannot even buy HDB flats and who are living in 1 -room rental flats. I would like to say that the monthly rental for the 1 -room improved flat was fixed at $30 in 1966. This is for rental plus service and conservancy charges. Today, 16 years later, this monthly rental is $44, including service and conservancy charges; an increase of only 40% over 16 years. It is common knowledge that the increase in rental for private housing in the last 16 years is easily five to 10 times. Sixteen years ago, perhaps the rental for a terrace house was only $200 or $300. Everybody knows that, including the hon. Member for Anson. Today, how much is the rental for a terrace house? It is 10 times, or at least five to 10 times. Maybe $1,500 to $3,000, depending on the locality. But for public housing, the rental has changed very little. In fact, the Government keeps on losing money because the rental includes service and conservancy charges, which means that the Government is taking care of cleansing work, repairs, redecorations, planting trees, etc. In fact, the $44 rental collected from tenants of 1-room flats by the Government is not even sufficient to pay for the maintenance cost. The rental has been increased by $14 in the last 16 years, from $30 to $44.

As for the selling price of HDB flats, take for example a 3-room improved flat in a New Town which was sold for $7,800. I always take the smallest flat that the lower income people are buying. Today, the selling price of this 3-room improved flat is $21,000, an increase of 1.7 times. If we compare this to private housing, a terrace house or a semi-detached house, in 1968 and today, the difference in price is easily five to 10 times. Again, as you can see, the increase in the rental and selling price of HDB flats has remained extremely moderate, which means that it involves a continuous subsidy from the Government. But the Government policy on public housing has always been to ensure that it is within the means of our people.

I think Singapore can proudly claim that perhaps we are the only country, whether developed or developing, to have housed more than 70% of our population. No other country is able to achieve this. The PAP Government can be proud of this record in the field of public housing. [Applause]

Hon. Members: Hear, hear! 8.15 p.m.

Mr Speaker: The time allowed for the debate has expired. I adjourn the House pursuant to the Standing Order.

Adjourned accordingly at Fifteen minutes past Eight o'clock p.m. to a date to be fixed.