20140726 HDB-CPF schemes to benefit citizens or a scam?

The CPF system needs a revamp because the use of retirement savings to fund public housing is a flaw. The burden of a 30 year loan for public housing places undue stress on ordinary and low income citizens. HDB-CPF schemes have been tweaked countless times only to maintain the illusion of a ‘wealthy’ country.

The PAP government has complicated a simple system not for the benefit of citizens but to perpetuate its power. The access to a cheap source of funds, our CPF, for public housing has allowed the PAP to control 80% of the population who live in public housing. CPF members are also funding HDB buyers indirectly through HDB concessionary loans.

HDB scheme a public housing scam?

1 Public housing has to be affordable. Period. But in Singapore Inc’s context, the government’s objective is sky high prices. The HDB has included land cost in new HDB flats for about 2 decades. The amount is more than $100,000 per unit for bigger HDB flats. To improve the image of public housing, new flats are then sold at a discount to resale flats. Despite selling at such high prices, HDB still claims to have made losses every year.

2 The land belongs to EVERY citizen, not PRs and foreigners, and has been developed using tax dollars. As taxpayers, why are we made to pay a second time for the development cost when we purchase public housing units?
The government says ‘land value’ must be included in the costing of a new HDB flat using an arbitrary figure. By costing HDB flats with such an approach, the PAP has profited handsomely at the expense of citizens.

3 Mah Bow Tan, ex MND minister built only 30,000 flats in 5 years from 2006 to 2010 (page 2). As a President and Colombo Plan scholar, it was impossible for Bow Tan to have grossly underestimated demand. During the same period, the population had increased by 100,000 per year, PRs increased by 290,000, new citizens averaged about 17,000 per year and there were more than 100,000 marriages. And our scholar minister actually built only 30,000 flats?!

Wasn’t he informed of the government’s plan? Or was the priority given to building 2 casinos, never mind if HDB prices skyrocketed?

Many HDB buyers are now stuck with a much higher mortgage installments for 30 years. Mah’s incompetence resulted in every HDB unit costing at least more than $100,000 on average. This translates into mortgage installments of more than $500 every month for buyers to service.

Mah Bow Tan was not informed of population plans?

4 The construction cost is a fraction of HDB’s selling price but yet HDB claims it has been losing money every year! By extension of HDB’s accounting, every statutory board must declare they have been losing tonnes of money. Ministers would do well not to attempt to insult the intelligence of non living objects with PAP’s accounting model.
Let’s take a look at the prices of Tampines Greenleaf, HDB BTO flats constructed by a company linked to a PAP grassroots member which has received at least 100 (30%) complaints of shoddy workmanship.

960 flats were constructed by Soilbuild which successfully tendered for the contract at $131 million. The average construction cost per unit is $136,458. ($131 million/960 units)

Table shows 2011 HDB flat indicative prices.

Assuming a best case scenario where every unit received the maximum grant, the HDB made a profit of at least $96 million from this project. (table below) How much did the its grassroots-linked construction company make? A profit margin of 10% would translate into almost $10 million! Why does the HDB not take over HDB construction and lower flat prices with economy of scale to benefit citizens?

Flat type Qty Price with max grant HDB proceeds
2 – rm 96 $80,000 $7,200,000
3 – rm 160 $131,000 $20,960,000
4 – rm 384 $249,000 $95,616,000
5 – rm 320 $325,000 $104,000,000
Total HDB proceeds $227,776,000
HDB pays Soilbuild $131,000,000
HDB minimum profit $96,776,000
Ave cost paid by buyers $237,266
Ave constr cost/unit $136,458
Min HDB profit/unit $100,808

5 The HDB makes at least $$100,000 per unit from the sale of 4/5-room flats. For smaller units, the profit margin is lower. PAP makes more than $100 million from the sale of nine blocks of flats from citizens.

6 Government grants come from tax dollars and grants eventually go back to the government. So PAP first creates high housing prices and then offers grants (PR stunt) to gain political mileage without resolving the issue high housing prices. The effects of incompetent governance continue to be felt and it appears will not be tolerated much longer.

CPF retirement savings scheme or scam?

1 The illusion of public housing affordability could not have been created without any assistance from CPF Board. Instead of focusing on our retirement needs, the PAP allows our CPF to be channeled into public housing.

Housing as a need, should not be viewed as an investment but consumption because there are interest costs. We are not able to profit from the sale of the ‘only roof over our head’. A second property is an investment.

2 Without our  CPF, HDB will not have any access to cheap funds for its concessionary loans. HDB simply facilitates the transfer of CPF members’ funds and charges an additional 0.01% to borrowers to cover its administrative costs. CPF members are being shortchanged when our retirement funds are not used for investment but as fixed deposits earning peanuts interest of between 2.5% and 4% for the last 15 years.

3 Last year, Desmond Lee, MND Minister of State, stated there were 335,000 households with an outstanding HDB loan. This translates into more than $40 billion of total CPF monies lent to the government at a pre determined interest rate. One of the reasons why our CPF cannot earn higher returns is because almost 20% of total CPF have been locked into low interest rates fixed by the PAP.

Because the government has unlimited access to CPF monies, it will allow HDB prices to increase as high as possible to create an illusion of wealth.

4 Without the use of CPF OA for housing, current salaries make the purchase of any 3-rm or bigger flat prohibitive. The PAP has been using our CPF to mask the issue of affordability. The consequence of using the CPF shortcut for decades is a huge shortfall in retirement funds which the PAP is now unable able to address.

A scheming PAP

Notice in almost all PAP assistance scheme, it will channel the maximum amount of tax dollars into the CPF eg PGP, NS support, Medishield subsidies, etc.

In helping self-employed low income citizens, WIS pays 90% into the recipient’s CPF account with a 10% cash component. Fortunately the government did not insist on any CPF component for citizens who are on Public Assistance.

The reason for pumping money into the CPF is obvious – the grant looks generous on the surface despite little immediate benefit to the recipient. CPF monies can be reused by for GIC investment and recycled within the system. In short, the PAP will continue to have control over ‘our’ money.

CPF housing grants given by the government will never be allowed to be taken out from the system when we retire. The Minimum Sum scheme prevents them from being withdrawn. Whenever the PAP ‘gives’, one should be mindful that a larger amount will be taken back in future. The question is ‘when’.


The inclusion of land cost in public housing allows the HDB to profit billions from citizens every year. It is obvious the HDB is subservient to the PAP and has aligned its objective with PAP’s – HDB prices skyrocketed as a result of the priority given to building the 2 casinos.

The CPF Board was roped in to be HDB’s financier, providing a source of cheap funds at a predetermined interest rate for ‘HDB’ concessionary loan. About $40 billion have been locked into low returns. By legislating the use of CPF retirement savings for housing needs, the PAP singlehandedly created high housing prices and a huge shortfall in retirement funds.

The HDB is no longer an institution which provides affordable housing; not unlike the PAP, it objective is to profit from citizens. By helping to fund public housing, the CPF Board has lost sight of its mission to provide adequately for our retirement needs. Without a doubt, HDB-CPF schemes are detrimental to citizens and beginning to look more like a scam.

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