How the new BTO classification framework can keep public housing affordable in SG

Under the framework, BTO flats will be classified into Standard, Plus, and Prime.

The Ministry of National Development (MND) underscored the importance of Singapore’s new classification for BTO flats saying it can “keep public housing affordable, maintain a good social mix, and keep the system fair.”

In response to the Parliament, the MND underscored that without the new classification framework “flats in choice locations will likely become more expensive and out of reach for many Singaporeans over time because of their good location and attributes.

“By launching them as Prime or Plus flats, the additional subsidies and tighter restrictions, including the income ceiling upon resale, will help to moderate demand for such flats, and keep prices affordable to Singaporeans from a wider range of income levels,” the MND said.

The agency also added that the government will provide additional subsidies on top of the significant market discounts already provided for Standard flats.

“On top of these subsidies, we provide progressive grants through the Enhanced CPF Housing Grant to eligible first-time homebuyers, to provide more support to those who need it most,” the MND said.

Expounding on how the new classification will keep public housing affordable, the MND said: “In today’s market conditions, a 4-room flat in the central region would be priced at around $650,000 under the current BTO model after significant market discounts. But the price is before grants. For a family earning a combined $7,000, which is below the median resident household income, this may not be within their reach. They receive an EHG of $25,000, but would still need to make an additional top-up of $52,000 in cash or CPF, and pay a monthly cash outlay of $399, or some 29% of their income after the top-up.”
 
“Under the Plus model, due to tighter restrictions and additional market discounts, the price comes down to around $550,000, before grants. The same family earning $7,000 would continue to receive $25,000 in grants, but the $52,000 in additional top-up is now reduced to zero. They now pay slightly more than a quarter of their monthly income (27%), and a monthly cash outlay of $273. This flat is now within their reach,” the MND added.

Meanwhile, to maintain a good social mix in HDB estates across Singapore, the government will “impose tighter restrictions” on Plus and Prime flats, including an income ceiling upon resale.

“ The income ceiling applied upon resale takes reference from the prevailing BTO income ceiling at the time of resale. Today, this is $14,000 for families and covers eight in 10 Singaporean households. The government regularly reviews the BTO income ceiling over time to account for income growth,” the MND said.

“We will also offer a variety of flat types across Prime and Plus projects, to meet the different budgets and needs of Singaporeans. To ensure that our neighbourhoods remain inclusive, we will continue to build rental flats in integrated blocks where possible,” the MND added.

To keep the system fair, the government will also impose tighter restrictions on buyers of Prime and Plus flats which have additional market discounts to keep them more affordable
“In addition to the tighter restrictions, we will also impose a subsidy recovery rate for the first buyer upon first resale, which will be commensurate with the extent of the additional market discounts given,” the MND said.

“Because Plus flat buyers enjoy lower subsidies than Prime flats, their subsidy recovery rate will also generally be lower. Similar to Prime flats, Plus flat owners will also have a longer Minimum Occupation Period, or MOP, of 10 years and will not be able to rent out their flat at any time. This is to ensure that these flats are primarily for owner occupation and not for speculative investment or rental yield,” the MND added.