HDB Loses $1
Billion a Year, and Why You Shouldn’t Care
Some Singaporeans
asked that land costs be excluded from HDB pricing.
The answer to this was a stern no. Too much social welfare, as we
all know, leads to laziness, communism, and Satan worship. Or even
worse, voting for the Opposition. Besides, HDB loses a billion dollars a year as is. That’s
pretty bad, right? Trouble is, that “loss” is irrelevant…as an
argument or otherwise:
Uh, guys?
I’m not sure ‘Top Spender’ is
an award category.
We’re not amazed
by the loss, and we’re not moved by it either. See, we remember HDB
announced losses before, in April ’08. Back then, HDB claimed a
loss of $2 billion. So actually, the deficit is
shrinking.
And anyway, HDB
has never hidden its losses. That’s what their financial reports claim most of the
time.
(Bet you thought
those reports were secret. But no, there they are in the open,
where anyone with a web browser and more patience than God can
understand them*).
But the most
important reason we don’t care (and neither should you) are:
*They’re
vaguer than Matrix Reloaded. On page 53, for example, dividend
income is listed as coming from “unquoted subsidiary” and “others.”
And the only “breakdowns” happen on the 114th attempt to make sense
of the accounting.
A billion
was easy. For our next trick, we’ll make your entire flat
disappear.
The Singapore
government’s land is handled by the SLA (Singapore Land Authority).
When HDB needs to build flats, it pays to acquire the land from
SLA.
Thing is, HDB has
to pay market rates*. That is, they pay the same price a private
developer would. But unlike private developers, HDB also has to
subsidize the cost of flats. This inevitably leads to a loss: The
land is purchased at a much higher price than proceeds from the
flats can cover.
But while HDB
takes a loss, the Singapore government as a
whole doesn’t.
However much HDB
pays for the land, it’s still paying much of that money
to another government body (SLA). So HDB’s
“losses” are more like a monetary transfer than
an expenditure. And if you ask some angry flat buyers, that
transfer seems to be from their wallet to the government
coffers.
*At least,
it’s now claimed that HDB pays market rates for land
and construction costs. We don’t know the actual
prices.
As long
as they meet our dress code, anyone can visit our archives.
There are two
reasons the billion dollar loss is a terrible counter-argument.
First, it suggests
it’s impossible for HDB to ever exclude land costs, or to give many
more subsidies. Any more and our economy will be reduced to trading
sea-shells for pomfrets or something, because look at how IN THE
RED we already are.
But that isn’t
true. As we said in point 1: Most of the money goes back to another
government body. The “loss” is nowhere near as serious as it
appears. And with an expected $3.9 billion surplus, I doubt the
exclusion of land costs is entirely unfeasible.
After all, the
government owns the land. Granted, if SLA
doesn’t charge market rates for it, the government won’t make
money. But it doesn’t stand to lose much either.
Second, the land
cost argument is impossible to verify. HDB doesn’t
publicize how much it pays for land, yet those unpublicized costs
are part of their argument. Trying to evaluate it is like
trying to pass a Maths test typed in Wingdings.
But if more
information comes up, follow us on Facebook so we can update you.
Let me
get this right: You worked in housing, and got fired for bringing
in *too many* customers?
HDB isn’t a
company, and budgeting’s a different ball game for them.
HDB at its core is
an administrative body. Just like MOE or MOM, it’s priority is not
to generate revenue. It’s supposed to take whatever resources it’s
assigned, and spend said resources to achieve a
task.
The next year or
quarter or whenever, HDB’s resources are topped up and they do it
again.
HDB may spend a
billion or two, but public housing is
a necessary expense. What matters is not that they spent
the money (the resources were assigned to be used),
but how well the money was spent.
Remember
the NParks bike saga? The big
issue wasn’t that NParks had $57k to spend; the
issue was how they spent it (on 26 bicycles).
Apply the same principle here.
Could that billion
dollars have been better used? Could we have lowered construction
costs? Was the EC scheme a bad idea overall? Could we skimp on some
aspects to build more units? Those are the questions that
matter.
We shouldn’t be
sidetracked by an impressive sounding deficit. If HDB had spent
twice that, but spent it well enough that Singaporeans felt secure,
there’d be less anger.
And some
transparency to back Minister Khaw’s position wouldn’t hurt.
