In order to better focus the housing subsidies on the lower-income
households, in 2000, the government established the Special Housing Assistance Program (SHAP).
How it works:
Initiatives in the SHAP work in tandem to make public housing more affordable to lower income groups in Singapore.
To qualify for all these SHAP schemes, the maximum household income ceiling is limited to S$2,000 per month.
Three-room Buy-Back Scheme
- Owners of two- room public housing are allowed to buy three- room repurchased public housing from HDB as their second subsidized dwelling. - Under this scheme, the resale levy for the two-room public housing is reduced to 10% of the selling price. - The minimum occupancy period is decreased to five years.
Low-Income Family Incentive Scheme
- A highly subsidized easy mortgage loan scheme for the purchase of cheaper four- room or smaller units.
The Rent and Purchase Scheme and The Sales of Flats to Sitting Tenants Scheme
- In 2000, HDB increased the maximum tenancy discount to S$15,000 per dwelling.
Within three years of its introduction, about 16,000 families had availed the program. To further assist the low-income families, as of 1994, the government has given S$30,000 grant to households of four with a monthly household income of less than S$1500 towards their purchase of a subsidized 3-room flat. As with the provision of a range of housing types, the diverse interventions potentially allow the families to select the support that is most useful and appropriate to them.
Advantages
Homeownership requires affordable housing credit, mortgage lending has to reconcile affordability to borrowers, viability to lenders and resource mobilization for the housing sector. The policy and interventions developed reduces the costs of public homeownership through pecuniary assistance with down payment and mortgage interest payments. Subsidies such as the Special Housing Assistance Program (SHAP) internalizes the external benefit of public housing, raising the marginal private benefit to be at the same level as the marginal social benefit. This eases front end loading and mortgage financing problems for the potential purchasers. Thus reducing the effects of income inequity in Singapore and allowing lower income groups better afford public housing.
Disadvantages
During periods of economic downturn, the problem of income inequity may be more greatly felt. The government may need to implement further grants and subsidies in order to tide Singaporeans in the lower income groups over this period of recession. For example, in Oct 2001, the government rolled out S$11.3 billion package to help Singaporeans cope with the economic downturn. Of this, S$698 million is specifically aimed at helping the poor and the unemployed. In the area of public housing, assistance is extended to service and conservancy charge rebates, reduction of utilities bills and rental assistance. Therefore, as subsidies require a high level of government expenditure, the government may have to impose higher taxes on citizens in order to continue funding the subsidies which aid the lower income groups. This may in turn have a disincentive effect of work and investment and thus pose as a greater burden on the countrys financial resources.