HDB reports record $5.38b deficit as more flats completed, ageing homes upgraded

HDB’s deficit for FY2022 was 23 per cent higher than the $4.367 billion deficit it recorded the previous year. ST PHOTO: LIM YAOHUI

SINGAPORE – Upgrading work on ageing homes, the development of new flats and more keys being issued to buyers were among the factors that drove the Housing Board’s deficit to a record $5.38 billion for the 2022 financial year (FY) from April 2022 to March 2023.

This was about 23 per cent higher than the $4.367 billion deficit the national public housing authority recorded the previous year.

HDB completed 23,782 new flats in FY2022, the highest in five years, according to its annual report released on Tuesday. It also issued 21,259 keys to home owners, up by 42 per cent from the previous year.

The bulk of the deficit – $4.68 billion – was attributed to the expected loss for flats being built, disbursement of Central Provident Fund (CPF) housing grants, and a gross loss on the sale of subsidised flats under the home ownership programme, HDB said in a statement on its annual report.

The losses incurred under this programme were 22 per cent higher than the $3.85 billion in the previous year.

HDB chief executive Tan Meng Dui said supply chain uncertainty, higher material costs and a labour crunch have caused construction costs to surge about 40 per cent since FY2019.

He noted that Singapore’s property market remained buoyant in 2022 in the midst of the Russia-Ukraine war, which began in February 2022, as well as the Covid-19 pandemic.

“These increased costs have largely been absorbed by HDB, as subsidies and grants are increased to keep flat prices affordable,” he said.

Of the $4.68 billion deficit incurred in the home ownership segment, about $2.712 billion stems from the expected loss for flats being built.

HDB said it incurs significant losses each year, as the amount it collects from buyers from the sale of flats is less than the total development costs of Build-To-Order (BTO) flats and the housing grants disbursed.

It also incurred a gross loss of $1.2 billion for the sale of flats, which nearly doubled from $659 million the year before.

This was because more new flats were completed and handed over to buyers. In FY2022, 18,478 flats were sold, up 36.8 per cent from the 13,506 units sold in FY2021. These numbers exclude studio apartments and flats sold on short leases.

HDB said this was the highest sales figure in the last half a decade, noting that it was able to complete more sales with the recovery of the construction sector.

Meanwhile, CPF housing grants totalling $686 million were disbursed to buyers of HDB resale flats and executive condominiums, down from $849 million the year before.

This decrease was because resale transactions dropped to 27,900 cases in FY2022 from 30,400 in the previous year, HDB said.

Separately, the board spent about $141 million on the provision of rental flats, as more repairs and work were done to spruce up the units.

It also spent $558 million on upgrading programmes, up by more than 40 per cent from the $392 million in the previous year. HDB said this was due to construction work under the Home Improvement Programme gathering pace as Covid-19 controls eased. The expenditure for FY2022 included flats that are still undergoing upgrading.

In FY2022, 33,704 flats were upgraded under this programme, which remedies common maintenance problems in ageing flats. In the previous year, 53,792 flats were upgraded.

Of the households whose flats were upgraded in FY2022, more than half also chose to install elder-friendly fittings at subsidised rates under the Enhancement for Active Seniors programme. The improvements available are ramps for multi-step entrances, grab bars and slip-resistant treatment to toilet floor tiles.

Another $432 million was spent on works such as the upgrading of electrical infrastructure in public housing estates, lease administration, and the management of facilities such as carparks.

In all, HDB incurred a total deficit of $5.811 billion, based on its financial statements. Taking into account a $431 million surplus from rental and other businesses, this brought its overall deficit to $5.38 billion.

HDB receives a grant from the Ministry of Finance to cover its deficit each year. In the latest financial year, it received a grant of $5.389 billion, up from $4.4 billion the year before. Since it was set up in 1960, HDB has received $48.36 billion in grants.

National Development Minister Desmond Lee said the Government increased its expenditure to keep public housing affordable and accessible in FY2022.

“Moving ahead, the Standard, Plus, Prime framework will allow us to keep public housing – including those in choice locations – affordable to Singaporeans, ensure a good social mix, and keep the system fair and sustainable,” he added.

Under the reclassification of HDB flats effective from the second half of 2024, BTO flats in choicer locations will fall under the Prime and Plus categories, which come with extra subsidies and stricter resale conditions.

HDB said it does not price flats to recover costs, and that nearly 90 per cent of families buying a flat for the first time have been able to service their housing loans using their monthly CPF contributions, with little or no cash spent.

It added that it is on course to launch up to 23,000 flats in 2023 to meet housing demand, and is prepared to launch a total of 100,000 flats between 2021 and 2025.

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