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There is an on-going debate on whether HDB flats are actually subsidised. Personally, I believe that the flats are subsidised because the government could otherwise sell state land to private developers for much higher prices.
A while back, Mr. Khaw Boon Wan, in an interview, revealed that "every year, hundreds of millions of dollars of losses were incurred by the HDB and that's why MOF has to give the HDB an annual grant, otherwise the HDB will be in the red. Because every unit that we sell, we lose money, HDB loses money."
HDB Singapore pays market rate for its land and construction costs. So, selling flats at below market prices, HDB incurs a deficit.
I blogged about how Mr. Khaw Boon Wan plans to bring down prices of new flats in non-mature estates before to ensure affordability. I wondered if this could lead to HDB resale prices crashing too but, once again, Mr. Khaw assured that a crash will not happen because there will be "distinct differentiation" between cheaper new flats and those built earlier.
I wonder how these cheaper new flats will be different from those built earlier but there is no doubt that subsidies will have to continue playing a big role to keep HDB flats affordable.
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