Purpose of SHAP

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.