The enabling state
A state’s transition from a provisionary to an enabling role is most apparent through top down changes to rhetoric by the political parties in power. In the UK, the seeds for an asset based welfare approach were sown decades before Thatcher’s Right to Buy scheme, when Anthony Eden declared that Britain was a, ‘property owning democracy,’ as a means to encourage the polity to fend for themselves through property acquisition (Groves et. al. 2007 p.184). The New Labour government echoed a similar sentiment when releasing this 2005 directive, ‘do not be responsible for passing impeded life chances to your children by depriving them of an inherited asset base’ – confirming the transferral of responsibility from state to citizen for security in the later stages of their own and their children’s life course (Watson 2008, p.298). Such rhetoric however, has not seen the withdrawal of the state from housing policy regulation. Rather, the level of government policy intervention has stayed the same but changed its tack towards increasing housing demand instead of providing universal coverage (Groves et. al. 2007, p.184). Underpinned by the UK’s neoliberal belief in the free market, was a policy strategy predicated on maintaining a stable pricing trajectory (Watson 2008, p.291). Increasing the choice of mortgage providers, encouraging price competition between lenders as well as deregulating the limits upon mortgage lending under the Consumer Credit Act 1974 were all initiatives that occurred prior to (Watson 2008, p.294) the dramatic scaling back of the public pension during the 1980s, thus reflecting the state’s escalating emphasis on enhancing the market’s ability to accommodate first home buyers (Groves et. al. 2007, p.185). While the UK has displayed the characteristics of a modernised enabling state, it has not dismantled its role in housing policy, but shifted responsibility onto the market and the citizen.
Singapore’s government has never felt the need to justify a shift in responsibility from state to the individual simply because its political system has remained unchanged since 1959 (Reisman 2007, p.161). The People’s Action Party were the driving force behind post-war home ownership and they downplayed the state’s role in redistribution and social insurance efforts in favour of championing the need for meritocracy (Reisman 2007, p.161). Current Prime Minister and PAP member Lee Hsein Loong reminded Singaporeans that the government is staunchly against breeding dependency as this is deters investment and increases taxation, confirming also how enabling states emerge because of the imperative to remain competitive in a global market economy (Phang 2007, p.18). Taking advantage of the fact that its populace is relatively small and its government bureaucracy is well-paid and uncorrupt, the Singaporean city-state has favoured extremely centralised intervention when crafting housing policy (Phang 2007). Originally established as a colonially established retirement fund for Singapore’s working population in 1955, the Central Provident Fund (CPF) began to finance housing purchases in 1968 following the government’s compulsory acquisition of privately owned land (Phang 2007, p.22). Like the UK and Australia, the state marginalized the rental housing market as tenancy contracts were stipulated by the government’s Housing Development Board (HDB) to last a maximum of two years and CPF savings were prohibited from being withdrawn to pay rent, only mortgages (Resiman 2007, p.168). Integral to the government’s asset based approach was the solvency of the HDB (Chua 2003, p.769), which receives generous annual subsidies in the realm of S$778 million during the FY2006-2007 (OECDa 2009). Thus, ‘public housing’ signifies more than just the provision of a shelter for low income earners, but is an important status symbol as well as a personal investment for retirement (Addae-Dapaah, 1999).
Australian politicians have approached the prospect of home ownership like their UK counterparts, by espousing the need for individuals to address their fiscal needs in retirement. The dominance of Australian political system by right wing political hegemony in the post-war period also resulted in the embedding of neoliberal values within the society (Aspalter 2001, p.5) which complemented and consolidated upon the state’s long entrenched corporatist ‘workfare’ orientation towards public provision (Castles 1998). Prime Minister Menzies was the first politician to elevate the importance of creating a nation of homeowners (Wood et. al. 2010, p.19). This has consequently produced a dualist housing system, (Kemeny 1995) similar to the one produced in the UK after the Right to Buy initiatives, in which the public housing sector is considerably smaller in comparison to the private market, comprising only 5% of dwellings in 2005 (Wood et. al. 2010, p.19). Even an ALP revival in the 1983 did not prevent the shift away from a culture of social entitlement and collectivism, best demonstrated today in the government’s aged pension scheme which rests predominantly upon two pillars of mandatory private superannuation savings scheme and voluntary saving -with home ownership included as a de facto fourth pillar (Bradbury 2010, p.195). To offset the third pillar, or the payment of means tested public pension, Australia’s approach to home ownership promotion has centered on demand through generous assistance to first home buyers and considerable tax concessions in excess of $74.4 billion each year (Brody and McNess 2009, p.1). This is in alignment with Australia’s tradition of being a non-contributory welfare state, which places an emphasis on targeted benefits (Brody and McNess 2009, p.1). Relative to the other two states, Australian intervention in the housing sector in terms of both supply and demand schemes has been more contracted.
While it appears that the UK, Singapore and Australia have actively promoted home ownership to mitigate the eventual fiscal burden of an aging population, their level of state intervention has not really declined. As Groves et. al. (2007, p.179) confirm, the form of the provision should not be confused with commitment and as the state withdraws responsibility for social provision, it facilitates it by other means. In the UK, the commodification of the public housing sector on the market has granted many low income earners the security of a home (Groves et. al. 2007, p.192). The same can be said of Singapore. Though the CPF provident fund does not entail the same level of financial burden as a public pension scheme, its facilitation of high ownership rates and retirement savings in Singapore has ensured the state’s centralized housing and retirement saving policy (Phang 2007, p.33). Only in Australia do governments appear to have successively minimized their role in the supply side housing sector to encourage greater asset wealth. In sum, there has been a change in the way states have approached social provision by encouraging their citizens to shoulder the responsibility for their well being in retirement, and the impacts of these arrangements for redistributive and equitable outcomes among the elderly will be discussed below.
The possibility of a trade off
While encouraging asset-based welfare eases the fiscal burden upon the state, it may well lead to poorer social insurance outcomes for households. With regards to the Australian government’s generous tax concessions for first home buyers, it was found that over 190 first home owners grants were paid in Victoria for homes worth $1 million or more since 2008 (Brody & McNess 2009, p.2). This implies a greater proportion of the houses purchased were done so by those in higher income quintile. While the government did not intend to be redistributive in the way it promoted home ownership, this has undoubtedly impacted upon the coverage of the scheme with the top 5% income quintile receiving 44% of the benefits (Yates 2009). The after-housing-costs poverty rates for non-home-owning older Australian households are also notably high in comparison with other OECD countries (Yates and Bradbury 2010, p.194). Projections suggest that this group will grow in size in the coming decades and may possibly lead to the collapse in asset-based approaches to retirement incomes incorporating outright home ownership (Yates and Bradbury 2010, p.201). Concerns have also emerged about the affordability of homes. Keeping a control on the price trajectory of homes was not a component of the Australian government’s strategy like in the UK nor was a centralized permanent authority established to subsidize home buyers as is the case in Singapore. Consequently, the 1990s saw a decline in the numbers of younger and mature aged Australians with outright home ownership (Brody & McNess 2009, p.46). Real house prices have soared which if maintained, could slow the entry of younger generations into the market until the later of their life course (Wood et. al. 2010, p.5). More Australian owner occupiers are retiring with outstanding mortgage debt as a result, which is neither beneficial for their overall well being or security.
Even though the vast majority of Singaporeans have benefited from access to ownership of affordable housing and the increased the savings rate to more than 50% of GNP (Phang 2007), there are concerns about the retirement financing implications of this arrangement especially since the burst of the 1997 Asian bubble. To reiterate, the CPF is not a pension plan offering redistribution of wealth from a pool of sources but a provident fund predicated upon direct contributions designed to meet retirement need. Such needs cannot be addressed however in a country where which nearly half the wealth is invested in their homes (Reisman 2007, p.165) and there are no schemes for releasing equity from the property. Projections revealed that 60-70% of 50-55 years age group will not have sufficient funds in their account to meet the government stipulated Minimum Sum required in 2003 (Lim 2001), exacerbating the extent to which elderly Singaporeans are asset rich but cash poor. This is compounded by the fact that replacement rates are at record lows at 8.3%, significantly below the East Asian and OECD average (OECDb 2009). While this confirms Kemeny’s (2005) assessment that with countries with higher levels of home ownership have less developed welfare states, this arrangement is not particularly comforting to citizens of a country that is likely to have one of the oldest national populations by 2040, with more than a quarter of Singaporeans predicted to be aged 65+ (Reisman 2007, p.120). The centralized state imposed dominance of housing as welfare has been particularly challenging for single persons and single mothers who are excluded under the CPF’s strict eligibility rules of tenure that discriminates against non-nuclear families (Mathi 2009, p.80). This raises a dilemma similar to Australia’s in which certain groups without owner occupied status face the double disadvantage of non subsidised rental costs and reduced retirement savings.
Market bubbles as a result of increasing financial deregulation also raises concerns about the sustainability of the asset based welfare models, especially in light of mortgage securitization’s implications for the US housing market and the global economy. The 1980s housing bubble in the UK retained devastating implications for housing investment portfolios. At least the British government has fared better at monetizing home equity since housing is privately not state owned, and individuals are free to participate in market transactions and downsizing (Groves et. al., p.189). This is in contrast with Singaporeans who only as recently as 1997, have been allowed to withdraw CPF savings for resale HDB and private housing purchases on the secondary housing market (Phang 2007, p.25). Ultimately, the trade off effect in which asset based welfare becomes a substitute for a public pension scheme is an unviable proposition (Bradbury & Yates 2010). More likely and less risky is the use of asset wealth to complement existing pension arrangements. Achieving an asset-based social policy that is also redistributive and equitable is possible according to Brody and McNess (2009, p.9), who recommend that the Australian government reform superannuation so that a proportion of the funds can be available for withdrawal for mid-life purchases, the most important of these being a house. This recommendation bears striking similarity to current role of the CPF and confirms Phang’s (2007, p.44) assertion that policymakers could look to East Asian systems of welfare capitalism for transferable ideas on how best to promote home ownership without sacrificing the prosperity and security of its citizens.
The transition towards asset based welfare, facilitated more easily in liberal regimes, has occurred in tandem with the redefinition of the state from provider to enabler and in light of the need to make provisions for the rising number of elderly across the world. While the political rhetoric of empowering citizens to fend for themselves may be shared, the institutionalization of home ownership promotion however has not witnessed retreating of government efforts in the UK, Australia and Singapore but the manifestation of state intervention for the supply and demand of public-private housing arrangements by other more regulatory and administrative means. Of more concern are the implications of these arrangements for the well being and security of the elderly, particularly those in the public housing or rental sectors, who were found to be doubly disadvantaged in societies where asset wealth is encouraged. Though social policy analysts advise against the complete substitution of asset based approaches for cash benefit schemes given the scheme’s inherent unsustainability, the promotion of home ownership is a particularly cost effective response to the pressures of being solvent and competitive in the global market economy.
Bibliography
Addae-Dapaah, K 1999, “Formal housing finance and the elderly in Singapore,” in K. Datta, & G. A. Jones (eds.), Housing and finance in developing countries, Routledge, New York.
Aspalter C 2001, “Different Worlds of Welfare Capitalism: Australia, the United States, the United Kingdom, Sweden, Germany, Italy, Hong Kong and Singapore”, Discussion Paper no.80, viewed 9 November 2010, <>.
Brody G and McNess E 2009, “Assets for All? A review of the Australian Government’s $77 billion support for asset building,” Brotherhood of St. Lawrence, viewed 9 November 10, < >.
Castles, F 1998, ‘The Really Big Trade-off: Home Ownership and the Welfare State in the New World and the Old’, Acta Politica, vol.33, no.1, pp.5–19.
Chua Beng Huat 2003, “Maintaining Housing Values under the Condition of Universal Home Ownership,” Housing Studies, vol.18, no.5, pp.765-778.
Conley D and Gifford B 2006, “Home Ownership, Social Insurance, and the Welfare State,” Sociological Forum, no. 1(21), pp.55-82.
DeWilde, C and Raeymaeckers, P 2008, “The trade-off between home-ownership and pensions: Individual and institutional determinants of old-age poverty,” Ageing and Society, vol.28, pp.805–830.
Doling, J and Ronald, R 2010, “Property-based welfare and European homeowners:
how would housing perform as a pension?”, Springerlink.com, viewed 9 November 2010, <>.
Esping-Andersen, G 1996, Welfare States in Transition, Polity Press, Cambridge.
Esping-Andersen, G 1999, Social Foundations of Post-industrial Economies, Oxford University Press, Oxford.
Fahey T 2003, “Is there a trade-off between pensions and home ownership? An exploration of the Irish case,” Journal of European Social Policy, vol.2, no.3, pp.159-173.
Garland, D. (1996) The limits of the sovereign state: strategies of crime control in contemporary society, British Journal of Criminology, 36, pp. 445–471.
Groves, R, Murie, A and Watson, C 2007, “From tenants to owners: change in the old welfare states”, in R. Groves, A. Murie & C. Watson (eds) Housing and the New Welfare State: An Analysis of Policies in East Asia and Europe, Ashgate Publishing, Aldershot.
Torgersen, U 1987, “Housing The Wobbly Pillar under the welfare state,” in J. Kemeny, L. Lundqvist, & B. Turner (eds.), Between state and market, Almqvist and Wicksell International, Stockholm.
Kemeny, J 2005, ‘The Really Big Trade-Off’ between home Ownership and Welfare: Castles’ Evaluation of the 1980 Thesis, and a Reformulation 25 Years on”, Housing, Theory and Society, vol.22, no.2, pp.59–75.
Kemeny, J 1995, From Public Housing to the Social Market, Routledge, London.
Lim K 2001, “Implications of Singapore’s CPF Scheme on Consumption Choices and Retirement’, Pacific Economic Review, vol. 6, pp.361-382.
Malpass, P 2008, “Housing and the New Welfare State: Wobbly Pillar or cornerstone?”, Housing Studies, vol.23, no.1, pp.1–19.
Mathi B 2009, “Meeting needs: Singapore’s shifting sands”, Lien Centre for Innovation, viewed 9 November 2010 <>.
Morris, A 2009, “Contentment and Suffering: the Impact of Australia’s Housing Policy and Tenure on Older Australians,” Australian Journal of Social Issues, no.4(44), pp.363-377.
OECDb 2009, Pensions at a Glance 2009: Retirement Income Systems in OECD Countries. Organisations of Economic Cooperation and Development, France.
OECDa (2009) Society at a Glance – Asia/Pacific Edition. Organisations of Economic Cooperation and Development, Korea.
Phang, S. 2007, “The Singapre Model of Housing and the Welfare State”, in R. Groves, A. Murie & C. Watson (eds), Housing and the New Welfare State: An Analysis of Policies in East Asia and Europe, Ashgate Publishing, Aldershot.
Reisman D 2007, “Housing and superannuation: social security in Singapore,” International Journal of Social Economics, vol.34, no.3, pp. 159-187.
Ritakallio, V 2003, “The importance of housing costs in cross-national comparisons of welfare (state) outcomes,” International Social Security Review, vol.56, no.2, pp.81–101.
Walter A and Wong C 2004, ‘The ethnocentric construction of the welfare state,’ in Patricia Kennett (ed.), A Handbook of comparative social policy, Edward Elgar Publishing, USA.
Watson M 2008, “Constituting Monetary Conservatives via the ‘Savings Habit’: New Labour and the British Housing Market Bubble”, Comparative European Politics, vol.6, pp. 285–304.
Wood G, Colic-Peisker V, Ong R, Bailey N and Berry M 2010, “Housing needs of asset-poor older Australians: other countries’ policy initiatives and their implications for Australia,” Australian Housing and Urban Research Institute, (accessed 9 November 2010).
Yates, J 2009, Tax expenditures and housing, Australian Housing and Urban Research Institute, Melbourne.
Yates, J and Bradbury, B 2009, Home Ownership as a (Crumbling) Forth Pillar of Social Insurance in Australia, Luxemburg Wealth Study Working Paper no 8., Sydney University Press, Sydney.