IMPACT OF PROXIMITY TO PUBLIC RENTAL HOUSING ON THE PRIVATE RESIDENTIAL PRICES

Abstract

This paper is motivated by the issue on social stratification and will be exploring specifically on the housing segment where the focus is on the Public Rental Housing (PRH) tailored to meet the needs of the lowest social class. In 2010, a notable tension within the social classes was witnessed where residents in two housing estates (i.e. Tampines and Pasir Ris) were upset over the building of PRH near their homes and concerned about the undesirable effects on their property values.

Thus, this research seeks to discover if any “Not in my Backyard” (NIMBY) sentiments can be found in the existing PRH areas and to empirically test if PRH is a disamenity that brings negative effects to the resale prices. Additionally, this research attempts to discover any additional impact on the resale prices due to an upward revision in the Public Rental Scheme (PRS)’s income eligibility criteria. Geylang, Bukit Merah, Central and Queenstown estates were selected as the study area. The reasons behind those choices are that these estates are known to be in prime locations and that private projects are extensively found in the areas.

A hedonic price model and a Difference In Differences (DID) model were employed in this study to determine the explicit impact of PRH on the neighbouring private housing. The sample used consists of 93 PRH blocks and 175,642 resale transactions. The findings suggest that PRH has indeed imposed negative externalities effect, which significantly reduces the value of the neighbouring private houses. It was evident that units falling within the boundary of 500m to PRH and between 500-1000m in distance is susceptible to a price drop by 25% and 10.30% respectively. Additionally, findings has shown that after the revision in PRS, the transacted prices in the treatment area (i.e. DISTWITHIN500PRH and DISTWITHIN500_1000PRH) has increased by 2.43%.