NEW STRAITS TIMES. 4TH JULY: An all-encompassing strategy is required in addition to efforts to raise people’s income over the long term to effectively close the affordable housing gap in Malaysia.
Housing affordability is an issue that affects major cities worldwide, in both emerging and developed economies. The two main factors are increased income growth and urbanisation, driven by better job opportunities in cities.
Three major issues that contribute to housing affordability in Malaysia include a mismatch between housing supply and demand, new construction that is biassed into unaffordable ranges, and house price increases that surpass household income growth.
According to Samuel Tan, executive director of KGV International Property Consultants (M) Sdn Bhd, the government should judiciously define the word “affordable housing,” which is frequently used to refer to housing units that are affordable by that segment of society whose income is below the median household income.
“First thing first. We need to define affordable housing properly. What is affordable housing? A RM400,000 house closer to the urban area could be deemed affordable, but it is considered expensive in the suburbs.
“Uniform pricing across all geographical areas will not work, and it is grossly inequitable for buyers of other categories to keep subsidising,” he told NST Property.
According to him, it is now appropriate for the authority to collaborate with key industry players to accurately define affordable housing and its cost in various geographic locations.
He said it will still be necessary to retain a set, consistent pricing tier for the city, town, and sub-urban areas in order to make policy management easier.
“Such a pricing calibration exercise would not be simple or easy to implement. Nevertheless, we implore the authority to seriously consider fine-tuning such a pricing mechanism so as to reduce the current inequitable way of cross-subsidy, which has the effect of pushing up prices of other housing types across the board,” he said.
Tan said Prime Minister Datuk Seri Anwar Ibrahim’s call to review the affordable housing policy to ensure its supply sufficiency and timely delivery is laudable.
“Such intent to solve the shortage of affordable housing is good, but one has to dwell deeper and ask, what is the root cause of the insufficiency and why the delay? Current policy compels the private developers to build a certain number of affordable houses based on a quota pegged to the development scale at controlled prices, which very often are below cost.” In other words, the selling prices of such affordable houses, especially those located near or in urban areas, are usually lower than the development costs incurred. Is such a practise viable and equitable? There is no free lunch.
“Someone has to ‘cross-subsidise the affordable housing. To make a profit, the developers would pass on the additional cost to other housing types in the development. So, buyers of other housing types, who do not qualify for affordable housing would have to pay more,” he said.
Tan said that to stay competitive and not overprice products in the initial stages, most developers will proceed to launch normal housing types first to keep the initial cash flow healthy.
Affordable housing would therefore be phased in at a later stage when the development is more mature, he said.
“This is the time developers can afford to price other housing types at a premium to make up for the losses of developing affordable housing,” he said.
Tan said due to the cross-subsidy of such a control-priced product, affordable housing has become a ‘burden’ that the developers are reluctant to develop or try to delay building.
“Hence, the problem of insufficient supply and delay of such a product,” he said.
Alienate land parcels at a discount
Tan contends that local governments in their respective states should consider offering land parcels to developers at discounted or even no-cost prices to encourage them to build such affordable dwellings in order to boost housing affordability.
“We must recognise the fact that the developer, being a profit-driven entity, cannot be made to develop property at a loss perpetually. It is also not fair for other buyers to keep cross-subsidising affordable housing, as articulated above.
“To better resolve the issue, the federal and state governments would need to work on some policies or regulations for such land alienation. As land matters are under the purview of the individual states, it is not a simple issue to resolve.
“Nevertheless, in view of the importance of the people’s well-being at stake, especially the B40 and some M40, it is time for all parties to take a holistic approach to address the issue,” Tan said.
He said that efforts to remedy the issue involve participation from the government, developers, and private purchasers.
Tan said that the strategy of “passing the bug” to the private sector should no longer be used and expressed his optimism that the issue would one day be solved.
“Both the federal and state governments have voiced their utmost concern on the affordable issue. We believe both have good intentions to resolve the issue, and it is the right time for them to work hand in hand to seriously look at the issue from a holistic angle,” he said.
Study the HDB model in Singapore
Tan said many have proposed time and again the need to form a federally centralised agency or statutory board to oversee the affordable housing issue.
He said one needs to just look at the HDB model in Singapore.
“We probably do not need to copy its policies and methodologies wholesale. We should at least learn and try to modify and tweak the HDB model to suit our society, then implement it in our homeland.
“We just have too many agencies, departments, and initiatives involved in the development of affordable housing. We should perhaps seriously consider starting a centralised body to oversee, regulate, and implement policy, coordinating and collaborating with other related agencies and industry players, as well as monitoring the demand, pricing, and quality of the products,” Tan said.
He said these proposals are by no means new or exhaustive.
“It is our sincere hope that all parties should take up some responsibilities and not just pay lip service. If we get the affordable housing issue right, we would be able to resolve many social issues, mitigate many dissatisfactions, instill people’s sense of belonging, and the list of benefits goes on,” Tan said.