Affordable housing is likely to be a key election issue. First published in September 2011 in the Penang Monthly.
Making housing affordable in urban states
The government that manages best in providing affordable housing of good quality is a popular one. However, solving the problem seems harder than one would assume. But if governments at different levels can collaborate in building and maintaining low cost housing, much will be won.
Malaysians love to talk about property. Most opening conversations of late sound something like, “Property prices are so high these days! I am just waiting for the property bubble to burst before making my purchase”; and this is amongst white-collar middle-income earners contemplating housing in urban areas. The combination of rising property prices, inflation in goods and services, and non-commensurate wage increases is indeed a lethal one. What then of those who earn meagre incomes, whether those below the poverty line income or those more despairingly caught in the trap of being neither in the “hardcore poverty” or “poverty” categories, where welfare and other assistance in kind are denied?
There are various bodies that administer policies and execution of low cost or affordable housing. At the federal level, there is the Ministry of Housing and Local Government whose role is to provide general national policy on housing and local government issues, and under which sits the National Housing Department. Then at the state government level, there are the Housing and Property Boards. In Selangor, this is the Lembaga Perumahan dan Hartanah Selangor, whilst in Penang we have the Lembaga Perumahan Pulau Pinang, both of which are purely state bodies promoting greater access to quality and affordable housing. Simultaneously, there exist corporatised bodies which are quasi-governmental in nature, such as Syarikat Perumahan Nasional Berhad (SPNB) or the National Housing Corporation, a wholly-owned subsidiary of the Ministry of Finance Incorporated with the objective of “providing quality affordable homes for every family in Malaysia”, and which behaves as a non-profit corporation.
Under the Ministry of Housing and Local Government, there are four categories of housing with varying house price structures and target groups based on monthly income. These are: Low Cost Housing with house prices of below RM42,000 and targeting those with a monthly income of below RM1,500; Low-medium Cost with house prices from RM42,001 to RM60,000 and targeting those earning between RM1,500 and RM2,500; Medium Cost with house prices from RM60,001 to RM100,000, and High Cost of any houses above RM100,000 – the latter two categories of which do not have a specific target income group. (These definitions differ according to SPNB, where low cost is from RM35,000; low-medium cost from RM50,000 and medium cost from RM80,000 and above within Peninsular Malaysia.)
Existing affordable housing efforts
The federal and various state governments have recognised that the problem is a big one and as far back as 1971 under the New Economic Policy, low cost housing was introduced as a government policy. It was reported that from 1990 to 2009, about 808,000 units of low cost affordable housing were provided to support Malaysians in need, with approximately 128,000 of these built between 2006 and 2009. It is not clear if these were provided by the federal or state government housing bodies.
Some of the challenges of affordable housing include the difficulty of matching supply and demand of housing based both on location and affordability. In 2005, supply of low cost houses was still 15% behind targeted demand. The 10th Malaysia Plan recorded that in 2009 a total of 13,529 individuals and families applied for public housing,
while a survey of states showed that “there were 97,260 squatter families who were yet to be relocated to permanent
housing.” Secondly, the quality and maintenance of low cost housing are generally poor. Finally, meeting the requirement of having an environmentally sustainable design such as green technology runs up the costs of houses.
The federal government has, at least on paper, focused on affordable housing. For example, one of its six National Key Results Areas (NKRAs) is to improve rural basic infrastructure and build housing for the poor and hardcore poor. As seen in its recent planning documents, the priority seems to be on the bottom 40% of Malaysian households. The government acknowledges the fact that the current national housing policy obliges housing developers to allocate 30% of housing project units to low cost houses. However, developers are often unhappy about this requirement when their development involves prime land and medium to high cost housing. Some developers have suggested that these 30% can be built but in other locations designated by the government. Although ideal on paper, the fear is that that will create low-income silos, perfect breeding grounds for ghettos – an obvious undesirable. This issue is addressed by Selangor in the manner mentioned below.
It is strange that the New Economic Model (NEM) proposes that state-level Housing Development Boards be established to work with developers to address the housing needs of the bottom 40% of households, since
many states already have these boards. But more important is the role they play, and whether they are empowered enough to manage interesting and unique housing schemes. Of course, at the federal government level, more can be done, including “providing those who are at risk of default or unable to afford the low monthly instalments a… lease on the low cost unit with an option to purchase at the end of the lease period.” Another interesting proposal is to offer Employees Provident Fund (EPF) loans for the housing needs of the middle 40% that are “repayable through deductions from employees’ monthly contribution.” It is unclear whether these proposals are being adopted or not.
Other glowing promises by the federal government include constructing 78,000 units of new affordable public housing, where approximately 30% to 75% of total construction costs are subsidised. Several funds were also reportedly established, such as a Housing Maintenance Fund with an initial funding of RM500mil to “assist the residents of both public and private low cost housing units” (based on a matching grant where half of the contribution comes from residents through their joint management body or management corporation), and a Tabung Perumahan 1Malaysia.
State governments’ role in providing affordable housing?
Within these efforts by the federal government, what role can state governments play? After all, all states have an executive councillor in charge of housing. In Penang, the person in charge is YB Chow Kon Yeow; in Selangor, YB Iskandar Samad. Based on statistics from 2000 (a later update was not obtainable), 47.7% of completed low-medium cost housing was in Penang (7,502 houses), followed by 18.2% in Kuala Lumpur (2,866 houses) and 10.8% in Selangor (1,696 houses).
In response to accusations by Barisan Nasional that Penang had not launched any affordable housing schemes, the Penang Chief Minister said that the state has indeed approved 11,596 affordable homes (low and medium cost) since 2008. These were a mix of state government and private-funded housing projects involving housing units worth an estimated RM42,000 (low cost) or RM72,500 (medium cost) each. Of the 11,596 units, 8,175 (2,612 low cost and 5,563 medium cost) units were built by private developers while the government and its agencies constructed 3,421 (1,194 low cost and 2,227 medium cost) units. It also stated its plans to redevelop other housing projects involving 992 low cost homes and 192 medium cost homes.
The Selangor state government in its recent announcements also seems acutely aware of the problem, and its Menteri Besar and executive councillor in charge of housing have announced affordable housing as a top priority in Selangor. A workshop and consultation session is expected to help the state review its current policy of requiring developers to allocate a proportion of its development to low and medium cost housing. YB Iskandar also proposes council flats for the very poor, and a “share” model for buyers and the government to pay for half a property each, the poor paying for incremental shares of the house until they eventually own the house in total.
With regards to the policy of imposing 20% of low cost homes, 20% of low-medium cost homes and 10% of medium cost homes ratios on developers for every residential development above 10 acres, Selangor plans to revise this model as the “allocation of affordable homes needs to be market-driven”. In tweaking the model, Selangor hopes that low cost homes will no longer be built in unfavourable areas such as near sewage plants or far away from public transportation. Selangor will also build affordable homes for residents earning between RM2,500 and RM5,000 a month under a new project of 2,000 houses, with several locations already identified.
Providing affordable housing is an area that both federal and state governments can surely collaborate on. It is a potentially hot issue for any election, and the government that can provide affordable housing at appropriate locations will be a popular one indeed. This is especially the case within the urban states of Penang and Selangor, where property prices are soaring. Whether or not the bubble bursts, there are a significant number of poor households who will require better accommodation than what they currently possess. State enterprises must emerge with better solutions and not solely rely upon the private sector to satisfy the needs of the public – the private sector, concerned with profit, coerced as they are to provide responsibly for society, invariably cannot do a better job than the state in identifying appropriate strategic policies and then ensuring enforcement and implementation of affordable housing schemes.
