Photograph: Ong Ee Lynn

One of the most controversial subjects in Malaysia is the issue of home ownership. How are Malaysians earning low wages to afford a house of their own? How is the government at any level to solve this serious problem? 

By Tricia Yeoh

(First published in Penang Monthly’s August 2012 issue).

Prime Minister Najib Razak recently called for feedback in advance of the government’s unveiling of the National Budget 2013. The top of the wish list for those who responded is that of affordable housing for the middle income group. Most respondents cited the rising price of property in various urban cities across the country as a problem. This has likewise struck home within the two states of Penang and Selangor, and as a growing concern, will surely be an election issue.

In fact, the dispute has already begun. Penang Institute’s CEO Zairil Khir Johari wrote an extended piece on housing in Penang, stating among other things that there is a shortage of 70,052 units for the group of newly-wed professionals and young middle class families. In a separate statement, he responded to MCA’s president Chua Soi Lek who had accused the Penang state government of not providing low cost housing, by citing the Chief Minister Lim Guan Eng’s earlier remarks that the state government has, in fact, approved 3,806 low and low-medium cost homes.

Selangor has not been spared the housing controversy either, where most recently PKR local councillor Latheefa Koya has resigned from her position in the Petaling Jaya City Council, purportedly because of her disagreement with the Selangor Menteri Besar on the issue of housing for the urban poor and squatters. Specifically, residents of Matang Pagar in Rawang have been disappointed as they were not given the land previously promised to them.

The right to ownership, housing and property seems rather bleak in such times, affecting a wide spread of society from the poor to the middle class. Property prices in Penang and Kuala Lumpur rose by up to 40% in 2010. The average price of a residential property in Kuala Lumpur is nine times the average urban household annual income, whilst the Demographia International Housing Affordability Survey rates markets where property prices are 5.1 times the median income or more as “severely unaffordable” (National House Buyers Association, 2011). Whose responsibility is it to solve the problem of those wanting affordable property?

First, you have the Ministry of Housing and Local Government, which is the result of a merger between the previous Ministry of Housing and Rural Development and the Department of Local Government (previously part of the Ministry of Local Government and the Federal Territory). On its list of objectives is the one to “ensure adequate balanced housing development and provide affordable housing for those who qualify” as well as “regulate aspects of housing development”. In a sense, they act as regulators of the industry.

There is also Syarikat Perumahan Nasional Berhad (SPNB), a wholly-owned subsidiary of the Ministry of Finance, with the objective of “providing quality affordable homes for every family in Malaysia in accordance with the National Housing Objective”. It is assumed that the Ministry works closely with SPNB in ensuring there is a steady supply of affordable housing. I had previously written on low cost housing, listing the categories under SPNB: 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 RM100,001, the latter two categories of which do not have a specific target income group.

And then of course there is the role of the largest players of housing in the market – the private sector. The Real Estate and Housing Developers’ Association of Malaysia (Rehda) is the voice of developers in the country, an extremely powerful stakeholder in our national economy. It has over 800 members who are responsible for 80% of the total real estate built (this includes shopping malls, commercial complexes and hospitals, among others). Operating on profit as any business entity does, its social contribution comes in the form of allocating a portion of their housing units as low cost units, following the national housing policy.

If the federal government (through SPNB) and the private sector (through its allocated proportions to low cost housing) are already providing affordable housing, why is there a continued gap, and what, then, is the role of state governments in providing a solution?

Photograph: Ong Ee Lynn

The low cost housing quota imposed on private developers may not be feasible even today, being a proportion that has not been revised to suit the current population and the urban demands of our states. In his article, Zairil goes further to say that developers cut corners to protect their bottom line. Rehda has in the past complained during a Selangor dialogue that the quota is unsuitable for their projects as it means having to physically place low cost housing in a vicinity close to their luxurious high-end projects, the former thus affecting the marketability and image (and therefore, pricing capability) of the latter.

Whilst such negotiations between the public and private sectors will continue, it is clear a more detailed socioeconomic study on housing, given increasing urbanisation, must be conducted to come to an ideal compromise on the roles and responsibilities of either party.

There continues to be a series of housing schemes introduced by different stakeholders in an attempt at addressing this problem. But not all of them are sound.

The federal government in 2011 launched its Skim Rumah Pertamaku, or My First Home Scheme, to assist young adults who have just joined the workforce earning RM3,000 a month or less, to own their first home. The scheme is meant to allow young adults to obtain 100% financing from financial institutions, without the need for a 10% down payment, whilst the maximum property value is RM400,000. Although this is attractive to young adults, it has also received criticism; it was announced that RM1.5bil of the Employee Provident Fund (EPF) would be channelled to finance funding schemes for houses in public housing programmes in Kuala Lumpur. Government assets are supposedly used to secure the loan, and such collateral would be dangerous in the case of loan defaults by the buyers themselves.

The point here is that in the attempt to solve housing woes, governments (either federal or state) must be equally cognizant of what the consequences may be. It is clear that any solution cannot in fact burden the same Malaysians it is meant to help.

In the meantime, state governments have also taken up the responsibility of looking into housing and development. Both Penang and Selangor have their state-owned corporations that delve into housing, the Penang Development Corporation (PDC) and Perbadanan Kemajuan Negeri Selangor or Selangor Development Corporation (PKNS) respectively. Each of these bodies aims at providing quality products, keeping in mind sustainable socioeconomic development as its objective.

PKNS, for example, has launched more affordable housing schemes of late, the latest of which are housing projects in Bandar Baru Bangi and Sungai Long, Kajang. The response is usually overwhelming, with application forms being snapped up quickly.

In Selangor, a new land policy has been drawn up which requires developers who build affordable homes to sell these at a fixed price. For instance, a low cost house is RM42,000 in local council areas, RM35,000 in local district areas and RM30,000 in other areas. For any development of over 10 acres of land in the Klang Valley, the developer will be required to build according to quota, with 20% of the development set aside for low cost houses, 20% for low-medium cost houses and 10% for medium cost houses. For areas beyond the Klang Valley, the allocations would be 20%, 10% and 10% respectively. A total of 3,317 low cost houses is under construction; while another 18,917 are either being rehabilitated from abandoned status or have just received approval. The affordable housing scheme targets households with a monthly income range of between RM2,500 and RM5,000, while a low cost house is prepared for those who earn RM2,500 and below.

In Penang, developers are compelled to contribute 30% to low cost housing, but instead of just forcing developers to comply with the quota, financial contribution is also now being allowed in lieu. Zairil stated that, “By collecting money instead of forcing developers to build low cost units, the state will then have revenue to channel towards more pressing housing needs.” There will also be stiffer foreign ownership laws to stem foreign speculation, which involves a minimum value of RM1mil for foreign property purchases (RM2mil for landed property) on the island.

As both the states of Penang and Selangor experience a rise in their population, affordable housing for low and medium income groups will continue to be a major issue to deal with. Without slowing down the runaway prices of property in urban areas, we face the possibility of an entire generation of young Malaysians unable to own a place of their own, which will undoubtedly have severe consequences on family and social development at a later stage.