This article first appeared in The Edge Malaysia Weekly on May 2, 2022 - May 8, 2022

THE subject of home ownership has again been hogging the limelight, with the government recently reactivating the National Affordable Housing Council to coordinate the government’s latest plan to build half a million affordable homes by 2025, as provided for under the 12th Malaysia Plan tabled just last September.

As almost one in four Malaysians are still without a home to call their own, the bread and butter issue is low hanging fruit for the government to champion, especially with the general election speculated to be just around the corner after Barisan Nasional cruised to victory in the Johor state polls. Malaysia has to hold its 15th general election by September 2023.

Not forgetting, also, how the pandemic has taken a serious toll on the B40 and M40 income groups, who already find it difficult to purchase a property, let alone their preferred ones in terms of size and location.

Up until 2019, Malaysia had 16 government-driven affordable housing programmes, comprising six at the federal level and 10 at the state level, according to data compiled by the Khazanah Research Institute (KRI).

There were nine government financing schemes as at 2019, including rent-to-own programmes, as well as deposit payment programmes such as MyDeposit and the Employees Provident Fund (EPF) withdrawals, KRI data shows. Banks, too, provide several affordable home financing schemes.

Still, in the 10 years between 2010 and 2019, homeownership among Malaysians inched up just 4.4% to 76.9%. This falls short of the 87.9% (2020) seen in Singapore, which has one of the highest land costs in the region, and 90% in fast-growing Vietnam.

Notwithstanding affordability and access to financing (see accompanying story), the Ministry of Housing and Local Government (KPKT) says in a written reply to The Edge that one reason for the homeownership issue is “inadequate new launches in affordable housing segments”.

Typically, affordable homes are rolled out to fulfil the 30% quota of a housing development project — meaning they are built only when open-market units are developed too. In Selangor, the ratio varies and can range from 15% to 40%.

Data from the National Housing Department (JPN) shows that just one in five houses approved for construction in the last five years was priced below the government’s affordable housing price ceiling of RM300,000 (see Chart 1).

In the same period, new Advertising Permit and Developer Licence (APDL) licence applications approved for the segment were only 986 or 16.3% of the total, meaning 83.7% were priced above RM300,000, KPKT says.

However, it should be stressed that the affordable housing segment experiences overhangs as well.

Remember the government’s latest goal to build 500,000 units in three short years? That will work out to roughly 167,000 units per year.

That appears to be a more aggressive goal targeting a shorter term, as compared to the Pakatan Harapan government’s 2019 plan to build one million affordable homes over 10 years, which would have worked out to 100,000 homes per year.

But a year later, Perikatan Nasional cut the 10-year target by 77% to just 227,100 units, citing the prevailing overhang in high-rise affordable housing units.

According to data from the National Property Information Centre (Napic), the property market overhang in 2019 included 9,324 units priced at RM300,000 or lower (see Chart 2). That figure rose to 11,610 units in 2021. In 2019-2021, the segment represented around 30% of the entire property market overhang.

Some argue that lack of proper accessibility for the housing projects — at times located far from the city or without public transport access — is one reason why B40 and M40 homebuyers refrain from making a purchase.

Comparatively, the high homeownership level in Singapore indicates that affordable housing will be taken up if it offers proper accessibility and liveability. In the island state, some affordable units are even resold for over S$1 million.

In Singapore, affordable home rollouts are led by the Housing Development Board (HDB). In Malaysia, the industry lacks a centralised mechanism for town-planning purposes. There are 15 implementing agencies and state governments, which, according to reports, will now be roped into the National Affordable Housing Council.

“Rehda has mentioned various times before that the industry needs a singular entity with comprehensive data that, among others, will allow developers to cross-check information on supply and demand within specific areas, which will help developers in deciding their future projects and developments,” the Real Estate and Housing Developers’ Association Malaysia says in an email reply to The Edge.

KRI concurs. In a separate reply, it says, “To ensure supply meets effective demand, feasibility studies should be required on the part of developers for local government approval.”

KPKT, which says there has been a need for centralised data since 2018, says it is still “in the midst of reviewing the affordable house prices based on locality’s median income”.

“The ministry has identified spatial housing mapping up to district level that could be one of the potential measures to address this issue as house prices would be set based on demographic and locality needs,” it says.

“[Developers] also could conduct a comprehensive feasibility study to identify the appropriate price, location and type of house in each locality in order to ensure high take-up rates and reduce overhang,” it adds.

Beyond affordable homes, developers argue that prices of open-market units (which typically make up 70% of a project) have to be pushed up artificially to subsidise the affordable units, which are built below cost.

Governments around the world know that social/public or affordable housing is their responsibility, Rehda says.

“If Malaysia goes back to the pre-1970s model, where the government underwrote public housing, two things would happen.

“One, more affordable housing can be built without depending on the pace of houses sold by private developers to provide cross-subsidies. Second, those in the M40 group would not be burdened with higher costs of housing and be better able to afford these houses,” it adds. “Currently, they are being taxed twice; through income taxes and higher housing prices to cross-subsidise affordable housing.”

KRI stresses that it is the role of both the government and the private sector to address the supply situation. “The social sector are those units administered to the vulnerable group based on needs and are given (rented or ownership) at below market prices. It should, therefore, reside under the government’s purview.

“In turn, the private sector must step in to provide houses in the affordable market segment, rather than pressuring the government to address the housing needs for both the social sector and the affordable segment.”

JPN has long highlighted the challenges around the cross-subsidy model, where “the targets of low-cost houses are not met while there is an oversupply of high cost houses and overhang of unsold properties”.

This is an issue the government is taking steps to address, according to KPKT.

“To strike a balance of the affordable housing supply for the B40 group, the ministry is highly committed to implementing the People’s Housing Programme (PPR) and Rumah Mesra Rakyat (RMR) under Syarikat Perumahan Negara Bhd (SPNB).

“As of Jan 31, 2022, there were 97,196 units of completed PPR, 10,712 units were still under construction and 2,770 units were in the planning stage. Meanwhile, for RMR, 50,078 units were completed, 2,706 units were under construction and 1,613 units were in the planning stage. In the meantime, KPKT still receives new PPR proposals from states from time to time,” the ministry tells The Edge.

Other efforts to encourage homeownership include the 2020-2021 Home Ownership Campaign, it adds. “Throughout the implementation of the HOC, the stamp duty exemption of 1% has reduced government revenue by around RM400 million to RM500 million. However, with the assistance, it helps to curb the issue of property overhang and increases home ownership in the country.”

The Home Ownership Programme (HOPE) launched in March this year is “looking into the housing ecosystem holistically across five key areas, namely availability, affordability, accessibility, quality, and liveability”, KPKT adds.

The latest public-private push for affordable housing in the Klang Valley involves the mega project MRT3 Circle Line, where at least eight stops will incorporate housing units atop their car park facilities — addressing the issue of price and accessibility at the same time.

The government set a “zero squatters” goal as early as 2005, under the 8th Malaysia Plan 2001-2005. Two decades on, the goal remains an uphill task.

Can the National Affordable Housing Council get it right this time? The Malaysians who have not been able to buy a home certainly hope so.

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