Social Housing - a magic way out of the increasing cost of homes?

80% of mid-, low-income earners may require social housing

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September 28, 2015

A whopping 80 percent of Malaysia’s mid and lower-income earners are likely to require social housing should the government fail to make urgent interventions.

In its “Making Housing Affordable” report issued last month, Khazanah Research Institute (KRI) described Malaysia’s housing market as “seriously unaffordable”.

The report also underscored the need for the housing sector to be seen as a key economic sector instead of a welfare issue.

Notably, the housing sector is a key economic sector, hence, an integral part of the overall economic management, said KRI research director Suraya Ismail.

“Unfortunately, this perception of housing as a key economic driver has yet to take root. Housing is too often seen by governments as a welfare issue, requiring the transfer of physical or financial resources to low-income households that are unable to house themselves adequately,” she told Business Times.

“Available resources, however, are rarely adequate. As a result, government housing agencies limit their direct housing provision to a small minority of potential beneficiaries, ignoring the interests of most of the population. By focusing on a small and limited housing agenda, these agencies fail to either understand or manage the housing sector as a whole.”

“This can be seen from the growing concern among middle-income households regarding their capacity to purchase houses. This group is often ineligible for public low-cost housing programmes and yet unable to afford housing supplied by private developers.”

According to PR1MA Corp Malaysia chief executive officer Datuk Abdul Mutalib Alias, the 1Malaysia People’s Housing (PR1MA) programme is aimed at transit-oriented developments in order to address the high cost of travelling and housing, including traffic congestion.

“Based on the demographic trends and evolution of cities like London and Tokyo, it will not be surprising that residential units in city centres will shrink in size and cater mainly for the rental market, especially for singles and young couples,” he said.

“Those with families will likely live in the outer city area and commute to work by public transport. Our rail infrastructure could facilitate this transition in a more orderly manner.”

“As such, the government’s huge investment to improve transport infrastructure, especially rail, is critical and should be commended because we would only appreciate the benefits five to 10 years from now,” he added.

The mismatch between demand and supply of affordable homes reflects an immediate need for housing reforms.

“Until now, policies have focused on controlling prices once the consumer receives the house at the end of the production process,” said Suraya.

The report took a different approach as evidence showed that it is more efficient to improve capacity on the supply side to develop a responsive and sustainable housing sector, which caters to all sectors of the population.

“The provision of affordable homes remains a major problem facing policymakers around the world.”

As the country moves towards becoming a high-income country, the demand for affordable homes will only increase. As such, a more structured and refined approach is needed.

Apart from the supply of affordable homes, Mutalib noted that another key challenge is ensuring that first-time buyers have access to affordable home financing.

“PR1MA is addressing both the supply and affordability issues through its mandate to build 500,000 houses and pricing them at least 20 percent below the market price,” he said.

“In addition, through PR1MA’s buyer assistance programme, where we have panel banks offering end-financing of up to 110 percent and rent-to-own schemes with an option to purchase, we are providing easy financial accessibility to home ownership.”

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