The affordable housing is defined as the housing which is legally restricted for the use of individual or household who meet the requirement of income stated by the government. The development of the affordable housing schemes recognises the needs and requirement of households where their household incomes is not sufficient to own a house without any assistance from the government. In the Malaysian context, the pricing of affordable homes must not exceed RM300,000 per unit. The exact selling price will vary across different states based on the household average income and construction cost in each area.
Table 1 : Pricing for affordable homes 2019
Source : Housing and Local Government Ministry
From the ministry of housing and local government’s perspective, affordable homes may not only refer to homes at low price but the home must also provide comfortable and safe living environment. In other word, they must be quality homes for the lower income group which includes the minimum built up area, bedrooms, parking as well as required facilities.
The standard built up area of low cost housing units gradually increases from 400 sf in the 1st Malaysia Plan to 650 sf in the 8th to 9th Malaysia Plan, with the current standard area of increased to 700 sf in the 10th to 11th Malaysia Plan. The medium cost affordable homes current standard built up area is between 800 – 850 sf.
Table 2 : Standard built up area for affordable housing
Source : Malaysia Plan (1966 -2020)
The World Bank in 1989 stated that Malaysia’s high standards for land use and infrastructure (e,g the road width requirements and the large area set-aside for public areas) contribute to the high cost of land for housing. The time taken to get relevant approvals also contributes to the overall costs of building homes.
With the constantly rising house prices, the government has came out with many plans and programs to help those who can’t afford to buy housing units offered by the private developers. The current government’s approach to affordable housing has been to built more public housing through PR1MA and other government agencies as well as to impose quotas that require developer’s to built low cost housing.
The 11th Malaysia Plan outlines a target of 653,000 units of affordable homes to be built during the Plan period (2016-2020), or an average of 130,000 houses built a year. RM1.5bil was allocated by the government to build and complete affordable homes under the People Housing Scheme, Civil Servant Housing Project, PR1MA and Syarikat Perumahan Negara (SPNB). Bank Negara Malaysia has set-up a fund for those first time buyers earning under RM2,300/- per month to buy affordable houses at interest rate of 3.5% through selected banks to own their first house priced up to RM150,000. For civil servants, to help them acquire homes, the Public Sector Housing financing board will extend loan repayment period from 30 years to 35 years for the first loan, and from 25 years to 30 years for the second loan.
There are seven government housing schemes available for the low and middle income group under the affordable housing program as follows:-
Table 3 : Affordable schemes by the government
Source : Star Online 13 Aug 2018
However, with all the incentives given by the government to developers and many government’s public housing schemes, there are still many people especially in the urban area who can’t afford to own a house due to the extremely high price of houses. Even the affordable units has now become unaffordable to many urban dwellers due to the high cost of living in the urban area.
PR1MA has had its share of challenges while developers have been blamed for the construction of low cost housing in remote places or place that lack of connectivity, subsequently attracting poor take-up.
Closer examination of the latest statistic from NAPIC shows that the addition of new supply in this range is against the back-up of a rising overhang in the affordable price below RM300,000. This overhang of properties priced below RM300K from the biggest slice (31% to 52%) of the overhang. The overhang which is defined as unsold units that have been launched for more than 9 months, runs across all the 3 categories of completed, under construction and those launched but not constructed. Kuala Lumpur city center had 8,008 units of not constructed, comprising largely flats and apartments in Q1 of 2019, despite the public outcry over lack of affordable housing. So what is actually the real problem here, not enough affordable units?, the price is not affordable enough? or the affordable units are not suitable to many prospective buyers??
Source: NAPIC, 2014-2018
We strongly believes that a market study must be conducted by any developer to determine the suitable location, type and size of housing units and also the proposed selling price of the housing units. The market study should also covers the current market demand, supply, current market trend and facilities to be included in the scheme even if its affordable housing scheme. This is to ensure a good take-up rate of the units offered.
On the other hand, apart from incentives to developers building affordable housing, the government must also play an important role to make it more ‘marketable’ to the market at large such as providing good infrastructure, connectivity to the proposed site as well as building more amenities to the community living in the scheme.