THE lack of affordable housing in Malaysia has long been a part of the national discourse, sparking debate and commentary in the media and among the policymakers on its causes and effects.

Better public awareness about housing policies is needed for deeper and more meaningful discussion.

Policies on housing should be formulated and executed with the input of the federal, state, and local governments and the central bank.

This article discusses the country’s policies on affordable housing from the perspective of supply and demand.

Housing unaffordability

The two most common measures for housing affordability are the median multiple method (median housing price should not exceed more than three times median household income) and the housing cost burden method (housing-related expenditure should not exceed 30% of household income).

According to a Bank Negara report, the median multiple has been above three since 2004 and reached five in 2016. Every state save Negri Sembilan and Malacca experienced housing unaffordability. The BNM analysis indicated that all income groups spent more than 30% of household income on property in 2016.

There is a mismatch in the housing market. The prices of new and unsold properties have a high tendency to rise above household median income.

On the other hand, the growth rate of property prices is outpacing the growth rate of household income.

Policies dealing with this problem have two facets: speculative demand and household purchasing power. Intuitively, high income households tend to be involved in more speculative activities, while lower-income households face housing unaffordability issues.

These two factors must be in balance. Current housing-related policies focus on curbing speculation and promoting innovative financing but the government lacks concrete policies to increase household income in the long term.

Consolidate agencies, improve labour productivity

There are 12 federal agencies on housing but they lack systematic coordination, which has led to the current state of inefficient planning and building.

Symptoms of inefficiency are housing and location mismatch, overlapping applicants, underserved buyers and lack of scale.

First and foremost, there is a need to consolidate the housing agencies like South Korea has done with the Land and Housing Corporation and Singapore, the Housing Development Board.

The National Property Information Centre (Napic) only reports supply of property; it should also work with KPKT e-Pemaju (the data portal that provides breakdowns by developer) as well as conduct policy research backed with Statistics Department data on, for example, the economic standing of households and household composition by location.

Napic should transform into a housing research institution and not rely on BNM as the sole major research agency on housing affordability issues. 

Agencies in all 13 states and territories are encouraged to work with the federal authority.

Exit policies need to be introduced and the state agencies should collaborate with social welfare agencies to focus more on asset-based growth to eradicate the need for low cost housing in the long run.

A single federal authority would be able to oversee the rental market, which will be discussed below.

A policy can be introduced to adopt technology to raise labour productivity, which will reduce housing development costs.

Standardise the building code and introduce smarter procurement processes such as a buying consortia and industrialised building system to replace traditional construction methods.

Land policies need to be further studied  to introduce policies to reduce land premiums and conversion costs.

Regulate rental market, increase household income

Renting a house should be another alternative to purchasing a property as all the income groups are facing spending constraints due to high household debt.

All income groups in Malaysia spend at least 60% of disposable income on mortgage and motor-vehicle loans, according to BNM.

Better regulation of the housing market will not just protect tenants’ welfare (since tenants do not have equal negotiation power with landlords) but will provide a viable option (not an inferior option) if one does not want to buy or cannot afford to buy.

Apart from the real property gains tax that aims to curb housing speculative activities as well as promotion financial literacy, the recently proposed residential tenancy act is a good move.

It is intended to protect tenants’ welfare via rent deposit management by third parties, the setting up of a tribunal, and prohibiting racial discrimination.

However, the proposed law can be improved with provisions to regulate minimum living conditions for tenants. On the demand side, the government needs to grow the household income in the long term, the economic gains of which shall be trickled down to the people.

Political will and policy knowledge are definitely needed to address the affordable housing issues. – March 10, 2022.

* Nick Tan Beng Teong graduated with Bachelor of Economics at University of Malaya. A member of Agora Society, Tan believes in policy reforms in order to build a better nation.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.