THE ancient Chinese idiom “yi-shi-zhu-xing” (clothing-food-shelter-transport) spells out mankind’s basic needs.

It is a constant challenge for many countries and societies to ensure that people live in happiness. A roof over their heads can provide for people’s physical and mental wellness, as well as basic security.

However, in Malaysia, housing often takes the lion’s share of expenditure in the average household.

According to the Household Expenditure Survey 2019 conducted by the Department of Statistics Malaysia, on average, 23.6% of household expenditure was spent on housing, including rental or mortgage as well as utilities bills. In the same year, 77% households in Malaysia are homeowners, while tenants make up only 20%.

The reality about the housing market in Malaysia is that since 2010, the prices of homes have doubled.

The average housing prices in a number of states have been identified and categorised by Bank Negara Malaysia as ranging from “moderately unaffordable” to “severely unaffordable”. The latter includes densely populated cities such as Kuala Lumpur and Penang.

Despite this people, especially those who just started new families, are often encouraged to buy their own houses.

The government also often promotes its policies that gear towards helping first-time homebuyers to fulfil their “dream”.

However, this is definitely a costly dream for aspiring new families, putting them under the pressure of hefty household debt at such a young age when they are still building their career.

For the past two decades, the average growth rate in salaries and wages could hardly keep up with the steeper growth rate of average housing prices.

Recently, due to the pandemic and war in Ukraine, the economy has gone into recession, and it is getting more difficult for many to successfully apply and secure a mortgage from banks.

In fact, in some countries, which put emphasis on social equality, such as western Europe and Scandinavian countries, home ownership is not necessarily a social norm, nor is it an ideal policy which their governments would specifically promote.

From the homeowner ratio: Germany (51.1%), Austria (55.3%), Denmark (60.8%) and Sweden (64.5%), we can deduce that one-third to half of the households in these countries prefer to rent a house. To them, this could be a rational choice.

Home ownership v tenancy: difference in social values

I spent four years each living in the United Kingdom and Germany while studying abroad.

I deeply resonate with German society’s prevalent housing tenant culture and norm. Compared to the rental price in the UK, Germany was much more affordable for me.

My guiding professor at that time lived in Hannover for almost 20 years. I used to visit his house, which I found out he had been renting all those years.

Considering his salary level and financial capability, he would have been able to purchase a house if he decided to do so. So, why then could his family live calmly and happily in a house they rented for close to 20 years?

I am sure many Malaysians would quickly whip out a calculator, press a few buttons and tell me later that if this happens in Malaysia it would be such a “waste”! If my professor were to take out a bank loan, he might have been able to repay the mortgage soon enough, and be able to “own” the property instead.

This is exactly where social values diverge: housing policy in certain countries is to ensure people could access and afford housing, and not to encourage the rent-seeking and investment-nature of economic activities.

Surely in common Malaysian understanding, people would point out that the professor has “wasted” an opportunity and financial resources by not owning a property.

However, he may have other important considerations. Twenty years ago, he was just a young scientist whose career had just started, and probably he was not well-to-do and financially unstable.

Furthermore, a professional in the field of science would likely prefer to have mobility options, should he meet a great career development opportunity that requires him to move to another city.

Being a tenant gives him considerable freedom and flexibility, for he need not be tied down by a property.

Indeed, shortly after I graduated, that professor was headhunted and promoted by a research institution in Aachen, another city in Germany. He then moved his whole family over to the new city, and consequently was not troubled by property issues.

Protectio of tenants’ rights

Germany has a massive tenant population as well as a relatively affordable housing market. This is largely due to laws that confer tenants considerable rights and protection, and at the same time there are some rent control regulations or mechanisms in many states.

Landlords cannot arbitrarily raise housing rent, make unreasonable demands, impose unfair treatment to tenants or force eviction. In return, they could enjoy the certainty and legal protection of their rights as landlords.

In addition to the massive mobile tenant population, landlords need not worry about rental demand or their steady stream of rent income being affected.

In Malaysia, the housing property market is often too skewed towards home ownership, which inadvertently leads to developers having the upper-hand in controlling housing supply and sales.

This also would encourage the larger society to have a mindset that treats housing purchase as a “strategic” financial investment, resulting in distorted housing prices, as well as a mismatched and inefficient housing property market in terms of demand and supply.

The common symptoms of this phenomenon are: (i) long-term growth rate in average housing price outpaces the growth rate in household income; (ii) large number of unsold (or overhang) properties while large demand for housing still persists and lastly, (iii) high decline rate of mortgage applications by banks.

According to statistics by the National Property Information Centre (Napic), in the first half of 2021, there were about 31,000 overhang residential units, of which the states that had the most are Johor, Penang and Selangor.

Paradoxically, most overhang residential units are priced at RM500,000 and below, which took the share of 53.3% (or about 16,500 units). Houses priced at RM300,000 and below contribute to 27.1% of the total share.

Thus, if residential units under the price range of affordable housing could produce such an amount of overhang units, the way to address this problem is that one cannot merely assume that adding more supply in the housing market can be a remedy to satisfy demand.

Need for tenancy law

To normalise the housing property market and ensure that people can afford housing expenditure, it is high time for the government to look into the rental market, and encourage more people to choose tenancy.

Meanwhile, developers should be encouraged to offer more “rent-to-own” packages.

Hence, the government needs to introduce the Residential Tenancies Act (RTA) to ensure fair and reasonable rights to tenants and landlords, so as to address current deficiencies of relying on various laws, which are especially poor and costly at resolving conflicts of tenancy due to lack of mechanism.

These uncertainties of tenancy rights and protection are one of the major factors that deter people from renting a house for the long term, because tenants often face unfair and disadvantageous contract terms, sudden hikes in rent, and unreasonable eviction or contract termination.

Since 2018, the federal government has already conducted research and consulted stakeholders on the RTA.

Last February, the government also published and uploaded the proposed bill’s context and explanation as well as policy research analysis, so as to seek public feedback.

Those who are interested may visit this webpage for more information.

To give credit where it is due, the policy of openness and transparency the government has practised for the RTA deserves praise.

I sincerely hope that the RTA would be a good policy solution for people to afford housing expenditure and live happily as tenants. – March 14, 2022.

* Lim Chee Han is a founding member of Agora Society and a policy researcher. He holds a PhD in infection biology from Hannover Medical School, Germany, and an MSc in immunology and BSc in biotechnology from Imperial College London. Health and socioeconomic policies are his concerns. He believes a nation can advance significantly if policymaking and research are taken seriously.

* 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.