AS I was catching up on my reading, an article in the papers entitled “Government can’t deliver affordable homes on its own” caught my attention.
It reported that Syarikat Perumahan Negara Bhd, which has been entrusted to deliver 200,000 affordable homes nationwide this year, has said it cannot achieve the target on its own and would have to collaborate with other parties.
The remark took me down memory lane, to the time when I was a fresh architectural graduate in the early 1960s. I joined Kuala Lumpur City Hall (DBKL) right after my studies and was assigned to build low-cost housing.
During that time, there were no policies on low-cost housing. However, DBKL managed to build low-cost houses without subsidies and sold them without a loss, as Government land was contributed for free. The housing industry was a free enterprise, therefore, there existed a few thousand small and medium-sized developers who were able to prosper by building and selling houses even below RM15,000 each, mainly because their overheads were very low. Many built less than 10 units at a time.
They did not spend money on advertising as they could not afford it; they merely put up a simple signboard on the site to attract customers, including yours truly. That was how efficient and cost-effective we were as an industry.
No doubt, the situation has changed over the years. With the rising cost of land and construction, in spite of all the competition, house prices kept rising.
Up until the early 1980s, there was no mandatory requirement for developers to build low-cost housing. Then, in 1982, some state governments started to impose a 30% low-cost housing quota on private developers in their housing projects.
All low-cost units had to be sold at the ceiling price of RM25,000 until a revision in 1998, which introduced a four-tier pricing scheme ranging from RM25,000 to RM42,000, depending on the housing type and location. Many small and medium-sized developers found such a ruling a big impediment to their business.
Many were unable to cope and had to wind up their businesses. This ironically reduced the number of developers who could produce cost-effective housing.
In order to meet this policy, private developers had to cross-subsidise low-cost units via the sale of other units at a higher price. Imagine a situation where banks are required to offer 30% of their loans interest-free, or lawyers to serve 30% of their clients without a fee. Obviously, this is not sustainable in the long term.
Recently, even more stringent rules were introduced with the new policy irrespective of the size of the development, announced by the state authority of Negri Sembilan. The state now requires developers to build 50% affordable homes in their new housing projects.
This new policy will mean higher prices for other homebuyers, and ironically will once again force some smaller developers who can build affordable homes with lower overhead costs to exit the property market. With all these limitations instead of incentives, I foresee many challenges for the private sector, especially small and medium-sized developers in assisting to close the gap for affordable housing.
So, what can be done to address the issue?
As mentioned in my previous articles, high land cost is a major factor for rising house prices. With ample land resources, only the Government can free up land in appropriate locations, convert agriculture land for housing purposes, or purchase land for affordable housing.
For example, large tracts of rubber plantation land in Shah Alam and Bangi were acquired by the state Government at very low prices of around RM10,000 per acre to create these new townships in the early 1970s.
In addition to availability of land resources, only the Government can expedite approval processes and find scale efficiencies for its housing projects, which will eventually lower overall development costs.
As we understand from other countries, only the Government holds the key to making the affordable housing goal a success. In Singapore, prior to the formation of the Housing and Development Board (HDB) in 1960, less than 9% of Singaporeans stayed in Government housing. Nearly half the population lived in dilapidated housing or squatter communities, and a growing population worsened the condition.
Recognising the impending crisis about 50 years ago, HDB started its mission to house the nation with considerable powers in land acquisition, resettlement, redevelopment and design. The organisation has also been led by an experienced professional and competent team.
Today, with its comprehensive approach, HDB has developed more than a million homes for its people. As many as 80% of Singaporeans live in public housing built by HDB, and 90% of them own the HDB houses that they live in.
The Singapore Government alone has shouldered 100% of that responsibility to ensure Singaporeans have access to affordable housing. The results over the years speak for themselves and are an oft-cited example of a successful model globally.
In our nation, there is still a lot of room to improve the supply of both affordable and low-cost housing for the rakyat. Our Government has the opportunity to fix the housing issue once and for all when it fully maximises its land resources, engages a professional and competent team to lead the cause, and maintains a strong political will to achieve the goal.