The Malaysian tripartite economics of affordable housing
16 December 2021 - Best view in desktop.
The pervasive problem of unaffordable affordable housing is measured as Price to Income Ratio (PIR) — (Median House Price / Median Annual Household Income) where Malaysia possesses a PIR of 4.1 in 2019, indicated it will take 4.1 years for median household, who earns RM5,873 per month, to own a house value at RM290,000.
The looming B50 in tandem with psychological distress
Housing is unaffordable to half of the population and the matter is worsen where Bottom 40% (B40) or lower income group has increased to Bottom 50% (B50) due loss of income and employment during the post COVID-19 pandemic. Further exacerbating the matter, Malaysian Mental Health Association (MMHA) reported that more than a two-fold increase in cases seeking counselling related to stress. Long-term psychological distress impact the body and health not only contributing to premature coronary artery disease but also to risk of heart attacks.
Twelve (12) pressing matters arising and economics of affordable housing
The following tripartite economics of Affordable Housing Supply, that has profound effect on the housing affordability are; firstly Malaysia whole of Government with more than 20 agencies at both federal level and state level; secondly is the Supply led by property developers and finally the Demand are both house purchasers and renters. Refer to exhibit - The tripartite economics and matters arising in Malaysia Affordable Housing.
The tripartite economics and matters arising in Malaysia Affordable Housing
The burning matters of supply and demand;
M1. House Price to Income Ratio (PIR) at 4.1 2019
M2. Mismatch of Supply & Demand such as 26% unsold units priced below RM 300,000 in 2021
The disadvantageous of lower income group namely B40 and looming to B50;
M3. 4.6 million household (57% of 8 million household) earns less than RM 5,336 per month in 2019
M4. Choice of rental market / rent to own based on economic condition and lack of landlord-tenant legal
safeguard
M5. Bank loan approval rate at 72% for price below RM 300,000 in 2020
Government national housing policy and demand touchpoints;
M6. Need of community / neighbourhood development and capacity building
M7. Lack of building maintenance and consideration on housing whole lifecycle cost (WLCC)
Property developers predicament's role as supply in affordable housing;
M8. Construction cost 50%
M9. High land cost 20%
M10. Capital contribution and compliance cost 6.6% to 20%
The most important and major force is the exigence of Whole of Government approach (WGA)
M11 Lack of database both supply and demand information leading mismatch of affordable housing
M12 Fragmented and absence of coordination amongst 20 agencies to provision adequate and cost effective affordable housing
Whole of Government approach (WGA) to lead in economics affordable housing
Moving forward urgently is the need of a concerted and consolidated WGA with nuance to supply and demand needs. Aleevar puts forward a summary suggestion of 4 collaborations (C1 to C4) steps to be undertaken and broken down into 11 suggested action plans (AP1-AP11) reviewed from National Housing Policy housing or Dasar Perumahan Negara (DRN) 2018-2025 that has already identified 5 focus areas and not less than 50 action plans with suggested measure back in 2018, National Affordable Housing Policy or Dasar Rumah Mampu Milik (DRMM), Bank Negara Malaysia (BNM), Khazanah Research Institute (KRI) and Tsinghua University. Refer to exhibit The Whole of Government approach (WGA) collaboration and action plan.
The Whole of Government approach (WGA) collaboration and action plan
The following suggested WGA collaborations (C) and action plans (AP) are;
C1. Government (and inter-agencies) coordination
The critical path to move forward are 3 main action plans entailing centralised housing authority, unified housing database and land preparation;
AP1. Centralise affordable housing authority
Malaysia Government encompasses 20 federal-level and state-level agencies are empowered and led by National Housing Department or Jabatan Perumahan Negara (JPN) and Housing Ministry (KPKT) guided by National Housing Policy housing Dasar Perumahan Negara (DRN) 2018-2025. The novel affordable housing intent was mooted back in 2012 to facilitate docile group up to Middle 40% (M40) having household income (HHI) between RM2,500 and RM7,500 per month to purchase house price between RM 100,000 and RM 300,000. However, provisioning of affordable housing are fragmented and uncoordinated has resulted in slow progress to achieving Government’s affordable housing target.
AP2. Create unified housing database
Klang Valley Affordable Housing (KVAH) has been much written on supply from home ownership of 3 programmes namely Residensi Wilayah (RW), Rumah Selangorku (RSKU), Residensi Prihatin (RP) and recently Rumah Idaman (RI). The main factors that will influence the success of affordable housing are affordability, availability in strategic location, financing and lower income group purchase financial capability. KVAH (excluding RI) can expect 72 affordable housing projects amounting 53,244 units by 2026 sourced from 3 official programmes website in 2021 based on Aleevar Research and