Making Affordable Housing an Economic Enabler

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Housing is a basic need. However, the Median Multiple approach developed by Demographia International considers houses in Penang to be unaffordable.1 According to the National Property Information Centre (NAPIC), the median house price in Penang is RM280,000 as of Q2 2019, while the median monthly household income, based on the Household Income Survey 2016, is RM5,409. This means that half the households, especially first-home buyers, are unable to afford a home with a price tag of more than RM194,724.

There is a significant mismatch between the price range of new properties launched and the range that people can afford, leading to a high overhang of properties and a sluggish market. As of Q2 2019, Penang had a total of 3,929 overhang properties, an average increase of 73% per year from 2013.

While 60% of households can afford to buy a house between RM100,000 and RM300,000, only 3.5% of the new houses lie within this price range. On the other hand, more than half of the high-end properties which are above RM400,000 are available only for 13% of the households (Figure 1).

Since Merdeka, low-income households have always been prioritised in the federal government’s housing policy. However, following the launch of the National Housing Policy in 2011, the focus shifted to middle-income households who were not qualified for low-cost housing, but were equally unable to purchase property. To address the issue, a variety of affordable housing programmes were launched, including My First Home (MFH) scheme, 1Malaysia People’s Housing Programme (PR1MA) and 1Malaysia Civil Servants Housing (PPA1M).2

In January 2019 the second National Housing Policy was unveiled with the intent of solving the mismatch of supply and demand, and to help low-income families own a home. The Home Ownership Campaign (HOC) was rolled out by the Housing and Local Government Ministry (KPKT) and Real Estate & Housing Developers’ Association (REHDA) to encourage home purchase for properties between RM300,000 and RM2.5mil whereby home buyers could enjoy either a stamp duty exemption or reduction.

State governments play a significant role in the housing matter as well. In this regard, Penangites have been fortunate. The Penang state government is a forerunner in providing affordable homes. The affordable housing scheme known as Rumah Mampu Milik (RMM) was launched in 2008. This scheme is classified into five categories with different maximum prices, namely the RMM A/low-cost (LC) houses (RM42,000); RMM B/low-medium-cost houses (LMC) (RM72,500); RMM C1 (RM150,000); RMM C2 (RM200,000); and RMM C3 (RM300,000), targeting different household groups as shown in Table 1.

Local council guidelines require property developers to build a combination of affordable home units for every property priced above RM300,000. In Penang Island for example, every residential project should be matched by 30% LC or LMC units and 25% affordable units (RMM C). In return, property developers are compensated through waivers, including development charges, infrastructure costs, drainage contribution and others, on compliance cost for those units.3 Through these interventions, a total of 102,000 units of affordable homes had been built, is being built and is approved to be built as of August 2019. Additionally, the state government targets to complete 180,000 units by 2030.4

It is important to state, however, that home ownership is not a simple matter of merely acquiring the physical property. Affordability notwithstanding, the decision to own a home entails a complex combination of decision parameters by the buyer. For example, geographic location – the distance between work and home – also tops the list in a buyer’s consideration. Naturally then, many affordable home projects are found on Penang Island, corresponding to the disproportionate distribution of economic activity between the island and the mainland.

Another consideration is living standards. A home extends beyond the mere confines of its four walls to include also the vicinity, and the area more generally. In this, ancillary transport infrastructure greatly affects the standard of living. Affordable home projects, for example, are significantly denser in their build ups, and will therefore exacerbate already poor traffic conditions in their surrounding locales.

The affordable homes equation is a catch-22 situation. Home buyers prefer to live close to economic centres, while demanding a living standard reflective of low density areas. This, in essence, is the tenet of the affordable homes dilemma.

Anecdotal evidence suggests that the uptake of affordable homes is below expectations despite prevailing supply of affordable home units and the persistent demand for them. In 2016 the state government decided to allow 30% of affordable home units into the open market, citing sluggish take-up and the need to stimulate the market. This figure was increased to 40% in 2019.5 Concurrently, the state government is also advocating home buyers to settle in less popular locations in Penang.6

The implication of this is less than ideal. The provision of affordable homes is heavily subsidised by the state government by way of waivers in compliance cost. Allowing the sale of these subsidised units on the open market means that the very people this policy is aimed at helping are losing out on multiple levels. Not only are area portions of affordable homes now unaffordable, the subsidies meant for them are also being transferred elsewhere – likely to those who do not need them.

The intervention of affordable homes should be looked at with a larger, more long-term objective in mind; economic development and wealth creation. Seen this way, affordable home projects provide an opportunity for more equitable development in areas that have been unwittingly excluded from the spotlight. Implicit in this mandate is the equal prioritising of connectivity between these new upcoming areas and already existing economic centres.

Home ownership is also inexplicably linked to wealth creation. The provision of affordable housing has to take this into account: that the ownership of a property – even more so by this target group – is tacitly an investment and a means for upward social mobility, i.e. the future value of the property should catalyse such households into a position of greater economic standing, rather than as a liability that acts only to re-enforce the very structures that they are fighting against. The former is only possible when affordable homes are, by design, framed as an economic enabler.

The conversation on affordable homes in Penang today is very much centred around meeting numerical targets. That said, this is in itself no small feat; the ability to own a home for RM100,000 at economic centres in Penang Island is unthinkable otherwise. For families within the household income threshold, this is truly empowering. The time is therefore right for a shift in paradigm from affordable housing merely as a home, to affordable housing as an economic enabler; the latter is deeper and more lasting in its empowerment of those who need it most.

Timothy Choy is a senior analyst at Penang Institute currently drafting the Penang Digital Transformation Master Plan.
Ng Kar Yong is a statistician at Penang Institute who loves art and nature



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