Rethink affordable housing strategy, think tank tells Putrajaya

A researcher says developers shy away from affordable homes because it is artificially made unprofitable by a series of regulatory obstacles.

PETALING JAYA: A think tank has urged Putrajaya to rethink its affordable housing strategy, particularly in relation to the National Housing Policy (NHP) it launched recently.

The Institute for Democracy and Economic Affairs (IDEAS) proposed several methods, including reducing the government’s direct involvement in the construction of low-cost homes and regulatory costs that developers needed to meet.

IDEAS senior fellow Carmelo Ferlito told FMT that the low-end segment is not naturally unprofitable.

“But developers shy away because it is artificially made unprofitable by a series of regulatory obstacles.”

Ferlito is the author of an IDEAS policy paper titled “The Property Market, Affordability, and the Malaysian National Housing Policy”, which was released today.

In the paper, Ferlito also warns that stringent low-cost development requirements in the NHP should be avoided to better facilitate supply and demand, taking into account location and size factors.

“The NHP prescribes minimum sizes for a low-cost residence.

“But this may only make it feasible to be developed far from economic centres like cities due to the high cost of land.

“However, just because homes are cheaper further away from the city, it doesn’t mean that people will want to buy them.

“Some may prefer to have a smaller place if it is closer to where they work.”

He said while technology will help reduce the cost of developing properties, developers will still need the freedom to react to market demands and not be constrained by the government’s requirements.

Ferlito, who is an economist, also said the government should consider ways it can play a role in the low-end rental market, rather than just on the supply of affordable homes for sale.

This, he said, was because the rental market is likely to grow in the future and also because younger generations are more inclined to renting rather than buying properties.

“In this perspective, the government may play a different role like ensuring the supply of guaranteed-rent homes, where it guarantees loans for developers investing in affordable projects.”

Doing this, he said, would make the projects affordable and economically viable.

The NHP, launched in January, includes a National Policy on Affordable Housing (DRMM), a new programme aimed at the B40 category of poor Malaysians.

The DRMM will guide the construction of affordable homes developed by the federal and state governments, as well as the private sector.

Among others, affordable homes must be at least 900 sq ft in size, and priced below RM300,000.