Housing crisis (Part 1): What is the solution?

By admin-j On May 17, 2014

The government’s response to skyrocketing house prices has been inadequate and left many Malaysians burdened. Jeyakumar Devaraj demonstrates why.

Jeyakumar Devaraj, ALIRAN

It is becoming increasingly difficult for ordinary Malaysians to buy houses in urban areas.

The prices of even terrace houses have shot up in the past five years. Even in semi-rural Sungai Siput, the selling price of terrace houses has gone up to RM140,000.

The Deputy Prime Minister is reported to have said in October 2013, “House prices have skyrocketed! I often hear complaints that terrace houses can cost as much as RM500,000. Who can afford such houses? Even those earning RM10,000 a month would have difficulty servicing loans for a RM500,000 house which used to cost between RM 140,000 and RM 200,000 several years ago” (The Star, 2 October 2013).

There is a housing boom in Malaysia. Lots of houses are being built. The problem is the supply of reasonably priced houses falls far short of the need for such houses as the table below documents.

Table One: Houses built by the private sector in Malaysia, 1 January 2006 – 31 December 2010

Price of house	Number built 2006 – 2010	Percentage of total houses built
Below RM30,000	5,518	1%
RM30,001 – 50,000	66,984	12.1%
RM50,001 – 70,000	17,341	3.1%
RM70,001 – 100,000	88,506	16.0%
RM100,001 – 150,000	92,125	16.7%
RM150,001 – 200,000	99,117	18.0%
RM200,001 – 300,000	89,958	16.3%
RM300,001 and above	92,286	16.7%

Source: Ministry of Housing and Local Government’s answer to parliamentary question put by the Member from Sungai Siput

We will be arguing later in this paper that around 70-80 per cent of the 1.7m families who do not yet own their own houses can only afford houses that are cheaper than RM70,000. Seventy per cent of 1.7m is 1.2m.

But of the 552,600 houses built by private developers between 2006 and 2010, only 16.2 per cent of them or 89,843 were priced below RM70,000. This clearly demonstrates the problem created by relying on profit-driven entities to provide for the housing needs of our people.

The prime minister outlined several initiatives that the government intends to take to address the housing problem, when tabling the 2014 budget. The government’s plans as mentioned in the PM’s speech are summarised in Table Two below.

Table Two: Government plans to address the shortage of affordable houses

Scheme	Ministry/agency in charge	Number of houses planned for 2014	Price range
Program Perumahan Rakyat	Ministry of Housing	16,473	Ns^e
Program perumahan Rakyat Disewa	Ministry of Housing	600	Ns
PR1MA^a		80,000	100,000 – 400,000^c
Affordable houses Rumah Idaman Rakyat Rumah Mesra Rakyat	SPNB^b	15,122 3,000 8,000	Ns Ns 45,000 – 65,000
Private Affordable Ownership Scheme	Ministry of Housing	10,000	45,000 – 170,000
^d

a. PR1MA = Program Perumahan Rakyat 1Malaysia, implemented by 1Malaysia People’s Housing Corporation

b. Syarikat Perumahan Negara Berhad = National Housing Corporation, a company under the Minister of Finance

c. Answer to parliamentary question No. 56 on 18 November 2013

d. The Ministry of Rural Development also builds houses – but in rural areas. It was not mentioned in the context of affordable housing for the urban population by the PM in his speech.

e. Ns = not specified in the PM’s speech

Source: Prime Minister’s Budget Speech on 25 October 2013

Is the BN government’s approach to the housing problem adequate?

We need to consider the following issues:

1. What is the current need for reasonably priced houses?

According to Datuk Abdul Rahman Dahalan, the Minister of Urban Wellbeing, Housing and Local Government, 25.5 per cent of Malaysians families do not own houses (The Star, 25 October 2013). (Does this number include the families who own houses but not the land their houses are on – the ground tenants?)

Based on the 2010 Household survey by the Statistics Department, 57.5 per cent of government employees and 67.1 per cent of workers in the private sector owned houses. (Parliament question No 145 on 2 October 2013 answered by the Ministry of Urban Wellbeing, Housing and Local Government.)

As there are 6.8m households in the country in 2012 (Answer to parliamentary question No 12 on 8 November 2012 by Ministry of Higher Education), that would mean that there are at present 1.7m families who do not yet own houses. Most of these households would be in the lower-income categories with monthly incomes of less than RM5,000. (Forty per cent of Malaysian households have monthly incomes of less than RM3054, and another 40 per cent have monthly incomes between RM 3054 and RM 6955).