The need for a national housing policy

It is depressing, but not surprising, that property overhang was at its highest since 2018 with 63,063 unsold units valued at RM46.96 billion as of June 2020.

By September 2020, the overhang worsened with high-rise units of prices ranging between RM200,000 and RM700,000 the worst hit, accounting for 70.5% of the overhang.

These figures reflect a total failure of our housing policy which allows developers to build mainly for profit and speculation, ignoring the real housing needs of the people. This mismatch of housing needs and housing supply is a misallocation and waste of our national resources.

In the meantime, the government has been trying to help the developers (who themselves created this problem) sell the unsold houses by calling for easier bank loans. This will put stress on the financial system and cause indebtedness for the poor who cannot afford expensive houses and risk losing their jobs and incomes during the pandemic.

Developers have to continue to complete their existing projects otherwise they risk having to pay liquidated ascertained damages (LAD) for late delivery of the projects. Delays will also erode the confidence of potential buyers. This will aggravate the overhang which has been on an increasing trend over the past five years. At most, developers can cut down the number of future projects just as statistics show that 2020 had the lowest over a five-year period but much too late.

Even if the pandemic is over, it will take a year or two at least for the economy to recover. According to the Department of Statistics Malaysia, there were 748,200 unemployed in October 2020 and annually about 500,000 Malaysians would enter the job market. Hence, it is expected that there will be more than one million job seekers and the closure of more than 51,000 retail stores in 2021. These predictions came before MCO 2.0 on Jan 13, making the situation even grimmer.

Under such circumstances, we call upon developers to seriously consider renting out unsold units or offering rent-to-own options. This would enable those who cannot afford to buy to at least have a roof over their heads while reducing the property overhang problem.

The government, on the other hand, should also encourage housing rental by expediting the enactment of the Tenancy Act to protect the interests of landlords and tenants, making standard tenancy agreements available online that landlords can use, and introducing a dedicated rent tribunal to resolve tenancy problems quickly.

The government should think seriously about renting as a solution to our housing affordability crisis as many studies have shown that even the middle class cannot own housing units as house prices have skyrocketed. Malaysia can learn from Germany where 58% of Germans rented the homes in which they stayed in 2018. In Germany, laws have protected tenants and landlords fairly without the stagnating of their housing supply. There, they have developed rental tables (based on market rates) in bigger cities to establish a certain range of rents at different localities. They only allow rental increase by specific percentages. And they have enabled the tenure security of tenants by ensuring that eviction is only allowed for specific reasons like the non-payment of rent, destruction of property, when owners want to occupy the unit and other specific reasons.

In the longer term, we need a national housing policy to look at our housing requirements.

1) Set up a national housing coard to do the following:

– Match housing needs and housing supplies to prevent the misallocation and waste of housing resources. This will prevent the large overhang of unsold housing units and the problem of abandoned housing projects, especially when at the same time we have a shortage of housing, especially for the poorer consumers and the homeless who cannot even afford to rent.

– The board should develop housing and business units to sell or rent. They should prioritise social housing and rental units especially for the lower income group, the homeless and workers who come to city centres to seek employment.

– The board should develop housing on state public land and land belonging to public authorities. Such land should not be given or sold to private developers for any purpose.

2) Acquire land for social housing and develop land banks for housing throughout the country.

3) Develop a long-term plan and allocate financial resources for housing needs for all Malaysians in different parts of the country. This should be a priority in our development plans to prevent a housing crisis.

4) A good housing policy is instrumental to political and social stability. It also creates a sense of belonging that will unite all Malaysians.

5) Develop and collect good and useful statistics to help us produce proper comprehensive housing plans that are linked to locality, jobs, transport and amenities. Socio-economic factors, occupancy rates, tenancy, mortgage, indebtedness, speculation, housing rental rates at different locations, and affordability data are also important.

6) Develop tax incentives, supply-side and demand-side subsidies and other fiscal policies to facilitate social and rental housing.

7) Develop standard tenancy agreements and expedite the enactment of the Tenancy Act to look after the rights of tenants and landlords, to ensure a vibrant and fair housing rental market.

8) Set up a rent tribunal to settle disputes between tenants and landlords.

Mohideen Abdul Kader is president of the Consumers Association of Penang.

The views expressed in this article are those of the author(s) and do not necessarily reflect the position of MalaysiaNow.