In Part 1 yesterday Why is affordable housing not so affordable? FMT looked at why private market homes have become increasingly aspirational, and how previous attempts at bringing prices down have been unsuccessful.
While there isn’t a magical solution to fix the housing market, economists and developers say that both public and private sector measures could contribute towards a more equitable environment for buyers.
Anthony Cho, a developer based in Melaka, said affordable housing should be supplied and run entirely by the government. Asking developers to help build affordable houses would increase the costs which then get passed on to buyers.
“The government should instead form housing boards at national and state levels to oversee the supply of such properties, and developers can contribute funds in lieu of building these homes,” he said, describing a system similar to that employed by Singapore.
He added that to ensure people who need affordable housing the most have access to units, the government could place limits on lease terms that can be reviewed when they expire, so those who have begun to make enough money to upgrade or buy can make way for those in greater need of social accommodation.
Geoffrey Williams, an economist with the Malaysia University of Science and Technology, agrees that centralising affordable housing programmes can provide a more equitable social housing market.
“House prices for social housing could be fixed at cost price. The housing could be offered using rent-to-own schemes with affordable repayments.”
With rent-to-own schemes, the minimum 10% down payment does not need to be paid, and those who may not qualify for financing from banks are given access to the market.
“Where people can get financing through normal mortgage-backed schemes, the free market would prevail. Where incomes are too low to raise a sufficient mortgage then rent-to-buy schemes could be used.”
However, Carmelo Ferlito, the chief executive officer of the Center for Market Education said that a “social-mobility centred approach” with less government intervention would be more effective, with developers catering to the rest of the demand at different price points.
“In this sense, I see the government eventually building shelters only for the very poor, let’s say the B10.”
He said that targeted rental assistance was a better long-term strategy, allowing people to bolster their savings so that they can buy a house down the line as their income level rises.
“The government can ‘book’ certain units in middle-range projects developed by private businesses, subsiding the rent for qualified tenants. The amount of the subsidy would decrease with the increase of income. This is a way to allow people to live near good job opportunities and therefore have access to social mobility chances.”
The government also does not need to play the role of a developer, and can instead leverage on existing infrastructure and make it more accessible.
While their suggestions varied, all agreed that the affordable housing agenda needs urgent reform. The current policies just do not appear to be working.