Need for National Housing Commission

  1. Affordable housing is an issue whose severity is jointly agreed by the previous and current government. Pakatan Harapan in its manifesto, commented on the ineffectiveness of PR1MA in delivering its mandate and committed that it will develop 1 million affordable homes. 
  1. Affordable housing delivery under the Barisan Nasional government was fragmented – surprising given the fact that it is such an important issue, unsurprising if you consider that perhaps everyone wants to take credit. There were four (4) ministries involved in affordable housing with every state having policies obligating developers to develop housing below a certain price as part of their larger development.

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    MOF has Syarikat Perumahan Negara Berhad (SPNB), KPKT has MyHome, PMO has PPA1M and PR1MA and Federal Territories Ministry has RUMAWIP.

  1. A review of PR1MA reveals that though it was mandated in 2011 to deliver 500,000 homes, it was not well equipped. Land availability was a major stumbling block – it obtained only 108 acres for development and after 7 years of being established, PR1MA only completed 11,000 homes. 
  1. KPKT has called out to the states to request that land be made available for affordable housing development. Selangor was the first (hopefully first of many) to reply that they will allocate land. While this is a good development, there is still room to optimise economies of scale.
  1. KPKT has spoken to say that a National Housing Council will be established and that a single entity will be created, bringing together PR1MA, UDA Holdings, SPNB, RUMAWIP, PPRT, PPA1M under one roof. These statements begs further clarification – will National Housing ‘Council’ be like ‘Council’ of Eminent Persons meaning it is a platform for deliberation? What is required is an entity for delivery. On the single entity to be created, the unavailability of land is still left unaddressed.
  1. Commissions are useful to centralised delivery and give regulatory powers. Using the example of Suruhanjaya Pengangkutan Awam Darat (SPAD), it was created to address fragmented delivery of public transportation and under one roof, it achieved streamlined planning and delivery.

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The Idea

  1. Putting #5 and #6 together, I believe KPKT should consider creating a National Housing Commission.

    At inception, the Commission must receive allocation of land from each state and its role would be to design, develop and manage affordable housing. The commission would also be tasked to do planning and policy research, which among other things, coordinate collection of data so demand and supply on a district level could be analysed.

    Given the size of acreage and standardised designs, the commission should work with supplier to order in bulk so material costs can be driven down. As designs are standardised, the commission may engage contractors to construct. States must give discounts to land premiums and statutory costs and if MOF can consider, facilitation fund should be provided for external infrastructure costs should certain lands require additional infra to improve accessibility.

    As a matter of governance, the commissioners can consist of representatives of each State as well as private sector players.

 

The government of the day should learn from past shortcomings and its idea of a single entity must be properly enabled at inception – it would be unfortunate to see a half-baked entity complaining of tied hands down the road.

 

 

Ideas For Housing

Housing in an area of national development I feel strongly for and with the advent of Malaysia Baru, I hope government may have stronger political willpower to address housing issues which have been addressed somewhat unsuccessfully by the previous administration.

Khazanah Research Institute and Bank Negara individually have conducted a thorough as-is analysis of the housing/affordable housing situation, both providing well thought solutions to address the situation. I would like to provide additional ideas to the ones provided by KRI and BNM:

1. Revitalizing community centers

Community centers in Malaysia is an underutilised asset. Every constituency has it but it is used mostly for badminton or weddings.

A good neighborhood design is one that facilitates interaction – a community center needs to do exactly that, to enable frequent interaction.

In Singapore, community centers are being transformed. The concept is as follows: lots for F&B are added to community centers. There will be an anchor tenant (usually McD or Starbucks as it brings the crowd) but other tenants are given a ceiling price per item for them to sell. The idea is simple – if you live in an affordable house but don’t have affordable food to go to, it’s not really an affordable lifestyle or community. Community centers is also a place for people to teach and learn skills, from casual to proficient. Have a piano for people to teach and learn, hall for tae kwon do and halls for free movie. As how the economist Raj Chetty mentions, good neighborhoods enable upward mobility, making our community centers more useful is a good first step.

Pictures from Tampines West Community Club, as an example:

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Starbucks on Ground Floor with more F&B outlets on 1st Floor
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Sports court which doubles up as a Screening Hall

2. Policies to reduce construction cost

Buying a home is much like buying anything, it is a function of two things: the price of the item and how you pay for it. From the media engagements with the new minister, a lot of focus is given to fixing the latter – working with MOF and BNM on fixing loan eligibility, encouraging Rent-To-Own. More needs to be done to address how you drive sale price down – and as developers simply push cost to customers, asking how stakeholders can drive construction cost down.

Affordable housing in Malaysia is a cross-subsidy model. What this means is developers make a loss building and selling affordable homes but make their profits from building commercial/service apartments on adjacent plots. For the government to deliver 1 million homes, this model cannot work. Developers need to innovate to be able to build and sell homes at ~RM250,000 and still make a profit. To complement innovation, the government needs to assist to drive construction costs down via addressing policies that push costs up.

Compliance cost needs to be addressed and reduced for affordable housing projects: statutory costs to CIDB, IWK, TNB, Syabas should be reduced. Different states also charge various costs differently – this should be reduced and standardized. State governments need to reduce land premiums, standardize cemetery cost and contribution to Improvement Service Fund should be waived.

The other area which requires standardisation is planning requirements. The final say on most matters lie with local authorities which makes standardisation difficult. One planning guideline that needs to be addressed is number of car parks. Certain local authorities require 1.5 bays per unit with 10% of total bays for visitor carpark. Car park bays are expensive – on a podium, it could cost ~RM35,000 per bay. If the government provide public transport infrastructure (which is in line with PT modal split targets), reducing car park bays to 1 bay for 1 unit would enable cost reduction.