Home run for housing

On Wednesday, Vincent, who heads the Better Malaysia Foundation (BMF), launched a new social enterprise programme to assist the government in addressing home ownership aspirations.

TYCOON Tan Sri Vincent Tan has been busy texting his friends and businessmen about his affordable home project for low-income Malaysians, notably the B40 (bottom 40% or poor) group.

His passion for this runs deep, so he’s adept at rattling off statistics and facts to back his arguments on how the country can do better.

His close associates are used to the Berjaya Corp Bhd chairman talking about becoming vegetarian and promoting Tzu Chi, the Taiwan-based Buddhist charity organisation.

But convincing top government leaders and policymakers on affordable homes has consumed his time since announcing that he and his son, Datuk Seri Robin Tan, will step down from their executive roles at Berjaya.

On Wednesday, Vincent, who heads the Better Malaysia Foundation (BMF), launched a new social enterprise programme to assist the government in addressing home ownership aspirations.

He has done his homework, evaluated the costs and learned that loans are a major stumbling block for the B40. Other related issues can only be ironed out by the government and banks.

But the idea of affordable homes isn’t something Vincent woke up with one morning recently and decided to work on.

In March, this writer was called on by former Hong Kong chief executive Leung Chun-ying’s office to organise a breakfast with Malaysian businessmen. Leung came to Kuala Lumpur to update Malaysian investors on the impact of the ongoing demonstrations there led by the youths.

Common complaints in the discussion included housing and jobs, which have been recurring themes for resentment.

The flats in Hong Kong are expensive and tiny, and even that the young have little hope of owning. Organising large-scale protests there has been easy because most people spend their time mainly in the streets instead of their homes.

Vincent asked one vital question: with the Hong Kong government possessing huge foreign reserves, why can’t a fraction be used to ensure people had homes, referencing Singapore.

Hong Kong foreign currency reserve assets rose to US$493.5bil (or RM2.03 trillion) in January 2021 from US$491.8bil in December 2020, the Hong Kong Monetary Authority announced in January. The reserve assets represent over six times the currency in circulation, or about 48% of the Hong Kong dollar, it was reported.

Leung was caught off guard and appeared flabbergasted. There were more follow-up questions from other tycoons in the room, who said that the Hong Kong rich had merely made their money from properties. And for a place with such a huge talent pool, it hasn’t become another Silicon Valley, with digital product discoveries and all.

Putting it bluntly, our public housing record is just as bad, if not worse, as Hong Kong’s.

Our government agencies have not been able to compete with Singapore’s Housing Development Board (HDB), which has been able to provide homes for most Singaporeans.

The housing areas there have proper facilities and are well-maintained, and there are no HDB homes which degenerate into slums.

There is also the question of location. Building affordable homes away from the cities because land is cheaper has led to poor response because public transport service is just as bad.

It is common for people in Tokyo and London to live away from the cities because a one-hour train ride can be comfortable and reliable. It is easy to travel from Seremban to Kuala Lumpur for work, although we don’t hear about many people from Ipoh doing the same.

By right, Johoreans should be able to make a round trip to Kuala Lumpur in a couple of hours, but that is another miss as the high-speed rail idea has been quashed, at least for now.

Vincent is pushing the concept that BMF, in collaboration with Berjaya Land Bhd, has designed a 900-sq-ft five-bedroom, four-bathroom show apartment specifically for this initiative.

He said affordable housing could realistically be priced from RM120,000 to RM300,000 for an apartment, with sizes starting from 450 sq ft up to 900 sq ft, in the Klang Valley.

“This price range is achievable with the government’s support, in terms of charging lower land premiums and nominal development charges for affordable housing projects.”

As such, Tan urged the government to implement strategic initiatives for banks and financial institutions to provide 100% financing to B40 house buyers with two-generation home loans of between 40 and 60-year duration, so that loan repayments would be affordable and manageable.

That apart, he added that the government should also guarantee the home loans of B40 house buyers, so they can be offered at a lower interest rate.

According to the BMF, banks and financial institutions must also play their part by providing loans with 100% financing to the B40 house buyers.

“We understand that the loan applications of 60% of buyers of affordable homes are rejected by banks and financial institutions due to age or poor credit scores, ” noted the foundation.

Vincent’s argument is that the key problem is the rejection of loans, which has also affected property developers who want to build affordable homes in allotted areas.

So, even well-meaning developers have found this to be a major hurdle as they, too, need to pay the banks when construction begins for these affordable flats.

But Vincent can’t pull this off unless the government extends support in terms of charging lower land premiums and nominal development fees for these housing projects.

The Federal and State Governments must also be willing to sell development land cheaply to developers to build affordable houses, especially in urban locations close to transportation hubs, which would translate to lower purchase prices for low-income house buyers.

The issue of affordability in the quest of putting a roof above one’s head was sparked by a concern raised by Prime Minister Tan Sri Muhyiddin Yassin recently, that the B40 has now deteriorated to B50 due to the Covid-19 pandemic. Perhaps, this issue should be the PM’s main passion, too, a goal to realise during his tenure.

In the Klang Valley, for every 1,000 affordable houses launched, there are somewhere between 10,000 and 60,000 purchasing applicants. There is a severe shortage of affordable homes to meet demand.

Based on the median house price of RM295,000 in the second quarter of 2020 as published by the National Property Information Centre and the median household income of RM5,873, the housing price range affordable to those with such income level will be RM211,000 and below. So, most houses are deemed to be “unaffordable” to the average Malaysian buyer.

The BMF believes that affordable housing can be realised with pricing going from RM120,000 to RM300,000 for an apartment in the Klang Valley, with sizes starting from 450 sq ft, 600 sq ft, 750 sq ft and up to 900 sq ft.

The foundation also conducted a survey on 1,700 employees of a private business organisation who fall within the income range of the B40 group, i.e. those having a combined household income of less than RM5,000 per month. The survey’s focus was on the amount B40 employees were paying for renting a room or a house.

From the survey, it was ascertained that the B40 employees were paying an average rental of RM900 per month for housing in the Klang Valley. That means the RM900 rental paid each month covers the monthly loan repayments of RM899 had the employees been able to obtain a 100% financed, 60-year loan of RM300,000.

The key takeaway from this is that the monthly rentals can be “converted” into monthly loan repayments, so a B40 person can buy his own home. It is imperative that housing loans for the B40 group are 100% financed for a term of 40 to 60 years, so that monthly repayments are affordable, and the two-generation feature is adopted.

Many wealthy Malaysian parents have begun buying homes for their children because they know it will be tough for them.

For those renting homes, it gets more difficult to secure bank loans when they grow older. It could get even worse when they can’t afford rent because they’ve retired.

But for the B40, they may end up homeless. And that could take us from enduring social and criminal problems, right through to navigating past a political storm.

Datuk Seri Wong Chun Wai is an award winning veteran journalist. Views expressed here are the writer’s own.

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