IT is regrettable that 59 years after independence, the shortage of affordable housing remains unsolved. Budget 2017 can and should address this major problem and provide more affordable housing.
Why are we in this quandary? Is it because all parties – federal, state and local authorities and the developers as well – are in one way or another guilty of protecting their own interests at the expense of the poor and unfortunate low-income house buyers? How come there are still 1.5 million first-time buyers who find it very difficult to get affordable housing?
One of the reasons is lack of supply to meet the rising demand for housing which has been strengthened by the growing young, energetic and independent working population. Unlike in the past, Gen Y and young employees and new enterprising graduates do not want to stay at papa and mamma’s house if they can have their own home. And why not? This is therefore a major challenge for Budget 2017! It should provide more incentives, and especially tax incentives, to encourage large scale affordable housing projects and even compulsory industrial building systems (IBS). This is a thriving industry in many countries, including some neighbours who beat their housing shortage problem a long time ago.
All we need is an IBS that can be sustained by economies of scale or high volume production. It will cut costs, standardise and enhance building quality, reduce reliance on imported workers, speed up construction and meet basic housing needs all over the country.
I know, for instance, that the Federal Government has been trying for a long time to promote the IBS but there has been resistance from those who enjoy reaping agency fees from the import of cheap foreign labour!
State governments rely largely on their limited land revenues because the federal tax system is highly centralised. As a result, they tend to keep the good land to sell to businessmen and the wealthy at higher prices. Low-cost housing projects therefore do not get preference and the land allocated for them are way outside the town centres. This is very inconvenient to those who work in the towns as they would incur higher transport costs and long commutes to and from the office! It’s a vicious circle that ultimately penalises low-cost house buyers.
The solution? Allocate land in towns for affordable housing at subsidised rates, please!
Local authorities also add to the constraints and higher costs of developers. Rules and regulations can differ among local councils all over the country, with some being more difficult to deal with than others. Corruption and cronyism can also add to costs and delays, and more wastage.
Developers themselves are not blameless either! There are some unscrupulous ones who will find ways to avoid constructing affordable housing. Others, especially if they are small players, provide poor quality finish to maximise profit. Bumi quotas for contractors and house buyers can also aggravate the housing shortage.
Providing more housing, and especially affordable low-cost housing, can have a positive impact on the whole economy. Budget 2017 should thus give top priority to reducing the burden of the 1.5 million first-time buyers of affordable housing, who could number about four million household members!
Developers should not be easily provided with lending licences, as they may not use these with prudence and financial discipline. In the end, the whole industry can lose out due to higher household debts, which Bank Negara is trying hard to manage now! We do not want the sub-prime crisis that hit the US not too long ago!
Budget 2017 should develop stronger cooperation with the private sector and state governments to ensure more dynamic and innovative initiatives to finance affordable housing projects for the millions who do not own homes and the homeless! Budget 2017 will then be seen by the rakyat and especially the voters as being more meaningful and beneficial to them rather than another business-as usual policy, which would inadvertently create the perception that it cares more for the rich and powerful rather than the deserving poor and underprivileged! We want a beautiful and bright budget that will lift the bottom 40% out of their miseries!
TAN SRI RAMON NAVARATNAM
Asli Center of Public Policy Studies