housing-for-all

It is becoming increasingly difficult for ordinary Malaysians to buy houses in urban areas. The prices of even terrace houses have shot up in the past 5 years. 

Even in semi-rural Sg Siput, the selling price of terrace houses has gone up to RM 140,000. Our Deputy Prime Minister, is reported to have said in October 2013, “House prices have skyrocketed! I often hear complaints that terrace houses can cost as much as RM500,000. Who can afford such houses? Even those earning RM 10,000 a month would have difficulty servicing loans for a RM 10,000 house which used to cost between RM 140,000 and RM 200,000 several years ago.” 1

There is a housing boom in Malaysia. Lots of houses are being built. The problem is that the supply of reasonably priced houses falls far short of the need for such houses.

So is the government’s response to the housing crisis adequate?

From the majority of the 1.7 million families who do not yet own a house, cannot put aside too much towards servicing their housing loans – for our estimation is that about 75% of them would be having household incomes below RM 3000 and most of the remaining 25% would be in the RM 3000 to RM 5000 category. Most of them would not be able to afford the payment sums required by the PRIMA scheme – but this, with 80,000 targetted houses is the main effort by the government to meet the housing needs of ordinary Malaysians in urban areas.

In fact, even for graduate with incomes that place them within the middle 40% of Malaysian household incomes ie RM 3054 and RM 69555, the PRIMA  scheme will put too high a burden on them. If this is the situation for graduates, then how about other Malaysians?

When trying to address a particular problem it is always useful to define its principal causes. Only then can we formulate a holistic solution. There are several interlinked causes of the current crisis in affordable housing in Malaysia. They are -
  1. The "Fencing Up of the Commons"
    Think back to the 1960s and the 1970s. There was massive migration of lower income Malaysians from rural areas to the urban. Thousands of peasant farmers and displaced estate workers came to urban centres of growth. But most of them did not end up with huge debts to the banks. Why? Because they built their own houses on unused government land using their own skills. Their houses were flexi-sized - they could add in an extra room if an elderly relative wanted to move in with them.
    That option is now not available to poor families seeking a house in urban areas. If they were to try to build on any vacant land, there is a very high likelihood that the owner of the land or the Land Office will come very quickly to stop them. The land, a part of our commons, has become "fenced up"!
  2. Commercialization of Home construction
    Communities have been building their homes for a long time. Sure there were craftsmen who specialized in certain aspects of the process, but the capacity to build houses was there in the community. The driving force for building a house then was not the hunger for profit but the need for shelter for a family in that community. (A house was primarily an “use-value” and not an “exchanger value”.)7
    That capacity has been taken away. Now there are a plethora of laws and regulations that have to be followed, permits and licences to be obtained. Houses in urban areas are now almost exclusively built by developers and propelled by the profit motive.
  3. Rent-seeking by Government Officials and Politicians
    An example first: There was a large plot of government land measuring some 150 acres behind the Sg Buloh New Village in Sg Siput (U). It would have been possible to build terrace houses with a built-up area of 800 square feet and sell these to the many house-less families in Sg Siput at a cost of RM 55,000. But what happened was that the government gave this entire plot to a company wholly owned by the Perak State Development Corporation. This subsidiary company went into joint ventures with private developers and the terrace houses there are now being sold at RM 150,000 a unit.
    Many people blame the Developers for being greedy and pushing up house prices. There is truth in that perception. But what many do not realise is that the "fencing up of the commons" by the politicians in power (together with the help bureaucrats in the Land Office and the State Administration) and the subsequent collection of royalties on this land from the developers is also an important factor that drives up the prices of houses.
  4. Financialization of Capital
    This term might sound terribly complex, but it can be easily explained - Throughout the world there has been a failure of consumer demand to keep up with the growth of investment capital. Relocation of firms to lower wage countries, the contractualization of labour, outsourcing, the use of migrant labour to keep wages low have all led to super-profits for the big corporations. But the flip side of that coin, is that consumer demand has failed to grow at the same pace as profits, because the income of the consumers – their wages - has failed to grow. The end result of this is an over-supply of goods and a lack of investment opportunities for capitalists who wish to produce goods and services for the general public.
    It is not in the nature of capitalists to stuff their excess profits into pillow cases and stash these in cupboards! They would want to invest in something that will grow the value of their capital. So the search for investment opportunities in the financial sector and and in real estate has become more frenzied over the past 10 years. That is why, when you pass by a new high-end apartment block that the developer claims is fully sold, you might find that less than 30% of the units have their lights on at nights. Many of the higher end apartments are bought not for their "use-value" of providing shelter but in the expectation that their "exchange value" will appreciate over time. They are investment decisions for the 5% of the richest Malaysians!
    The appetite of the top 5% of the population (as well as many rich non Malaysians) for expensive apartments as an investment item, plays a role in creating a scarcity of land in our urban centre and drives up the cost of land and thus the price of houses.
  5. Lack of coordinated resistance to the onslaught of expanding capitalism
    All the 4 causes detailed above are part and parcel of the expansion of capitalism into more and more aspects of Malaysian society. The fencing up of what used to be common property, the disempowerment of the people through destroying their capacity to meet a human need (shelter) through their own efforts, building of houses to make profits, and the speculation in land and in property are all integrally tied in to the development of capitalist relations in Malaysia. Unfortunately most Malaysians do not see things this way - they do not see the interconnections between these trends or the fact that they are all engendered by the insatiable desire of capital for ever increasing profits.
    This lack of insight on the part of the Malaysian Public, no doubt due to a large extent to the fact that the Left in Malaysia has been decimated by a very hostile government which much preferred the promotion of an ethnic interpretation of social reality, has meant that there has been no serious opposition to this onslaught. Protests have been piecemeal - isolated communities launch campaigns to protect their homes (Kg Hakka is the latest example) but they do not recognize that their oppression is just a part of a much larger systemic oppression of ordinary Malaysians by an ever-expanding capitalist system.
  1. Stop creating homelessness.
    There are still several "peneroka"8 villages in urban areas - much less than 20 years ago, but still significant. Most State Governments are bent on clearing all these villages – a “zero squatter program” - to allow for "development".
    An alternative approach would be to recognize these villages, legalize them by giving them land grants, upgrade their infrastructure - roads, drains, sewerage systems and rubbish collection, and poviding them with low interest small loans to make repairs and upgrade their houses. Such an approach will help reduce the number of home-less people.
    A similar approach can be used to handle ground tenants - these are families which have rented land from private landlords for the purpose of erecting their own houses. The numbers of this group of poor urban settlers is probably several times bigger than that of the “peneroka” currently living on government land. Many of these gound tenants have stayed in their current locations for decades - some even before Merdeka. But they face the danger of eviction - there is the ever present danger that some big property developer will come and offer a price that is too attractive for the current land-owner to refuse. Once the developer gets the land, he will proceed to evict the ground tenants who really have no rights at all under the present National Land Code.
    Why shouldn't we not modify the National Land Code to create some rights for the Ground Tenants who have occupied the land for more than 20 years? Why not use the Land Acquisition Act to acquire the land and sell it to the current dwellers at reasonable prices. That money can be topped up by the government and paid to the landowners as settlement for the acquisition. Adopting this course of action would be much less expensive than making them all homeless, and then trying to build low-cost houses for them with subsidies to the developers.
  2. Take the provision of First Houses for families out of the market.
    The government should set up a non-profit authority to build terrace houses on government land and sell these to Malaysian couples seeking to buy their first house. According to housing developers, the cost of building a terrace house given today's prices and labour costs is about RM 50 per square foot of built up area. Therefore the building cost of a house measuring 20 by 40 feet would be 800 x 50 = RM 40,000. If we add in infrastructure costs of RM 12,000 per unit, the price of each unit would be RM 52,000. Note that the cost of the land has not been factored in because we feel that government land should be used for this purpose without adding to the financial burden of Malaysian families.
    These terrace houses should be sold to Malaysian couples seeking to buy their first house at just above the price of construction, with the proviso that the owner can only sell this house back to the non-profit authority itself. He or she cannot use this house for speculative purposes. Of course to implement such a program, a national data base has to be created so that we know which are the families that already own houses in Muncipial Areas (urban). They will nor be eligible to partake in this scheme. We would also need to define how banks should handle the buyers who default on their loan payments - the banks should be required to sell the house back to the non-profit authority at the actual price of the house. The authority can then re-sell the house to another eligible family.
  3. Institute a loan insurance scheme
    This has been alluded to earlier. All Malaysians buying houses should be required to pay a sum of money equivalent to 10% of the loan repayment amount to a body like the EPF, that can be used to help meet the monthly loan repayment if that family suffers a loss in income because of an economic downturn. This is crucial because at present, when a lower income family defaults on their housing loan, their debt goes up rapidly because the loan interest rate goes up a couple of notches, lawyers, evaluators and auctioneers start charging their fees. However the collusion of the housing agents who often buy these houses at the court sanctioned auctions ensures that for the majority of houses sold off thus, they are purchased by the housing agents at the 4th or fifth auction after their floor price has been depressed by about 30%. This means that the family concerned still ends up owing the bank a residual debt despite losing their house and all their accumulated savings that they had invested in it!
    The loan insurance scheme would help reduce the incidence of default due to economic recessions. Perhaps there should be a proviso that if this fund is drawn upon, the monthly repayment amount to the bank can be reduced so that this fund can last for a longer period, giving the house-buyer more time to get a new job.
  4. "Council Homes" for those earning less than RM 2500 a month.
    In an earlier section we dissected the living costs for a family of five living in an urban area. We saw that even with a household income of RM 3000, such a family would have difficulty in putting aside RM 300 a month regularly to service their housing loan. So families with household incomes less than that should be provided housing by the government at subsidized rates.9
    In the United Kingdom, the government made funds available to the local councils to build low cost flats for poor families - hence the term "council housing". Such a scheme should be considered in Malaysia - perhaps under an agency that is separate from that building houses for sale to couples not owning houses. The Malaysian government has already embarked on several programs10 that have elements of the "council housing" scheme. Most of these provide government funds to build simple houses for the really poor in rural areas. A similar approach should be instituted for the urban poor - those with household incomes less than RM 2500.
There may be people who argue that subsidizing houses will create a bad work ethic and would be inimical to the development of the economy. I beg to disagree. I believe that we have a moral imperative to make sure all our people have reasonable accommodation. Three main reasons -
  1. We are keeping our wages low in the interest of the national economy. In 2012, during the debate on the minimum wage rate, the PSM argued for RM 1500, because then a family would have a minimum income of RM 3000, which we felt was the minimum for living in our urban areas today. However or government argued that a minimum wage at such a level would lead to relocation of firms out of Malaysia, and to a loss of the local market to firms located in Malaysia. So the government set the minimum wage at RM 900. Workers were asked to sacrifice for the national good. And they have done so. Which is why it would be right to subsidize one of their most basic necessities - housing. It is not "charity" or "mollycoddling". It is their right, and should be considered a legitimate part of the "Malaysian social contract".
  2. Marginalization of any part of our population will come back to impact negatively on all of us. Data the world over has shown that marginalization and the attendant hopelessness breeds underperformance, delinquent behaviour, substance abuse, an increase in street violent and the like. It is in the enlightened self interest of all Malaysians to make sure that no one is left too far behind.    
In summary then, the housing crisis in Malaysia has been created by various parties including ruling party politicians, land office bureaucrats, property developers, and the 10% of the richest Malaysians who have all, in their own ways, tried to make lots of money from the provision of housing to the population. Their collective actions have led to the sky-rocketing of house prices to the extent that many young couples are unable to afford homes and household debt has reached dangerous levels with many lower income families living on the precipe of bankruptcy.
This has to stop. The holistic solution to this problem that has been caused by rampant capitalism, is to take the provision of the first home for Malaysian families out of the market and to provide it at the cost of construction to the families earning more than RM 2500 per month. The government has to provide subsidized housing for the families below that income level.    

Further Reading:

4 Ladang Putrajaya