Ensuring the success of affordable housing

News that affordable homes will soon be built through a partnership between the Government and private developers would certainly be welcomed by a growing number of Malaysians, particularly those struggling to buy their first house.

Details of the programme will be revealed in two months. One hopes that it would not only be implemented in the Klang Valley where the issue is most pressing, but also in other locations where home prices have risen beyond affordability levels.

Houses that fall under this category ought to be opened up to those in the middle income bracket as well (apart from the lower income group) while rules need to be in place to avoid them from becoming targets of excessive speculation.

The world over, there are various models of effective and successful affordable housing schemes that have worked for the benefit of the people. Closest to home is, of course, Singapore. With the mass rapid transit (MRT) project scheduled to start operations in 2017 in the Klang Valley, there is sufficient time for a partnership to identify the land suitable for affordable housing and to complete the project in parallel with the construction of the MRT.

But there needs to be one certainty - affordable houses must be built with quality in mind.

What the Government can do is to carve out a certain portion of land at identified areas for commercial purposes in the future;these pockets of land can be sold at market rates for commercial development and the money received could be used to cross-subsidise the residential component of the project.

The new dwellings should not be of low quality. If incomes are expected to rise in future, so will the demand for creature comforts. They would need the luxury of amenities provided by most of the apartments and condominiums in the Klang Valley, such as a swimming pool, gymnasium or even some tennis or badminton courts.

Maintaining such facilities should not be shirked and a monitoring agency should be set up oversee this matter.

The other thing the government should do ensure affordability in the greater housing market is to douse excessive speculation that has dramatically pushed up prices of homes.

A house is an asset class, not unlike equities. The difference is people can live without buying shares, but not if they can't afford a roof over their heads.

Therefore, more must be done to ensure the housing market reflects the fundamentals of actual demand and supply as close as possible.

One way may be to rein in certain liberties that foreigners currently enjoy in terms of buying houses.

Who hasn't heard of stories of tourists or foreigners in the country laden with bags of cash to buy houses or commercial properties at certain property launches?

These flexibilities largely benefit property developers and foreigners. Even so, they would be easier to accept if they didn't happen at the cost of Malaysians being able to afford homes. Of course, there are speculators among Malaysians as well. But where does it leave genuine house buyers?

There should also be a limit on the number of houses a person can own in the affordable segment and real property gains tax should be used to make flipping homes in the country less lucrative.

With Malaysians now able to buy just about any asset around the world as an investment, the freedom of making money will not be lost. They just have to look elsewhere to make a quick buck.

By The Star (by Jagdev Singh Sidhu)