Fair & Affordable Housing

Affordable housing is a term used to describe dwelling units whose total housing costs are deemed affordable to those that have a median income. In the Unites States and Canada, a commonly accepted guideline for housing affordability is a housing cost that does not exceed 30% of a household’s gross income. The cost generally includes taxes, insurance and utility costs.

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Malaysia’s Scenario

In Malaysia, people often grudge about expensive houses, yet we see new house built, and sold like hot cakes.

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While private sector hardly built double-storey linked house that cost less than RM300k ( with built up area ±2800ft2 ), a medium cost high-rise apartment ( with built up area ±1000ft2 ) easily costs a hefty RM200k.

With maximum sum of loan from bank, one may easily have to re-pay RM1k/month for up to 30 long years !

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Government’s Role for Low-Income Group

Government through Jabatan Perumahan Negara ( JPN ), an agency under the Ministry of Housing and Local Government, whose only mission is to “ get ready that housing development are enough, comfortable, affordable and save to fulfill the need for low income group of people.”

The low cost houses ranging from single-storey linked house to highrise apartment, supposedly cost between RM25k – RM 42k, are targeted for low-income group with household income ranging from RM750 – RM1.5k.

Such programs usually result in congested housing and undesirable neighborhoods.

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Medium-Income Group’s Scenario

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Medium-income group takes home an average of gross income of RM5k/month. After deducting all the expenses, there are hardly anything left ! This has yet to include medical expenses, clothing & accessories, entertainment & holidays, and for household with children, schooling expenses.

Considering 10% down payment to purchase a ±RM300k house, one need to fork out RM30k upfront. Assuming all savings goes to that, one still need to save up to 5 years to gather enough money for down payment. This excluding any other fees, renovation or furniture which may cost as much. 

( Not forgetting young couples who had just spend a huge chunk of their savings for their wedding, honeymoon etc.  Whatever leftover of their savings are hardly sufficient to acquire a dream house ).
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Then, to secure a ±RM270k loan from any bank will mean monthly installment of ±RM1.2k for 30 years ( until retirement, that is ). By the time one settle the last installment, total money paid may be doubled due to the accumulative interest rate..

Considering ±RM1.2k monthly installment, one may wander how to squeeze out the money from a gross salary of ±RM5k, without cutting down budget for food, transportation and other basic needs.

Household Income		$ 5,000
Tithe	10%	$ 500
Housing	20%	$ 1000
Groceries	30%	$ 1500
Transportation	20%	$ 1000
Insurance	5%	$ 250
Savings	15%	$ 750

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Without doubt, a ±RM300k house is beyond a medium-incomer’s reach. In fact, if we do some calculation, if 20% of total monthly income goes to housing, one can only afford a ±RM150k house, which is mostly an apartment with ±1000ft2 built up area.

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Suggestions .

++ Implement built-and-sell system..

To buy a house is definitely the most expensive purchase for most people. With the current buy-and-built system, buyers are buying dreams. There are no guarantees that the developers will keep their end of the bargain. If the developers fail to deliver, the owners will end up owing bankers, with no more money to make new purchase, while being blacklisted for unsettled loan.

Built-and-sell system ensure only genuine players with strong monetary background can enter the industry. It is after all, a lucrative business building and selling houses, and everyone wants a piece of it. Besides, it is only fair to sell a finished product, rather than a promise.

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++ Control sale price of new house

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It is known that a developer net earnings is >100% of total sale, i.e. when a house worth RM300k is sold, developer makes at least RM150k nett.

We can’t blame the demand-and-supply of free market, but considering housing is man’s basic need, thus making it everyone’s right to an affordable housing. When a basic need / basic right are charged exorbitantly, an imbalance of power and economy follows. No man shall be held ransom for his basic need / basic right.

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++ Control of loan interest

Interest on housing loan is a huge BLACK HOLE. Interests are calculated based on balance principle on fixed period basis. Installments paid are mostly for paying the interest instead of the principle. A rough calculation indicates that total installment paid over loan period = double the principle loaned. Meaning that, a loan of RM100k for 30 years shall end up with repayment of RM200k.

Obviously, the interest is exorbitant !  Does the proposed Price Control & Profiteering Bill 2010 includes houses ? Or only for RM1 glass of water ?

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++ 1 person 1 house

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Many consider buying a house as an investment. Buy and sell, and make money out of it. This will of course resulted in increase of price of house, over every transaction, making owning a house more difficult for others.

Some will buy house to collect rental. This may seems like providing affordable housing by renting out rooms for certain individual, but it is an indication of unfair housing and economical dominancy.

As a basic right, every man has the right to own a house of his own. But when a man owns more than 1 house, he deprives another man’s right to own a house.

++ Government control vs free market

Property, as to any other industries, deserves a free market to thrive.  Yet, there are no absolute freedom.  Even in the property industry, a form of control is needed. 

Flats, apartments and terrace houses are low and medium cost housings, thus should be regulated by the state, in order to protect the people.  Housing is no a supply-and-demand issue anymore, it’s a matter of basic need.

Meanwhile, high end properties such as bungalows, and condominiums can be allowed to be traded freely.  It is after all luxurious properties.

+++ any more ideas, anyone ?