Tessellar Blog

Monday, January 9, 2017

Low-Cost 5-storey Flats

Since the 1980’s, Malaysia developers were required to set aside 30% of the houses they build to be low cost houses priced below RM25,000. Implemented and amended to varying degrees by State and Federal Governments through the years, it has been clear for some time that there were serious problems with this policy.

By the 1990’s. it became clear that the housing that came out from the current low-cost policy was not satisfactory. The construction cost of a low-cost house that met the minimum requirements was more than the selling price. Developers had to subsidize the low-cost housing; not surprisingly, developers designed and built them to minimum standards.
But of course, any subsidy wasn’t really from the developers’ own pockets: they passed it on to ordinary house purchasers. Developers found that the sales from seven medium-cost house could not sufficiently subsidize 3 low-cost homes; better to build 7 high-end houses. In effect the low-cost housing requirement became a disincentive to building medium cost houses. It was also a heavy tax on purchasers, and a very regressive one to boot.

So, the rules were tweaked. For example, in Johor for instance, the new requirement became:

  • 20% low-cost RM25,000
  • 10% low-medium type 1 RM60,00
  • 10% low-medium type 2 RM80,000
In the latter part of the 1990’s the federal government also introduced a raft of other new measures to boost the building housing for the poor: it offered soft loans to developers of low cost housing; a revolving fund was set up to finance construction. The standard of the low-cost houses was set at improved levels, notably the requirement for 3 bedrooms.
The government entrusted government linked companies to work with the private sector and State governments to build low-cost housing. The mood of the times is reflected in the book produced by a think-thank which was closely allied to the government: "Housing the Nation - A Definitive Study". The problem of housing for the low income was going to be solved!


However, because the ceiling price of low-cost houses had greatly exceeded the cost of constructing them, developers placed the low-cost housing in the most undesirable locations in their site, and spent as little as they could to minimize their losses. But the resulting low quality of the houses made them unpopular.

The low-cost housing was almost always segregated in the worst location of any development, away from shops, amenities and public transport. The house-type of choice was the 5 storey walk-up flat, about 60 units per acre, some with the ground floor empty, with only about one car parking space for every two units.

They have almost all turned out to be crowded and all badly maintained. Many of the new housing schemes that resulted looked likely to become slums.

It was expected that the low-income people would grab the chance at home ownership! But this was not the reception that was given. In the states of Johor and Selangor where there is the problem of property overhang, unsold low-cost houses made up the main component in the number of unsold completed properties.
In many instances the vacant properties became dilapidated and the “forced sale value” of the low-cost houses were a fraction of the original selling price. In many cases where the banks took over and tried to auction off the properties, there were few takers and reserve prices drifted lower to ridiculous levels.

In 2005 nearly 3000 completed houses in the low-cost category were unsold. It appears that developers were being forced by government policy to build houses for poor people who did not want them.

This situation was absurd! Developers make a loss from building low-cost houses even when they are able to sell all of them - when they remain unsold, their cashflow and profitability became seriously compromised.

Whilst the middle class buy houses that appreciate in value, the buyers of many low-cost flats, especially those out of town, have seen the value of their homes dwindle.

It was during the mid-1990’s that I first started thinking about building types and how to improve them, not in response to any one project but to develop a new generic solution that could be adapted to a range of sites. Most walk-up apartments in Malaysia can be described as slab blocks and it was to this specific building type that I developed an alternative. 
In a paper written in 2000 I argued that the point block low-rise apartment is not only more aesthetically pleasing and socially functional, it is also an economically viable alternative. 

In the next post I will touch on the point-block low-rise low-cost apartments.

To make things worse, the low-cost housing policy had the unintended but nasty side effect of discouraging developers from building houses that people with middle income could afford. The low -cost housing policy was in effect a very regressive tax on house buyers.
Developers responded by simply by building more high end units and fewer medium costs ones. 

1 comment:

mawuli afedzi said...