Monday, June 25, 2012

Low Cost Housing in Malaysia

Housing Boom
In Malaysia, the housing industry took off in the 1970’s when rising incomes, the availability of housing loans with low interest rates, and urbanization fuelled a building boom that lasted till the end of the 1990’s. In the beginning, the projects involved small pieces of land and were undertaken by developers with limited capacity. By the 1990’s big private sector developers could undertake development involving thousands of acres, building not just homes, but wholly new townships.

Low cost housing program
In the midst of this extended boom, the Government instituted a low-cost housing program that sought to enable the poorer segment of the population to own their own homes. In the 1980’s, the price of these houses was set at RM25,000. This amount has been increased through the years.

Table 1: Low Cost Ceiling Prices, Low cost Ceiling Prices 1998 Revision, from Mohd Razali Agus, “Perumahan Awam di Malaysia (Public Housing in Malaysia)”, 2001

The provision of Low cost houses was shared between the public and private sector. The private sector undertook the construction of Low cost houses through a rule that required housing developers to have 30% of what the houses that they built to be Low cost houses. Throughout the program, the private sector outperformed the public sector.

In the beginning, the low cost houses were mainly single storey terrace houses. As the cost of land for developed increased through the years, developers opted for double storey house. As land became even more valuable, five storey walk up flats and later on, high rise flats were added. The scale of the biggest of these low cost housing projects also became larger and larger.

By the end of the 1990’s weaknesses in the low cost housing policy for the private sector began to show. The main problems can be clustered around the issues of location, cost (that compound each other) and the side effects of the subsidizing the low cost house.

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