Publication: New Straits Times (Malaysia)
Author: Lim Lay Ying
Date: Jan 14, 2006

Every year, the Government sets aside a hefty allocation of funds from the nation’s annual Budget for the provision of affordable housing. This year, in addition to a RM1 billion allotment to build low-cost houses, the powers-that-be also made provision for RM1.1 billion to construct 26,000 houses, primarily for teachers and uniformed personnel.

Another workforce housing allocation included in the Budget proposal is a RM2.5 billion fund, to be implemented on a build-lease-transfer basis, for police personnel throughout the country.

Such a social agenda is not unique to Malaysia alone. Throughout the world, policy makers share a common goal: To ensure that everybody, regardless of economic or social status, has a roof over his or her head.

This is because of the intricate link housing has to national priorities such as education, public safety and healthcare.


The quest is never-ending, whether for developed nations such as the United States, or for those that lag behind in economic terms. With the world’s population projected to reach nine billion by 2054, providing shelter for all is an increasingly daunting task made worse by rising costs.

Asia today may account for 61 per cent of the 6.5 billion people living on the planet, but the US and Europe are just as flustered with having to house their citizens despite the much smaller headcount: The US with five per cent of the world’s population and Europe, with 11 per cent.

However, because of the latter’s more extensive track record and long history of development dating back to the Industrial Revolution, developing nations are looking to Europe’s affordable housing models for insight and inspiration.

In the continent, countries such as United Kingdom and the Netherlands have made major strides in providing high-quality affordable housing for their citizens. In the UK, housing associations dating as far back as 1389 are developing and managing affordable housing as a socially-oriented business, often reinvesting surplus revenues into developing more affordable houses.

Simplified financial programs

People in these countries benefit significantly because such housing developers do not have to struggle for funding, nor compete against larger or more powerful developers. Not only do they have direct access to significant financial resources, they are also not compelled to submit endless and multiple applications for money.

To a large extent, simplified financial programmes have helped increase the supply of affordable housing to the European masses. In the UK and the Netherlands, many of the larger, nonprofit housing developers own 50,000 to 70,000 units while many more control over 20,000 units.

In southern Netherlands for instance, 51 per cent of the houses in the city of Tillburg – the seventh largest in the country with a population of 165,000 – is owned by one housing association. The houses are rented out at half to two-thirds the going market rate.

As in many other European cities, affordable housing units here are found alongside other types of housing. This “blending”, or mixing, within the same neighbourhood or even within the same complex is a typical European practice to ensure that residents are indistinguishable by social and economic traits.

Shared-equity basis

Meanwhile, the UK’s latest initiative to bridge its housing affordability gap was launched last April. Nine British building firms competed in a “Design for Manufacture” competition to produce 1,000 houses costing not more than STG60,000 (about RM400,000) each.

The cost of the land (which were the sites of former schools, hospitals and military bases) and site infrastructure such as drainage, estate roads and parking, are not factored into the cost.

Milton Keynes, the first of 10 sites selected by the competition’s organizer, English Partnerships – the Government’s regeneration agency – is targeted for completion before the end of this year.

Once built, 300 starter houses will be offered to first-time buyers on a shared-equity basis under the Government’s HomeBuy Initiative. Under this scheme, purchasers will only have to borrow a certain percentage of the house price, while the balance will be obtained from housing associations, lenders or developers, which will act as co-owners. Through this system, profits earned from a future resale will be redistributed according to the respective ownership proportion.

Helping new buyers under this approach also allow more first-timers to get onto the home ownership ladder – which is especially important at this time when they are increasingly being priced out of the housing market.

Innovative approach

Unlike the European system where the provision of affordable housing provision is largely centralized and institutionalized, the American approach has so far been private sector-driven, resulting in more product innovation and management entrepreneurship.

One example is the successful effort by Thompson/Dorfman Partners LLC, a California-based multifamily development and advisory firm, in developing housing for teachers in several northern California communities.

Located on surplus school sites, the public private joint venture has produced high-quality houses that are rented out to teachers at below market rates.

The teachers are permitted to stay for a maximum of five years, provided they work in the area. At the end of the tenure, they are assumed to have accumulated a nest egg sufficient to buy a home nearby – otherwise, their rents will be adjusted to reflect market or above-market rates. This approach has helped to solve high turnover among the teaching personnel.

Such ideas are indeed worth exploring by the Malaysian Government when utilizing the billions of ringgit allocated to housing in every annual Budget.

Who knows, this may even help prevent the recurrence of abandoned housing projects for the uniformed personnel, such as the cases in Setiu and Besut in Terengganu, Sandakan in Sabah and Kuantan in Pahang in 2004, resulting in huge financial losses for the Government.

Lim Lay Ying is managing director of Research Inc. (Asia), a company specializing in market research and consultancy for all facets of real estate development. Access past articles and more at or contact 03-2092 4966.