- Khazanah Research Institute
The provision of affordable homes remains a major problem facing policymakers around the world, with Malaysia being no exception. Malaysian policy initiatives which focus on ensuring affordable housing have typically involved the transfer of physical or financial resources to low-income households who cannot house themselves adequately. The scarcity of such resources then forces government housing agencies to focus on a small and limited housing agenda and stymies efforts to understand or manage the housing sector as a whole. As Malaysia becomes more urbanized, the demand for affordable housing will only increase. Trends in Malaysia indicate that both the bottom 40% and middle 40% of income earners are likely to require some form of social housing if the relevant interventions are not made urgently.
Interventions in the housing market have largely been on the demand side, by making housing financing cheaper or providing subsidies for home-buyers. ‘Sophisticated/innovative’ financing packages and cash transfers are provided to home-buyers to buy houses they could not afford. The supply side interventions have been by direct provision of low-cost houses or subsidising housing costs. These measures are unsustainable as they can drive price increases, result in more household debt, and incur opportunity costs on government finances that potentially could be used more productively.
This presentation considers the problem of supplying affordable houses from the perspectives of both an institutional arrangement (national business system) and the firms (industry value chain analysis and the economics of governance). Current policies have focused on controlling house prices once the consumer receives it at the end of the production process. Our policy options proceeds differently because the evidence seems to suggest that it is far more efficient to enhance capacity in the supply side to develop a sustainable and responsive housing sector that caters for all sections of the population.