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Thinking beyond the current housing financialisation model: rental housing and the way forward

A major contradiction is present in the Malaysian housing sector. While Federal and State Governments are scrambling to build affordable housing, a massive glut has built up recently and ironically, people do not have adequate housing. The glut is here to stay and is made worse by rapidly escalating interest rates.

There is barely any effort to address the housing needs of the impacted apart from the continued construction of houses that are far beyond the means of the average Malaysian working class, particularly the B40s.

The notion of a “house owning democracy is a cliche. Among the circle of policymakers and the general public, the mental block that ownership is preferred to renting persists, which further drives up the need to own a house and the concept of treating it as some form of financial accumulation. A mindset shift is urgently needed. Renting should be made more desirable to address this dilemma.

In this closed-door roundtable held on 21st July 2022, REFSA brings together a collective of policymakers, architects, urban planners, elected representatives and finance professionals to drive the exploration of this topic further.

Listed below are some of the summary points from the roundtable:

Key Points

A paradigm shift in mindset towards the concept of renting

  1. There is a challenge to influence the majority or cross-section of Malaysian society to opt to rent instead of buying. It is a trite perception that home ownership is significantly more attractive as it is related to the indirect effect of the astronomical increase in wealth over the last few decades. Irrespective of that notion, home ownership in Malaysia continues to take a toll on the financial capability of Malaysians. It is generally unaffordable. 
  2. Housing financialisation, or the increased dominance of the financial markets in the housing sector, has continued to reinforce and rescale itself. The increase in the interest rates and the consequential debt burden of the B40 and M40 makes house ownership even more unaffordable. 
  3. One may argue that there is no security of tenureship in renting, at least that has been the sentiment among the younger generation. They also seem to think that owning a home in the perfect or correct location plays a part in their decision of home ownership. In the end, to push for the rental agenda one must consider it to be a lifestyle option. The mindset that one needs to own a home leads to the B40 primarily not being able or wanting to purchase a home in the foreseeable future.

The rental housing model

  1. Why is renting a problem? The Government advertises their achievements through the provision of affordable housing. However, house ownership is a relatively new concept ranging from 50 to 60 years ago. It should be noted that Germany has a robust rental housing market of 70%.
  2. Central banks also offer a very low interest rate for the financialization of houses. We have seen banks providing 95%-105% loans. It is possible to even buy a house by placing the down payment using a credit card!
  3. Rent to own (RTO) can be used as a step for people who want to access the housing ladder. RTO is at its infancy in the Malaysian property market. It is targeted mainly at homebuyers who do not have the credit scores to secure a loan. One of the main attractions of RTO is that no down payment is involved.
  4. Exploring build to rent options. Build to rent does well in countries where the rental amount is very high (for example in the United Kingdom). In student accommodations in the UK, the facilities are very well-maintained. Developers are actually building communities where people can mix together such as gymnasiums and lounges.

The role of the state in promoting rental housing

  1. Developers cannot be forced to provide social housing as there are always loopholes in which they can bypass. It requires state intervention in terms of introducing tenant protection laws through the Residential Tenancy Act (as in Australia and Germany) and a step-up financing system. 
  2. It is a common fallacy that the government sees itself as a promoter of house ownership as opposed to shelter. The developers, on the other hand, are fixated on chasing profits and do not regard themselves as being providers of public goods. Banks continue to provide easy credit and increase the money in circulation in the financial system hence driving up asset prices.
  3. In order to allay the disputes faced between landlord and tenants, the state government should endeavour to construct a landlord-tenant dispute tribunal to address issues of rent and discrimination in the housing market.
  4. A single umbrella database on data on rental housing should be employed. Housing boards generally do not share information with each other therefore the federal government through KPKT should implement such a system so rent and rent disparity can be accessed through a click of a button.
  5. More progressive policies need to be employed by the federal and state governments in terms of urban planning. Initiatives such as refurbishing abandoned structures like shopping malls and office blocks for rental space – DayaBumi syndrome – can be employed in order to address the accumulating housing stock and gluts in property. Through renting, we are able to prevent an increase in fire sales.

This roundtable discussion suggests reading a book titled ‘Why can’t you afford a home’, by Josh Ryan Collins, Head of Research at the Institute of Innovation and Public Purpose, University of London. This book argues that the housing price increases not because of supply-demand, but because supply of credit. The more money in the credit system, the cheaper to borrow, and the house prices will go up.

List of Participants

YB Liew Chin Tong Chairman REFSA
YB Andrew Chen Kah Eng ADUN Stulang
YB Rajiv Rishyakaran ADUN Bukit Gasing
Alan Tee Boon Tsong Former ADUN Senai
Datuk Chang Kim Loong Honorary Secretary-General National House Buyers Association
Dr. Tan Loke Mun Past President Pertubuhan Arkitek Malaysia
Prof. Parvaiz K. Ahmed Director Institute for Global Strategy and Competitiveness (IGSC)
Ms Ahila Ganesan Senior Director Thinkcity
Dr. Negin Haghefi Senior Analyst Penang Institute
David Teoh Council Member Pertubuhan Arkitek Malaysia
Ooi Kok Hin Research Manager The Centre Malaysia
Fikri Fisal Researcher The Centre Malaysia
Pn. Adriana Abu Legal Advisor National House Buyers Association
Badrul Hisham Ismail General Researcher IMAN Research
Gregory Ho Wai Son Research Associate Khazanah Research Institute
Theebalakshmi Kunasekaran Research Associate Khazanah Research Institute
Siva Shanker CEO, Estate Agency Rahim & Co
Alex Anton Netto Partner Anton & Chen
Chen Yu Szen Partner Anton & Chen
Cheah Ee Von Lecturer UCSI University
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