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Saturday, November 10, 2012

Fix the leak and the rest will flow

An article that I read recently reminded me of the importance of always identifying and solving the root cause of a problem in order to achieve the desired result. It was about a country which had faced water shortages for years despite the fact that the country gets ample amount of rain.

More and more water reservoirs were planned but the desired result was not achieved. Upon close scrutiny, the root cause of the water shortages was due to leakages from faulty pipe lines. In some areas, water lost through leakages was as high as 40%.

Imagine if the problem of water leakages could be addressed as a top priority instead of building more reservoirs, the water shortages that had plight the country would have been reduced very affordably and significantly.

The article reminded me of the issue of affordable homes in Malaysia. Based on recently published statistics from National Property Information Centre (NAPIC), the total residential homes in Malaysia as at the second quarter of 2012 was 4.58 million. Low-cost houses and flats account for 23% (1.05 million) or nearly one in four of the total residential units. About the same percentage also applies as well in Kuala Lumpur and Selangor.

The debate still goes on whether the number of low cost houses and flats is sufficient but there is no doubt that there is a huge demand in the market for such units. Many qualified applicants have commented that it is difficult to find a low cost housing unit to rent.

According to a recent report in The Star, thousands of government housing units in Kuala Lumpur were being sub-let to third parties by irresponsible tenants at five times above the control rental price. The same report also stated that the number of applicants for low-cost units in Kuala Lumpur had reached 26,000 and many of them had been on the waiting list for over a decade.

Questions are being raised. Are these low-cost units occupied by the right group of people? Why are the owners or tenants renting out their units? Does it mean that they own or rent other such units as well? Should we focus on repairing the allocation system before building more homes if there is so much leakage?

For a long time, I have heard that many quarters have been sceptical about the process involved in the allocation of low-cost units. Now that the Government is scaling up its effort to build more affordable homes, this is a good time to immediately carry out an exercise to review and ascertain whether or not the allocation and implementation system has any leakages. Building additional units will never be sufficient to meet the demand if these leakages continue to exist.

To ensure that the review is carried out without interruptions or biases, the review panel should consist of both the authorities and NGOs. The process of receiving and filtering the applications, the filtering criteria and the final determination of the allocation would be the specific areas to review meticulously to ensure controls are in place and no abuses creep in.

Based on the principle that low-cost housing units are meant to provide shelter to low income earners, it is essential to ensure that there is a transparent and comprehensive mechanism to determine qualified owners as well as to ensure that no one can own more than one low-cost house.

As part of the review, some commendable practices in other countries should be considered for adoption. For example, the Singapore HDB (Housing and Development Board) flat owners-to-be are not allowed to own any other properties in Singapore or in any other parts of the world. For HDB flat owners who wish to sublet their flats, they must meet the minimum occupation period (depending on purchase mode and flat type) and obtain HDB's approval before they can sublet their units.

In Hong Kong, to qualify for a Housing Board flat, one must not already own a house or flat, and it must only be for own use. In London, the right to buy a council home comes with several conditions. For example, the applicants have to hold a public sector tenancy for five years, and the property that they wish to purchase must be their only home and is for owner occupation.

To implement a more effective housing allocation system, we may want to consider applying similar measures to deter owners or tenants from the blatant abuse of public and low cost housing units for rental yields.

Low cost housing is a significant subset of affordable housing. If the review confirms that there are leakages within the allocation system that have allowed “abusers” to choke the market for low cost units, the government and relevant stakeholders ought to immediately work out a solution to fix these leakages.

Water and homes are the key basic necessities of life for everyone. Imagine yourself living in an environment where it is difficult to get these necessities and then to find out later that if proper diagnosis had been made, the problem would have been reduced tremendously. The key is: “Do it once, do it right”. The solution can be as easy as fixing the water leakages rather than building more reservoirs.

FIABCI Asia-Pacific regional secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email

By The Star

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