Posted in Dari Meja Ketua Menteri

Speech by Chief Minister of Penang
Housing in Malaysia’s Forum
7 May 2017

In Penang, the state government places a high emphasis on housing. In my 2014 Budget Speech, I mentioned that the state government aims to achieve a democratisation of housing in order to fulfil Penangites’ aspirations to have a place they can call home, especially those who are from the lower income families.

Penang being a land scarce state faces our own challenges when it comes to building houses. However in the bigger picture, Malaysian development policy poses a problem as well. The disparity between federal and state policy contributed to confusion among developers and home buyers. At times, having a larger power and resources compared to the state government, the federal government’s punitive attitude towards states governed by political rivals makes the matter even worse. Take for example, how developers in Penang were denied or were being delayed their application of Advertising Permit and Development License (APDL) by the federal government. The delay may actually contribute to the cost of a development project and more often than not, increases in cost will be passed on to buyers.

The Penang state government, fully aware of our challenges and limitation, sets as our priority, the provision of affordable housing for the people. In 2011, we established an Affordable Housing Fund with an initial grant of RM500 million. The purpose of the fund is to expand the stock of affordable housing throughout the state, either through the state’s own development or partnership with the private sector. We are the first and only state to have such fund.

Between 2008 and 2016, the state government has built 20,887 units of affordable housings of all categories throughout Penang. It is by no means a small feat. Let me give you a contrast, within 2000 and 2007, the previous state government only managed to build 5,124 units.

For the future, we are aiming to build another 20,000 units, spread out in both Seberang Perai and the Island. A new township, Bandar Cassia is being planned in Batu Kawan, the first phase of which will be completed this year with over 500 units of affordable housing.

It is our firm commitment that every Penangites will be able to afford their own home which is well-serviced in an environment that is clean, green, safe and healthy.

The state government understands that Penang’s vibrant property market is good for investors. However, the state government has a responsibility to shield the most vulnerable groups from the market storms. We do not intervene at the upper echelon housing market. We want to encourage talents and investors to make Penang their location of choice and habitat of choice. But the state government uses policy instruments to ensure affordability for locals. For example, we grant higher density and lower charges to developments which build 100% affordable housing.

In order to ensure maximum protection for locals, foreigners can only purchase landed property priced at least RM3 million on the island and RM1 million in Seberang Perai or strata property priced at least RM1 million. There is also a 3% levy on property purchased by foreigners. Not forgetting, there is a moratorium on subsale of affordable units for a period of 5 years for affordable housing and 10 years for low-cost and low medium cost houses according to the pricing category of the units. There is also a 2% levy imposed on property flipping, which is defined as property sold within three years from the date of the Sales & Purchase Agreement. This is to attract genuine buyers and avoid speculation which will increase the price of affordable housing.
But achieving home ownership is not as simple as merely constructing houses. With the tightening of Bank Negara’s mortgage ruling, homeownership among the lower income and the poor becomes a major challenge. I agree that we cannot dispense credit indiscriminately. However, home mortgage especially in the affordable housing category should not be seen as a purely commercial financial activity.

The government and developers assumed business and financial risks when we take up to provide affordable housing for the people. This is social responsibility. Banks therefore must not shirk from their social responsibility as well. It cannot be just a government venture. Even when the state government reduced the price of a RM42,000 low cost house by 20%, some still could not get bank loans.

We regret that 70% of intended 1st-time buyers who register with us are unable to secure housing loans from banks. Bank Negara disputes such figures because they fail to include intended buyers who cannot even make an application because they do not have any proper documentation. For this, I hope our federal regulators will review the current model to take into consideration affordable housing categories when approving loans.

The issue becomes worse when the expected new home is delayed. A buyer for example has to bear both the cost of rental and mortgage in a prolonged period of time due to the unexpected delay in the unit’s delivery.

Which is why we must take seriously the recent controversial "extension of time" (EOT) granted by the Ministry of Urban Wellbeing, Housing and Local Government, where developers are allowed to extend their stipulated deadline of delivery. This means they are exempted from paying late delivery charges, known as liquidated ascertained damages (LAD), to their buyers. Such move entails several important issues, the key of which is the risk of development is unfairly borne by buyers when government policy disproportionately sides the developer.

EOTs should be only granted before Sale & Purchase Agreement is signed with the purchasers in the interests of justice. To grant EOT after S& P is signed is singularly unfair to purchasers as they are denied their Liquidated damages for compensation for late delivery. After all the Ministry of Housing is not a party to the contract and should not intervene to extend the contractual period, which is beneficial only to the developer. If EOT is granted before the S&P is signed then the purchasers are fully aware as they go in with the eyes open that their houses will be delivered not within the stipulated period but later. EOT should only be granted for high-rise buildings which are over 30 storeys, as they need more time to construct. For other cases, there must be special circumstances warranting the granting of EOT. What the former Minister of Housing has done is unfair interference into a private contract that does not benefit the purchasers as well as the public interest.

Datuk Seri Abdul Rahman Dahlan was the Minister of Housing who had granted a 12-month extension to a developer to complete the project, thereby allowing the developer to record huge savings and purchasers to lose out on their claims of liquidated damages for late delivery.

Abdul Rahman had entertained the appeal of one housing developer caring only for their interests, without taking into account the interests of 104 purchasers, clearly showing that he is the Minister of Housing Developers rather than Minister of Housing. Did Abdul Rahman consult with the 104 housing purchasers before “robbing” them of their rights and entitlement to compensation with a stroke of a pen?

In the housing sale and purchase contract, the Minister is not a party to the contract but an outside third party, who had no relationship with the sale and purchase contract signed between the purchasers and housing developer. The Minister had chosen to interfere in a private contractual agreement to side the single housing developer against 104 house buyers. In his case, the KL High Court had ruled that Abdul Rahman Dahlan had abused his powers.

At the very least, Abdul Rahman should have tried to gain the consent from the two parties in the contract, namely the housing developer and the house buyers. Instead he has chosen to blindly support the housing developer and continues to do so. He should have the courage to face 104 housebuyers and explain why he is appealing against the KL High Court decision.

Should he dare not do so or fail to convince the house buyers why he is right, then he should withdraw the appeal and accept the KL High Court decision with an open heart to allow the house buyers to reclaim their rights and entitlement to full compensation from the housing developer for compensation for late delivery.

For our part, the state government recently reintroduced the rent-to-buy scheme to assist the lower income group to own a home. The pilot rent-to-buy scheme was launched with 51 units in Taman Seruling Emas and 359 in Taman Sungai Duri Permai. In Taman Seruling Emas for example, the applicants pay a monthly rent of RM100 plus RM20 maintenance for 15 years and then the unit is transferred to them. This way, we are enabling more people to own a home. However we do not have the funds to do more rent-to-buy schemes.

Hence, it is timely that Penang Institute is organising this talk to discuss about the various challenges and issues that is faced by the housing market in Malaysia, from the perspectives of public housing, economy as well as the perspectives from home buyers as well. I hope that you will be enjoying the discussion later today.

It is important to reckon that housing demand in Malaysia will not disappear, not at least for the next decade or so, due to the relatively young population that Malaysia has. While we encourage the market to grow and prosper, we cannot depend fully on market dynamics to meet both the need and demand for housing in Malaysia. The state government is committed to this vision to democratise housing in Penang and hence, we are constantly exploring new ways to achieve this vision. I hope that discussion such as this one will be expanded to more experts so that finally, we can achieve our goal to democratise housing.