Compliance costs hindering affordable housing: REHDA Institute report

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Ng (left) and Tong unveil new Rehda Institute report.

Ng (left) and Tong unveil new Rehda Institute report.

PETALING JAYA: Compliance costs remain as a stumbling block in ensuring that homes are affordable, especially to the lower income groups.

Imposed by separate governmental agencies, the over-regulation adds towards the cost but not the value of the property and these costs have been steadily increasing over the past 30 years, creating inflexibility in the market.

“It cannot be a situation where the government says, we want house prices to come down, but on the other hand, you increase your compliance cost,” said Datuk Jeffrey Ng, chairman of Rehda Institute, the training and research arm of the Real Estate and Housing Developers' Association Malaysia (Rehda).

When acquiring land for a project, developers are asked to surrender a portion for public amenities such as roads, parks and schools, he said during the Regional Housing Conference (RHC).

Findings from Rehda Institute’s report reveal that an approximate 60% of land bought by developers are to be surrendered, only to be hijacked by third parties and funnelled into separate projects rather than public amenities. 

While industry leaders do not expect construction and labour costs to decrease, compliance costs are imposed by the authorities, therefore, these policies can be changed with enough political will. 

While the government has reiterated its commitment towards affordable housing provision in line with the 12th Malaysian Plan (12MP), Ng cautioned against building more houses rather than tackling the root cause of the affordable housing crisis. Decreasing profit margins through additional compliance costs will cause house prices to rise, contributing to the issue of overhang units.

Ng called for the government to include property stakeholders, such as developers and professional consultants into discussions to ascertain if the cost of implementing a new compliance cost outweighs the benefit.

“The federal level has very robust policies but as it trickles down, especially at the local authority level, the interpretation goes any which way,” Rehda acting president Datuk NK Tong said.

The report’s researchers outlined several recommendations, which include reducing unproductive costs, minimising cross-subsidies, optimising land and implementing a more efficient approval system.

“If we can mitigate the compliance cost impact then there is a higher chance that moving forward, house prices can be kept at a more sustainable level,” Ng added.


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