National Housing Policy 3.0 marks an important shift in government's approach

By Sulaiman Saheh

The launch of the National Housing Policy (DRN) 2026–2035 marks an important shift in the government’s approach to the housing sector, moving from the longstanding emphasis on increasing supply numbers to ensuring that the homes being provided genuinely correspond with the needs of the people and the realities of the market. While the DRN 2018–2025 established much of the foundation around housing affordability, quality, liveability and supply, the new edition takes a broader view by asking more fundamental questions: What type of homes are needed, for whom, where should they be located and under what form of tenure should they be provided?

With a target of delivering one million affordable homes by 2035, increasing housing supply remains an important component of the national housing agenda. However, this target should not be treated simply as a numerical exercise. The real measure of success will depend on how effectively these homes can be matched with actual demand in terms of location, housing type, price and occupancy or tenure model. Building one million units will mean little if a significant proportion of those homes do not reach the households they are intended to serve. The shift from a supply-driven approach towards demand-led planning is therefore one of the most significant changes reflected in the new DRN. At a time when the property market continues to grapple with unsold completed residential stock, the housing challenge is no longer simply whether Malaysia has enough homes. The more important question is whether the homes being supplied are in the right locations, at the right prices and with specifications that can actually be absorbed by their intended target groups.

Delivering the target should involve a range of housing models, including conventional ownership, rental and rent-to-own arrangements, rather than focusing predominantly on the number of units constructed.

Prevention is better than cure

This demand-led approach is important in preventing housing development from continuing to produce a mismatch between supply and demand. A home may be considered affordable on paper and still fail to meet market needs if it is developed in an unsuitable location, has specifications that do not correspond with household requirements or is priced beyond the actual purchasing or rental capacity of the local population. Affordability, therefore, should not be assessed solely through the sticker price of a house. More importantly, housing affordability should be considered alongside the ability of households to sustain that housing choice over the longer term. This includes mortgage or rental commitments, maintenance costs, transportation expenses and other household expenditure associated with living in a particular location.

The same principle applies to housing affordability indicators. Broad state-level and certainly national-level indicators can provide useful macroeconomic context but they can conceal substantial differences between local markets. What is considered affordable in one locality may be completely out of reach in another. Similarly, a house that appears affordable based on its purchase price may become considerably less affordable when commuting costs, limited public transport access and the distance from employment centres are taken into account. For this reason, measures of affordability, or more appropriately, long-term housing attainability and sustainability need to be examined at the local level – ideally at a neighbourhood-level detail even, not just district-level data. The question should not simply be whether households can technically afford to purchase a home but whether they can realistically live there without placing unsustainable pressure on their finances and quality of life. This will have to consider the local area’s income level – not just gross income but net disposable income level.

This makes a comprehensive housing database increasingly important in determining the direction of future development. Data should cover not only existing supply and prices but also household characteristics, purchasing and rental patterns, housing preferences and demographic changes. Crucially, such data needs to be updated regularly and made sufficiently granular at the locality level.

Petaling District, for example, encompasses numerous localities with very different market characteristics, demand profiles and levels of household affordability. A more detailed, locality-based approach would allow policymakers and developers to identify more accurately the type of housing required, the appropriate target groups and the price points that are realistic for a particular area before a project is planned or approved. This could significantly reduce the risk of developments being delivered without sufficient demand to support them.

Here, independent market studies supporting development approvals or development financing also have an important role to play. Such assessments should ideally be undertaken independently by parties with genuine expertise and understanding of the property market as well as the buyers’ profile. This would ensure that development decisions are supported by objective assessments of demand, rather than projections that may be influenced by the interests of the party seeking approval or financing. This is particularly important because demand should not be confused with aspiration. A development may generate considerable interest on paper but actual demand is ultimately shaped by household purchasing power, financing availability, employment patterns, location, competing supply and the wider economic environment. A robust demand assessment should therefore test whether prospective households can actually absorb the proposed product, rather than merely establish that there is a broad need for housing.

A more holistic approach

The new policy also brings a broader understanding of what constitutes housing affordability. The price of a house alone is no longer sufficient to determine whether a dwelling is genuinely accessible. Travel costs, access to employment, public transport, schools, healthcare facilities and essential services all contribute to the real cost of living in a particular home. Housing planning must therefore be considered alongside transport and urban development so that affordable homes do not become isolated from employment opportunities and everyday amenities. This is where the concept of Total Cost of Occupation and Ownership is important to be appreciated.

This is also where transit-oriented development and better integration between housing and public transport become particularly important. An affordable home located far from employment centres and public transport may ultimately impose a significant financial and time burden on its occupants. Conversely, a moderately higher-priced home in a well-connected location could potentially be more sustainable for a household over the long term because it reduces commuting costs and improves access to essential services. Moreover, we have not even quantified the social costs of quality family time and waste due to travel time, especially for those who endure hours a day being stuck in traffic.

At the same time, DRN 2026–2035 broadens the range of housing choices by placing clearer attention on rental housing and rent-to-own models. If homeownership has traditionally been treated as the principal measure of success in housing policy, the new approach recognises that housing stability can be achieved through several different pathways. This is a positive development, particularly as changing household structures, mobility patterns and economic conditions make permanent ownership increasingly difficult for some groups.

Rental housing should therefore no longer be viewed merely as a temporary stepping stone towards ownership. It can form a legitimate part of the housing ecosystem in its own right, provided that it is supported by appropriate tenant protections, reasonable security of tenure, transparent rental arrangements and adequate standards of maintenance and management. Recognising rental housing officially, however, is only the first step. The supporting regulatory and institutional framework will need to be sufficiently developed to make renting a genuinely secure and viable long-term housing option, as well as having the interests of tenants and landlords at heart at all times.

Consumer protection and reforms to the housing delivery system also receive greater attention, including proposals associated with the Build-Then-Sell approach. Such initiatives demonstrate an effort to reduce some of the risks borne by homebuyers while projects are still under construction. This is a welcome direction but implementation will need to be carefully calibrated. The implications for development costs, financing structures, cash flow, project viability and the capacity of different segments of the property industry cannot be overlooked. A stronger consumer protection framework should not inadvertently create new barriers to housing supply or push development costs beyond the reach of the very households the policy is intended to assist. The success of such reforms will therefore depend not only on the policy principle itself but also on how the implementation mechanism is designed and phased across the industry.

Getting it right

Ultimately, DRN 2026–2035 represents a meaningful evolution from the principle of building more homes towards building the right homes. The one-million-home target remains important but its success should not be measured by the number of units delivered alone. The more meaningful questions are whether those homes are in the right locations, at the right price, with the right product specifications and supported by the right tenure model for the people they are intended to serve. In this sense, the evolution from DRN 2018–2025 to DRN 2026–2035 reflects a shift from provision to matching. The government is no longer simply being asked to ensure that housing exists but to ensure that supply actually meets demand. This is a much more complex task but potentially a much more effective one.

The direction is encouraging. Greater emphasis on demand-led planning, rental and rent-to-own options, more granular data, stronger consumer protection and closer integration between housing and transport reflects a more mature understanding of Malaysia’s housing challenges. Yet good policy intentions must ultimately survive the realities of implementation.

The real test of DRN 2026–2035 will therefore not come at the point of its launch but over the decade of its implementation. If the new policy succeeds in translating its demand-led philosophy into disciplined planning and better execution, it could help Malaysia move away from the recurring cycle of producing homes that are affordable in theory but mismatched in practice. But if the one-million-unit target once again becomes the dominant measure of success, the country risks repeating the very supply-demand mismatch that the new policy seeks to address. The policy has set the direction. The next challenge is ensuring that its promises are translated carefully, transparently and consistently into action. Only then can the ambition of providing one million affordable homes become more than a numerical milestone and instead deliver what ultimately matters: houses that people can afford, access, sustain and genuinely call a home.

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