Addressing the housing issue

The issue of aff ordable housing in Penang is nothing new, given the limited availability of land for development on the island. But various factors are pushing the issue to the fore – a growing, young professional class, stagnant wages, property speculation and a huge surge in the luxury property market. Getting a foothold on the property ladder has become increasingly difficult.

Ong Ee Lynn

DEMAND FOR HIGH-END property in Penang has been robust and finding new houses or apartments on the island in the RM250,000–RM350,000 range is next to impossible. It is simplistic to lay the blame entirely at the developers’ doors and unrealistic to expect corporations to act in the best long-term interests of the citizenry. Likewise it is beyond the purview of the state government to provide social housing for the middle classes.

Ironically, the middle class is now caught in the middle of the housing equation, one that appears to favour the affluent investor and to an extent the lowincome earners. Th e ever-widening affordability gap is an obvious cause for concern for the state; it is a multi-faceted conundrum with far reaching implications for those living in Penang.

A recent closed-door discussion at SERI on this gap and Penang’s deteriorating low cost housing brought together senior figures from the Penang Development Corporation (PDC), Northern Corridor Economic Region (NCER), Khazanah Nasional, the state government, local authorities and SERI. It is clear that finding a solution to a problem that has built up over four decades will not only require more cooperation between the public and the private sectors, it will also need the political will to make potentially unpopular decisions.

Daniel Lee
Goh Ban Lee


Speculation and the luxury property boom

Picking on the developers and property speculators is easy because of the visibility of recently completed high-end luxury properties; a case in point would be the ever-changing skylines of Tanjung Bungah and Batu Ferringhi. Th e director of a local developer noted that, “Ultimately developers are allowed to build their projects only aft er council approval so we cannot lay the blame wholly on the developers.”

“Even as recently as 10 years ago there were already too many houses in Penang compared to the state’s population. Th e state government could make speculation harder by increasing assessment on unoccupied properties,” said Datuk Dr Goh Ban Lee, senior research fellow at SERI.

Commenting on the number of unoccupied super condo units and empty shophouses in George Town, Liew Chin Tong, SERI’s executive director, compared Malaysia to the Philippines. “Instead of sending remittances home as cash, Malaysians working overseas are buying property at home.” This situation helps fuel even greater speculation, forcing prices beyond the reach of those who earn their living in Penang.

Public housing in Penang in the 1970s

In the 1970s, affordable housing was built with assembly line workers in mind, thus the PDC built low cost housing close to the Free Trade Zones. Nearly 40 years later the variables have changed significantly. Today it is middle management, the recent engineering graduates, who are on the hunt for affordable housing. While early industrialisation enabled the first wave of workers to afford their new homes, current first-home buyers are trapped between the twin pincers of stagnant salaries and increasing land costs.

“In the early 1970s the PDC was the player in the housing industry and in effect determined housing prices.”

Daniel Lee
Toh Kin Woon.

Datuk Dr Goh Ban Lee,
senior research fellow, SERI

“PDC Property’s social objective was eventually lost with privatisation. Today, the private sector has gone berserk, new housing is not housing for the people. You ask yourself, why are all these super condos built? Is there a market? What is the impact on the residents in the surrounding areas?”

Datuk Seri Chet Singh,
ex-general manager of the PDC

“Tun Dr Lim Chong Eu did a good job building social housing where workers lived near their workplace,
gardens and parks.”

Datuk Dr Toh Kin Woon, chair,
Centre of Economics, SERI

Moving forward: Creating a new State Housing Board?

References to Singapore’s successful Housing & Development Board (HDB) invariably cropped up during the discussion. Given the similarities of both islands, would establishing a State Housing Board in Penang help to alleviate some of the pressures?

“Policies need to be outlined before we can move forward. The PDC needs to move into urban redevelopment as has been done in Singapore. Perhaps it’s time to buy up old low cost apartments, knock them down and rejuvenate the area.”
Ex-senior PDC official

“There are too many different agencies involved in housing and not all of these report to the state executive council. Th is means that there are problems obtaining accurate data as the information is all scattered. Imagine having to deal with so many civil servants to obtain all the necessary information! A new State Housing Board might eliminate this issue, but I foresee that capable manpower will be the most important component.”

Wong Hon Wai, state executive councillor for Town &
Country Planning, Housing and Arts

“Statistical data is academic. The inherited machineries in planning are inadequate; not just in Penang but the whole of Malaysia there is a lack of qualified manpower. Without adequate and competent manpower the government will fail.”

Datuk Seri Lim Chong Keat, architect,
ex-member of Singapore’s
Housing & Development Board

Liew observed that, “We have arrived at a situation where we have to weigh the pros and cons of green field vs. brown field development. What is the role of PDC Properties, is the way forward a shift to PDC Housing?” Is putting the ball back into the PDC’s court even viable given how much Penang and the organisation itself have evolved?

Datuk Seri Chet Singh, ex-general manager of the PDC, added, “Does the state government want to be led by developers? What does the state government want a housing board to do? How is the state government to direct the PDC? What is the PDC supposed to do now? Chances are that private developers have already spoken to the government to obtain prime land.”

To shed some light on the situation that PDC Properties is in, a senior official explained how stifling bureaucracy makes it extremely difficult for the organisation to build low to medium cost housing, “…the State Housing Department is slow to allocate such property and this places fi nancial strain on the PDC. PDC Properties is also scrutinised more closely and we always have to comply with more requirements which causes delays and means we lose money every day the development is held up.

“Currently we have RM20mil in bad debts on unpaid service fees (for existing low to medium cost properties). Where is the Commissioner of Buildings in all this? Th is is toothless and ineffective, more proactive decision making is needed,” the senior official stressed.

Daniel Lee
Liew Chin Tong

Low cost woes

The slow and, many would argue, opaque allocation of low cost and low-medium cost houses which is carried out by the State Housing Department has added another dimension to Penang’s housing picture. Speculation even exists at this tier and it’s not uncommon for individuals who already own their own homes to purchase such property (often in another family member’s name) and rent these out. According to Wong Hon Wai, state executive councillor for Town & Country Planning, Housing and Arts, “I’ve been informed by developers that there are still a lot of low cost housing projects which are not fully occupied. The Penang Auctioneers Association alone has 500 unoccupied properties.

Inefficiency may help to explain why so many low cost units are uninhabited but there are undoubtedly other reasons. “Many low cost houses tend to be built in ‘undesirable’ areas, and connectivity to schools, public transport and gardens is not considered important. It’s as if we are telling people, ‘You are poor, these things don’t matter to you’,” said Datuk Dr Toh Kin Woon, chair of the Centre of Economics, SERI.

“The problem is that there is no concern for the choices of the poor. We cannot keep passing the buck back to the federal government. The state government must not be afraid to really get involved in the housing issue.” An NCER senior official suggested shifting away from building more low cost housing in prime areas to building more public amenities in low cost areas. This would require developers to take a more longterm, holistic view of low cost development, rather than to regard it as a necessary “evil”.

Many low cost houses tend to be built in ‘undesirable’ areas, and connectivity to schools, public transport and gardens is not considered important.

Grinding out solutions

The SERI roundtable was the first in a series of discussions that aims to create an open dialogue between the numerous stakeholders as well as to find sustainable solutions to the various housing issues.

Towards the end of the first session, Wong reiterated the state government’s desire to take the lead, citing the 2010 adjustment of Penang’s density guidelines (prior to this, plot ratios had not been adjusted in 16 years).

While there was no shortage of ideas, the most apparent future stumbling blocks were bureaucracy and a lack of well-trained, experienced manpower within local government and government agencies. For now, Penang’s middle class can only adopt a “wait and see” attitude, for many, home ownership is still a distant dream.

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