Our housing crisis - II

The housing policy of Malaysia aims at provisioning of adequate, affordable and quality housing for all Malaysians. Without getting involved physically, over the years, the government has encouraged the private sector to produce low-income housing schemes at affordable prices. But the scarcity and high cost of land in urban areas, rising labour costs, and expensive construction materials have adversely affected the efficacy of government drive for LCH programmes. Analyzing results to date one can conclude that programme success is dependent upon striking a fine balance between low-income obligations and private developers' profit-making drive.
Malaysia as a developing country and one of Asia's tigers is growing rapidly and is aiming to become a developed nation by 2020. Affordability of housing is an issue only for 2% of population who live below the poverty line. The federal and state governments address this with direct subsidy support. Consequently, squatter communities in larger cities are fading and will soon be a thing of the past. However, in the countryside, housing needs are more acute and there is less formal help. Malaysia's population of 33 million is growing at a CAGR of 1.6%. 65% of the population is urban while 35% is under 15 years old. This large percentage of young people shows future demand for housing.
The government of Malaysia has focused more on low- to medium-cost housing by mandating that 30% of housing construction must be for this segment. In Kuala Lumpur, these are mostly pegged between RM 70,000 to RM 85,000 per unit (PKR 1.75 to 2.13 million). Given present per capita income of RM 50,000 in Malaysia (equivalent to PKR 1.25 million), these housing units are extremely cheap and affordable. In fact, developers mostly engage in constructing medium income and luxury housing for which demand is much higher. The overall performance of houses built under the low-cost housing category is encouraging with 200,513 units completed or 86.4% of the target during the 9th 5-year economic plan. Out of this number, 103,219 units or 51.5% were constructed by the public sector including state economic development corporations.
These projects were implemented by state governments through loans provided by the Federal Government and mainly concentrated in small towns and sub-urban areas. These houses were sold to eligible buyers registered under the computerised open registration system administered by the respective state governments. The LCH Program was implemented for the resettlement of squatters in cities and larger towns. Under this program, 37,241 low-cost houses were completed and rented out, 'not sold', to those eligible. The 10th plan which is now underway envisages 78,000 such housing units. These large social housing projects will remain State property maintained through rental income.
Analysis of Malaysian LCH plans and regulations indicates that in its planning exercise Malaysia pays special attention to detailed housing requirements. They have identified key elements for special attention in their future agenda such as:
-- median income group beside the low income group;
-- overall quality of life;
-- focused housing for government employees;
-- specialised building for disadvantaged and the poor in urban and rural areas;
-- more systematic and well-organised urban services programs, emphasis on sustainable development;
-- promoting greater community participation;
-- physical and social infrastructure;
-- soft housing loans for target groups, and;
-- female-headed household as a target group for special attention. All these plans are thought out in detail, enumerated, and well documented in terms of timelines and funding sources.
Turkey: Provision of social housing in Turkey is among the highest government priorities. The current population of 78.5 million has a CAGR of 1.33% with a median age of 31 years. According to data of The Association of Real Estate and Real Estate Investment Companies (GYODER), the urbanisation rate in Turkey is 78% and likely to exceed 85% by 2023.The Government is acutely aware that housing pressure of urbanisation heavily impacts low income groups leading to establishment of slum areas in metropolitan cities. This has also put pressure on infrastructure such as water, sanitation, and healthcare. Access to private funding through banking system to buy a home remains limited for low income groups due to income and savings levels that are inadequate to meet housing loan instalments of commercial banks.
Articles 56 and 57 of the Turkish Constitution declares that every Turkish citizen has the right to decent housing and that the State has a responsibility to help meet those needs and to promote mass housing projects (Pakistanis too enjoy this right in theory). The Mass Housing Law No 2985 on public housing is a framework defining fundamental principles outlining solutions to the housing problem in Turkey. The Law also determines the tasks of the Housing Development Administration (TOKI)...a unique federal entity that reports directly to the Prime Minister.
Through its 30-year history, TOKI has acquired essential knowledge and experience on developing different financing models regarding housing. For its mass housing projects produced on its own lands, TOKI targets low and middle-income families, who cannot afford decent housing units financed on commercial terms. For these families, in the eighteen years between 1984 and 2002, TOKI built 43 thousand houses while also providing credit support to 940 thousand households building their own shelters.
TOKI's primary income consists of:
1. Revenues from sale and rent of houses in its portfolio;
2. Loan recoveries,
3. Interest income on funds;
4. Regular budgetary subsidy allocations;
5. Statutory fees collected from citizens departing on foreign travel. And
6. Service fees of up to 10% for construction services provided to all State and local Governments and Public Sector organisations.
Following passage of legislation on Emergency Action Plan for Housing and Urban Development in 2003 TOKI was set a five-year goal of 250,000 housing units This was accomplished on target, ie, by the end of 2007. Thereafter, TOKI was asked to start500 thousand housing units along with their social facilities...a goal that was achieved in four years. The number of housing units started in January 2015 stands at 650,000. In short, TOKI's running rate of erecting new housing units now exceeds 150,000 per annum...a performance rate that continues to grow exponentially.
Meanwhile, some non-banking real estate assets of a State-owned commercial bank (Emlak Bank) were transferred to TOKI. Similarly, assets and liabilities of Urban Land Office were also transferred to TOKI ownership bringing in 64.5 million square meters of land for development on to TOKI's balance sheet. Related duties of Public Works and Settlement were also transferred to TOKI as were the functions of the Prime Minister's Implementation unit for Dwelling Affairs. Thus, TOKI is now a very powerful and rich federal organisation with a countrywide housing and urban development mandate. As of December 2014 it had assets of 46 billion TL (PKR 1.6 trillion) and Net Income of 2.8 billion TL on Turnover of 4.5 billion TL...a far cry from our paper-shell federal Ministry of Housing and the likes of PHA and HBFC.
According to Turkish Statistical Institute (TurkStat), the total number of housing units throughout Turkey is currently 20 million (approximately the same as we claim exist in Pakistan with a two and a half times larger population). 40 percent of these are shanty and 67 percent lack settlement permits. To address this challenge, The "Real Estate Sector Vision 2023" prepared by GYODER requires production of 7.56 million incremental housing units over the 12 year period between 2012 and 2023 (roughly the same number is needed in Pakistan, but we have no matching visionary plans to address our problem). TOK?, with its rapid housing production practices honed over the years will likely end up meeting 30-40% of the national goal all by itself! Over the same period, 5 million shanty houses will be demolished and built anew. The balance of housing need, largely for the well-off segments of society will be catered by commercial developers.
Social housing programme of TOKI targets the low and middle-income people who cannot own a housing unit under the existing market conditions. The beneficiaries of social housing projects of TOK? (constructed on lands owned by TOKI) make down payments at the start of construction(no down-payment is collected from the poor), and continue monthly payments according to a wage-indexed reimbursement plan. For the projects targeting low income group citizens, monthly instalments are increased (twice in a year) depending on the rate of increase for public sector wage index announced by TurkStat. The maturities of the loan repayments of TOKI are set between 8 and 25 years depending on the financial capabilities of target groups. With regard to the applications for low-income group houses, it is assured that net monthly household income does not exceed 3,200 TL (PKR 114,000).
TOKI only undertakes projects in townships with minimum population of 40,000 and does not take orders for less than 100 houses at a time from Municipalities and District Governments. Given its sterling reputation, the existing demand for TOKI properties far exceeds supply. Every citizen who does not own a house has a right to apply for social housing. However, in general low-paid workers and civil servants benefit most from these houses. Due to the very high demand created by policy driven affordability, houses are often sold to applicants through a lottery supervised by a public notary.
Most crucially, for mortgage supported housing, Property title is retained by TOKI until the debt is fully repaid. Hence, default is rare (contract termination for non-payment occurs in only one out of 2,000 cases). Keeping to its own side of the bargain, TOK? finalises the construction of housing units within 24 months, often much earlier. It is important to note that sale prices of housing units produced for poor citizens (one of the category of TOK?'s social type housing program) do not include the cost of land.
TOKI maintains accounts with public banks in accordance with the General Communiqué of Public Treasury. The reimbursements for the sales realised and loans made available by TOKI are pursued and collected through public banks (Ziraat Bank, HalkBank and Vakiflar Bank) in the name of TOKI.
Some interesting statistics on houses produced by TOK? are as follows:
- Approximate cost of housing for the poor ordered by the Ministry of Family and Social Welfare is 1,100TL/m² (PKR 1.76 million for a 45 m2 two-room flat!);
- Approximate cost and sale price of middle-income house is 1,200TL/m²; and
- The sales prices for luxury houses are between 2,000 to 15,000TL/m2.
The fundamental conditions of sale of the social housing projects by TOKI are as follows:
-- For minimum wage group (citizens without any means to purchase housing under the current market conditions); having a maximum monthly net income of 3,200 TL (3,700 TL in Istanbul) houses with covered area of 45-65 m2 (484-700 ft2), with instalments of 100 TL / month (PKR 3,500!) starting from delivery of house without down-payment, with a maturity of 25 years.
-- For the low income group; houses of 65 - 87 m2 (700-936 ft2), with instalments starting from delivery of the house with a down-payment of 5% and a maturity of 15 years,
-- For the middle-income group: Houses with an area of 87-146 m2 (936-1571 ft2), 10% to 25% of the house price in advance with loan tenors of 8 to10 years.
Because the problem of slums and shanty settlements cannot be solved through the efforts of the local governments only, since 2003 TOKI has been following a comprehensive policy toward supporting modern urbanisation in cooperation with local administrations, often backed by subsidies from the central government. With the houses it produces for low-income groups, TOKI not only transforms slums but also tries to prevent formation of new slum areas.
TOKI houses use the "tunnel formwork" system with high building safety which is also earthquake resistant providing smooth geometric spaces and allowing fast and high-quality production in schools, trade centers, hospitals, mosques, police stations, dormitories, and stadiums.
Apart from housing, TOKI has also pioneered in substructures and public utilities in regions damaged by natural disasters. The activities of the administration in the field of disaster management and restructuring started with Erzincan Earthquake in 1992. TOKI received the United Nation's HABITAT Scroll of HONOR in 1994 for having provided housing credits to hundreds of thousands of low and medium income families and for having implemented the Erzincan Earthquake Reconstruction Project successfully. After the recent VAN Earthquake in Anatolia, 15,000 houses and their social facilities were completed and delivered by TOKI within 12 months!
(To be continued)