Kuala Lumpur, 11 January 2019- A central plan by the government to address the issue of affordable housing could lead to losses that may “fall on taxpayers’ shoulders”, warned the Institute of Democracy and Economic Affairs (IDEAS).

“Although the government’s intention is commendable in providing affordable homes to the rakyat, (it should) be careful of not intervening the market directly and creating distortions,” IDEAS Senior Fellow Dr Carmelo Ferlito said in a statement today.

He was responding to the plan by the National Affordable Housing Council (MPMMN) to build one million affordable homes in the next ten years.

According to Ferlito, the government as a central planner may not necessarily have access to “entrepreneurial knowledge about actual market needs”.

“This is what makes (it) impossible for the government to know what the market truly needs. It is best to leave the market to the entrepreneurs since they are the players who are continuously engaged with the market process,” he said.

Although Ferlito’s concerns are not rooted in the target number of houses to be built by MPMMN, he noted that the private sector was only able to provide an average of 200,000 new launches per year across all price ranges during the “best years of the property market”.

“A central plan would suffer from rigidity and would lack the necessary interaction with market forces in order to discover if it needs to be revised,” he said, adding that this could result in financial losses.

The government previously signalled its intention to conduct an open tender, which would engage the private sectors in providing affordable homes, Ferlito noted. He believed this could be a move in the right direction rather than building houses directly through government-linked companies or ministry agencies.

“I believe there is demand for affordable houses and I also believe that only private entrepreneurs can elaborate sound plans in line with the real market needs. This does not necessarily have to be focused on home ownership, but also toward new rental schemes,” he said.

MPMMN intends to build the affordable homes via the One Million Affordable Homes (RMN) 2018-2028 Implementation Monitoring Steering Committee, which is chaired by the Housing and Local Government Minister.

First published in The Edge Online, 11 January 2019