To Build Or Not To Build? The Role Of The Urban Renewal Act In Rejuvenating Our Cities
Written by Nischal Ranjinath Muniandy, is the Senior Researcher, Public Finance Unit at the Institute for Democracy and Economic Affairs [IDEAS].
By the First Quarter of 2025, Parliament is scheduled to table the Urban Renewal Act, which will have a major impact on urban development in this country. What does this mean for urban development and the possibility of redevelopment in our cities?
The main bone of contention with the Urban Renewal Act (URA) is that it will lower the consent threshold required for the en-bloc sale of strata title properties from the current unanimous (100%) resolution, required under Section 57 of the Strata Titles Act 1985 (Act 318), for development to 80% for buildings under 30 years old, 75% for buildings over 30 years old, and 51% for abandoned developments or buildings. This is on par with regional peers like Singapore, which has an 80% threshold for buildings over 10 years old, Western Australia, which has a 90% threshold for buildings that are less than 30 years old, and New Zealand, which requires a 75% threshold. .
Currently, the requirement for unanimous approval from all strata title holders within the development makes redevelopment of existing strata-titled property extremely rare. One such attempt was the redevelopment of the Desa Kudalari Condominium in 2016. Built in 1984 as one of the first luxury properties in the KLCC area, it was a shadow of its former glory and in dire need of extensive, costly structural repairs totaling RM12.5 million. By this point only 15% of the development’s 186 units were inhabited by the original owners, with 30% left empty and another 55% rented out to outside tenants. Despite both the Management Corporation and 87% of owners agreeing to the offer made for the property, a combination of resistance from owners seeking a price of over double the offered amount and uncontactable absentee owners rendered this attempt at redevelopment ultimately unsuccessful. The few multi-family developments that have been redeveloped in Kuala Lumpur have been legacy public housing, namely Sulaiman Court in 1986, the walk-up flats of Pusat Bandar Datuk Keramat in the early 2000s, Tunku Abdul Rahman Flats in 2015, and Razak Mansion in 2016.
The redevelopment of Razak Mansion in particular is worth mentioning because of the unanimous consent that was given for redevelopment. Built between 1960 – 1967 and comprising 657 units across 13 4-5 story blocks, Razak Mansion was one of the first apartment buildings to be built in Kuala Lumpur. When the area was slated for redevelopment for what is now RC Residences, the residents of Razak Mansion were compensated with a one-to-one replacement with a unit in 1Razak Mansion, a single block apartment building built to accommodate these residents. In addition, these units were larger than their previous units, at 800 sq. ft. compared to the 400-500 sq. ft. units that made up Razak Mansion. The new apartment also included new facilities like a multi-purpose hall, market, surau, and shoplots. The development of RC Residences also introduced 5,748 market-rate housing units into the market, which has an appreciable impact on the overall affordability of the housing market by increasing the supply of new housing.
According to Nga Kor Ming, Minister of Housing and Local Government, there is currently no law to govern urban renewal and redevelopment. Furthermore, the Ministry of Housing and Local Government has also identified 534 potential sites for urban redevelopment in Peninsular Malaysia, with 139 of these sites located within the Federal Territory of Kuala Lumpur alone. The total area of the sites within Kuala Lumpur is equal to 13.4% of the area of Kuala Lumpurs, and with a combined Gross Development Value (GDV) of RM355.3 billion.
While the Ministry cites the need to redevelop dilapidated and under-maintained structures, opponents cite the potential for abuse by powerful interests in the real estate sector and that these sites could be overdeveloped for the interest of private profit. Those who find themselves in the minority against redevelopment would also find themselves being forced to relocate, potentially displacing families and uprooting whole communities.
There are also some concerns about the welfare of existing residents should the URA be passed and the consent threshold be lowered. These concerns centre around ensuring that owners get full information needed for informed consent, just compensation in the event of redevelopment, and the maintenance of existing community bonds, which is especially important for long-time elderly residents who might have nowhere else to go and no-one to turn to. Even the previous owners of Razak Mansion, who did provide unanimous consent in exchange for larger units and more up-to-date facilities in 1Razak Mansion, are now struggling to pay the RM120 maintenance fees, 240% higher than the previous RM35 maintenance fees, for the upkeep of modern facilities, maintenance of lifts, and other expenses like paint and waterproofing. These are expenses that the largely elderly residential population cannot afford and were largely ill-informed about during the redevelopment process.
Despite this, passing the URA will allow for the redevelopment of abandoned and derelict structures, especially in the historic city centre. This is especially the case when the cost of refurbishing and renovating these buildings, especially to meet current energy efficiency standards, becomes too cost prohibitive. The main benefit of the URA is that it would enable the effective renewal and redevelopment of the urban core and inner city neighbourhoods that have been neglected as a result of a continued focus on suburban development.
Redeveloping the historic urban core and inner city residential areas is necessary because major urban areas like Kuala Lumpur can’t sprawl forever. At some point, the time and energy to commute from ever further new suburbs and townships outweigh the cost savings on housing. In Greater Kuala Lumpur, there are already “super commuters” travelling daily from locations as far away as Tanjong Malim, Perak and Seremban, Negeri Sembilan. In the north, Greater Penang sees commuters from as far away as Taiping, Perak and Alor Setar, Kedah,while in the south, people from Ayer Hitam and Kota Tinggi commute to and fro the Greater Johor Bahru urban region for work.
The reason for this? Why do some residents commute many hours every day from ever further suburban developments to jobs in the city?
This is because households and individuals are priced out of productive urban areas because of a lack of new housing in the historic core, leading to rising housing and rental costs as demand far outstrips supply and increased suburban sprawl as more affordable housing is built on greenfield sites at the urban periphery. The repopulation and renewal of historic city centres can play a role to combat suburban sprawl and ensure that the historic commercial centres of cities like Kuala Lumpur, Ipoh, and George Town aren’t hollowed out and turned into little more than ghost towns cantering mainly to tourists and suburban visitors to drive through. Urban renewal and redevelopment is crucial for this. Living in Kota Damansara, I have seen the transformative power of urban development, turning a sleepy suburban bedroom community into a commercial and economic hub in its own right, with new residential, commercial, and office developments transforming the area. I want this transformation to happen in the historic downtown of Kuala Lumpur. Looking at the abandoned and derelict buildings that dot the area, emblematic of years of disinvestment, I know that we can do better and that it is possible to bring back the vibrancy that once characterised this area.
Enabling redevelopment in the urban core is also a fiscally responsible decision because of the costs of financing and subsidising infrastructure in lower density suburban areas. Every kilometre of water and sewage pipes, power lines, fibre optic cables, and asphalt, serves more people in a dense urban area than in a lower-density suburban area, with suburban infrastructure being ultimately subsidised by more productive, higher density urban places. Right now, it is, perversely, the lower-income, blighted inner city that subsidises the rich, well-to-do outer suburbs in places like Eco Ardence and Elmina. This is entirely because of the difficulty in redeveloping and rehabilitating the blighted, underinvested, historic city centre that has led to it being hollowed out and further exacerbating suburban sprawl. The objective of this is not to turn walk-up apartments into skyscrapers, but to ensure that dilapidated and ill-maintained structures can either be revamped or redeveloped. Currently, this cannot be done because a single strata-title owner out of hundreds can grind the entire process to a halt.While there is perennial opposition to new, dense housing development, fewer housing units nearly always translates to higher housing prices as demand outstrips supply. Housing crises across the developed world, from San Francisco to Sydney, that have made these among the most expensive housing markets in the world, are emblematic of this.
On the whole, the URA presents a golden opportunity to rejuvenate urban areas throughout the country, especially in the urban core, and enable redevelopment where it was once not possible. The welfare of existing residents can be maintained by ensuring that units are valued by an independent valuator to ensure that owners get the fair market value of their units or are provided with a one-to-one replacement of their unit in the new development. Concerns on how this can introduce conflict neglect to mention that these places likely already have conflicts on points like maintenance of common facilities, car parking, and other matters. In addition, the consent threshold set by the URA must also balance the right to own property in Articles 13(1) and 13(2) of the Federal Constitution with the need to redevelop the city as development patterns change. It cannot be so low such that a relatively small majority can be won over by developers looking for easy wins by demolishing and redeveloping existing structures, while not being so high that redevelopment is functionally impossible due to a small number of absentee or recalcitrant owners derailing the process.
The current debate on the URA also points to the need to inculcate a maintenance culture to ensure that these properties are well maintained and kept in a state of good repair, which will increase the building’s lifespan and lessen the requirements for redevelopment to begin with. As Malaysia aspires to be a carbon neutral country by 2050, additional requirements like carbon scoring and allowing for the number of parking spaces in any development to be determined by market forces instead of government dictate should also be considered as part of this goal.
At the same time, our cities cannot be frozen in amber to placate the demands of individuals who want a retirement village that reminds them of their childhood home. They are dynamic engines of growth and innovation that demand change and redevelopment.
This article first appeared on www.businesstoday.com.my on January 18, 2025.
The views expressed in this article are solely those of the author and do not necessarily represent the views or positions of IDEAS Malaysia. All opinions are the author’s own.
