In 2019, Malaysia can be defined as a developing country comprised of 32.6 million people, 7.3 million households, and a total supply of 6.02 million homes, with its average household size decreasing to 3.9 persons from 4.1 persons in 2016 ^[1]. Shrinking household size, population growth, and urban migration have created an increasing demand for affordable housing. According to UN-Habitat ^[2], affordable housing is broadly defined as housing which is adequate in quality, location, and pricing that can sustain other basic living expenses. The term “affordable housing” is also often used to describe a housing unit that is affordable for those whose income is lower than the median household income in a place. The term “housing affordability” is often used to determine whether housing is affordable for households. There are three approaches commonly used to measure housing affordability, namely Median Multiple, Housing Cost Burden, and Residual Income ^[3]. In Malaysia, the Median Multiple method is used to evaluate the housing market and housing is considered affordable when the median price for the housing market is not more than three times the annual median household gross income [3,4,5]^[3][4][5]. Based on the 2019 Household Income and Basic Amenities survey ^[6], the Malaysian annual median household gross income was MYR 70,476; thus, affordable housing should have a market median price of MYR 211,428. However, as household income levels reveal a variance among states, the price of affordable housing is in two ranges; either less than MYR 150,000 or between MYR 150,001–MYR 300,000 ^[7]. In this paper, affordable housing refers to a housing with a selling price that does not exceed MYR 300,000.

The National Property Information Centre (NAPIC) ^[8] showed that 30,664 units of new residential property were unsold in 2019, among which 32.4% was affordable housing. This reflects the contradiction that whilst the housing affordability of low-income households cannot be met, a bulk of affordable housing is still vacant. In 2019, Malaysia enacted the National Affordable Housing Policy (DRMM) which was intended to solve this contradiction and to improve the housing affordability for low-income groups. In such circumstances, this paper attempts to find the reasons why low-income households have low housing affordability and whether the DRMM can guarantee housing affordability of low-income groups.

Drawing on a series of studies that have been completed, there are few that have reviewed the evolution of Malaysia’s affordable housing policy to deal with the issue of housing affordability. Shuid ^[9] divided the evolution of Malaysia housing provision system from 1971 to 2011 into four phases to analyse the key players in housing provision. Masram and Misnan ^[10] used the housing provision framework to analyse the key affordable housing policies of Malaysia. There are even fewer that have evaluated the effect of the long-term policy implementation to address housing affordability. International experiences have proved that housing affordability can be solved by increasing the quantity of affordable housing and lowering housing costs. Malaysia has implemented both strategies, but the housing affordability issue has never been solved. The real scenario is that whilst housing affordability of low-income groups is not achieved, the majority of affordable housing supplied for low-income households remains unsold. What caused this scenario to happen in Malaysia is an interesting question to ask and the answer to this question will be an academic contribution that can help to enhance the strategy to improve the housing affordability issue effectively. Moreover, up to now, no researcher has attempted to explore whether the DRMM could guarantee the housing affordability of low-income groups. This is the first study that draws attention to DRMM strategies in improving the housing affordability of low-income groups. The findings have important implications for the revising of the DRMM strategies to improve the housing affordability of low-income groups. The results will also influence future housing policies in Malaysia.

Housing affordability is a global issue which many countries have attempted to overcome. It is not an inherent attribute of a housing unit, but rather a relationship between housing and people [11], depending on one’s ability to pay for a housing unit. Housing affordability is often related to “affordable housing” for low-income groups, but it is a problem regardless of whether people are rich or poor. As mentioned earlier, the Median Multiple method is used to assess the Malaysian housing market. Based on the concept, in this paper housing affordability is defined as the ability of Malaysian low-income households (B40) to own a house, with the housing price-to-income ratio not exceeding three. Low-income households include poor households with a monthly income of less than the poverty line income (PLI). The analysis of housing affordability in this paper is limited to home buyers due to the insufficient data on rental housing.

A deep understanding of the influencing factors of housing affordability is crucial to determine the reasons for low housing affordability. The international literature indicates that housing affordability is generally affected by four dimensions, i.e., household income, housing price, home financing ability, and housing planning. However, there are many factors that impact housing prices [12]^[11]. According to Mostafa [13]^[12], housing prices vary along with the changes in regional economics. The development cost which consists of land cost, hard costs (construction costs), and soft costs (consultant fees and processing costs) can also alter housing prices [14]^[13]. Meanwhile, housing obtains its price due to the factors surrounding supply and demand, which can be proved in the cases of the US [15]^[14] and Australia [16]^[15]. In those countries, the disparity between housing supply and demand has led to either an increase or decrease in housing prices. Thus, the influencing factors of housing prices are interpreted in this paper in terms of land cost, construction cost, compliance cost, supply and demand, and economic factors. Based on international experience, eight factors are identified as the most significant in view of their influences on Malaysia’s housing affordability.

In Malaysia, before the National Housing Policy was issued in 2012, housing policy evolved through the country’s five-year development plans. Low-cost housing was considered as affordable housing when it was subsidised and was allocated only to low-income people with several eligibilities set by the government [36]^[16]. Table 1 shows in chronological order the government’s initiatives of affordable housing development with different policies in different periods since 1957, as well as their implementation effects.

Source: Tabulated by the authors according to relative documents [37,38,39,40,41,42,43,44,45,46,47,48,49,50,51,52,53,54]^{[17][18][19][20][21][22][23][24][25][26][27][28][29][30][31][32][33][34]}.

In Malaysia, low-cost housing has been injected into its affordable housing policy and has evolved through the Malaysian five-year plans since its independence until 2012, when a formal housing policy was established as a National Housing Policy. Through this evolution, the government realised the necessity of managing affordable housing development more effectively and introduced the National Affordable Housing Policy in 2019. Over the decades, the government has taken different initiatives and focused on different target groups in affordable housing development. In the early period, the principle of affordable housing development was to provide low-cost housing for low-income groups. When the time passed and the demand of M40 for affordable housing increased, the government began to develop median-cost affordable housing for M40. This led to a scenario where more parties had the opportunity to be involved in affordable housing projects. Consequently, the housing development projects were changed from public sector-led to private sector-led and then were turned into joint ventures between the public and private sectors. Housing affordability has become the main concern of Malaysia’s housing policy after efforts for decades, leading to the formulation of a specific housing policy to strengthen the government’s initiatives in overcoming the housing affordability issue. The policy review shows that the housing affordability of low-income groups is still not guaranteed though Malaysia has long implemented affordable housing policies to improve housing affordability.

The reasons that cause low housing affordability among low-income groups are low household income, high land cost, construction cost, compliance cost, mismatch of supply and demand in terms of quantity, instability of national economy, low home financing ability, and incomprehensive housing planning due to information insufficiency. They explain why the long-term implementation of housing policies cannot significantly guarantee Malaysian housing affordability as expected. In particular, insufficient analysis on household data that delivered inaccurate statistics to developers has caused a mismatch of housing supply and demand in terms of type of properties and location, resulting in a high vacancy rate of affordable housing and low housing affordability. The DRMM was anticipated to effectively improve the housing affordability of low-income groups in three aspects: (1) supply affordable housing more precisely by implementing the strategy of centralised affordable housing authority, creating a unified housing database, strengthening development control and ensuring appropriate dwelling condition; (2) reduce housing costs by preparing land for affordable housing and reducing compliance cost and construction cost; and (3) improve home financing ability by improving financial literacy and offering various housing schemes. However, the exclusion of household income and economic factors may cause the ineffectiveness of the DRMM and, as a result, housing affordability of low-income households cannot be guaranteed.

To guarantee housing affordability, household income should be steadily increased, particularly in view of its relevance to housing prices. This, of course, depends on the strength of the national economy, which affects not only government’s ability to deliver enough affordable housing but also the job opportunities and wage levels for households. Thus, the DRMM strategies could not guarantee housing affordability of low-income households without any consideration of these two factors. To further improve the anticipated effectiveness of housing affordability, due attention should be paid to the two factors in future decision-making, while the current affordable housing policies that prove to be effective should be continuously enforced, and the existing affordable housing stocks should be more efficiently utilised.