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CHAPTER 5: LOW COST HOUSING PROVISION IN MALAYSIA

5.4 Selective State Intervention (1956-1970)

5.4.1 Low Cost Housing Policy and Programmes

Prior to independence, the British Colonial Government introduced the low cost housing programme in response to continued housing problems. The Housing Trust Federation of Malaya was entrusted with providing low cost housing by the government from 1956. Prior to 1956, the Housing Trust confined itself to the provision of houses for sale for the middle income group (Housing Trust, 1956, p.2). Following the general election in 1955, the Housing Trust came under the Ministry of Natural Resources and Local Government and the minister was appointed as the Trust’s chairman. The minister then decided that the Housing Trust should concentrate only on providing low cost houses for rental and sale. The housing was targeted at people with a household income of less than RM300 per month. The Housing Trust’s role as a government agent also earmarked the beginning of state intervention in low cost housing provision in Malaysia (Housing Trust, 1956 p.5). Meanwhile, the private sector continued its role of providing housing for people with a middle and high income.

After independence, the low cost housing policy was largely influenced by recommendations from the United Nations and British government experts. The report by Mr. Atkinson, the Head of the British Tropical Building Section (Atkinson, 1961), on low cost housing revealed a large number of houses in poor condition throughout the Federation of Malaya particularly the low cost houses. Under the Second Malaya Plan (1961-1965), the government emphasised the provision of cheap housing as a basic

social need based on the ‘home-owning democracy’ (Agus, 1997, p.34). However, the programme never achieved its objective to increase homeownership among people with a low income due to a limited number of low cost houses built by the government during this period (Johnstone, 1979, p.220).

Following the establishment of the Ministry of Local Government and Housing (MLGH) in 1964, the formulation of low cost housing policy was based on two guiding principles. Firstly, the Federal government should provide the necessary funds at a low interest rate and utilise the technical services of the Housing Trust. Secondly, the State governments would provide land at a nominal price with the necessary roads, road­

side drains and water mains free of charge (MLGH, 1966, p.3). The housing, however, was still targeted at people with a monthly income of less than RM300, usually working class people such as general labourers and lower rank government staff. From 1964 onwards, a lot of ground work and research was conducted to prepare for a more intensive low cost housing programme under MLGH. This includes the formation of “a Committee on Standards” which was appointed to draw up minimum standards for low cost housing with a view to achieving uniformity throughout the country and also to reduce the cost of construction (MLGH, 1966, p.5).

The structure of low cost housing provision shows the significant role played by the state during this period. From 19560 to 1970, most low cost houses were built by the Housing Trust (see Figure 5.3). The reason was because private housing developers did not find it economically viable to undertake low cost housing, especially on land which they bought at a competitive market price (Soo Hai, 1979, p. 175). In addition, there was no requirement from the government for the private sector to provide low cost housing. That was in line with government policy for minimum intervention in the housing market.

The low cost houses built by the Housing Trust were for both hire purchase and rental.

The hire purchase housing was defined as “housing where the monthly rent paid by the tenant is recorded as a hire purchase instalment” (Housing Trust 1956, p.6). The tenants were also not required to pay an initial purchase deposit and they became the owner of the house when the cost of the building and ancillary services was fully repaid. Loans were provided to purchasers by the Housing Trust at a heavily subsidised rate of 2 percent with a 10 year repayment period. The monthly repayment was fixed at RM35 which meant that the total cost of the house including land and

cost houses under this category targeted people living in rural areas or the fringes of urban areas (see Figure 5.4). Therefore, it shows the Housing Trust were willing to use local materials for housing construction to reduce the construction costs.

STRUCTURE OF LOW COST HOUSING

PROVISION

STATE

Financing:

Federal Government

Land:

State Land Construction:

Private Contractors

Federal Government 1

N/

The Houssing Trust | >1 Allocation Committee

Housing Stock

I

Housing Stock

I

I

State Government

\/

Local Aijthorities |

Infrastructure provision and housing administration

Hire Purchase Rental

Figure 5.3: The Structure of Low Cost Housing Provision in Malaysia, 1956-1970 Source: Author

Meanwhile, rental housing was defined as “housing where the tenant pays a monthly inclusive rent sufficient to cover repayment of loan, interest, fire insurance, rates, maintenance and administration” (Housing Trust 1956, p.6). The inclusive monthly rent was fixed at not more than RM50 per month. Loans were provided for a period of up to 30 years at the subsidised rate of 3 to 5 percent per annum to local authorities for housing construction by the Housing Trust. The rental housing then became the property of the local authority when the repayment of the loan to the Housing Trust was completed. It was decided to implement this policy through the construction of houses and flats of brick or concrete construction in inner urban areas (see Figure 5.5). Local authorities were still involved directly in house allocation and the collection of monthly rents from the tenants.

Figure 5.4: Typical Wooden Low Cost House Available Under the Hire Purchase Scheme in Rural Areas by the Housing Trust

Source: A nnual R eport H ousing T rust Federation of M alaya, 1957

Figure 5.5: Typical Low Cost House Available for Rental in Urban Areas by the Housing Trust

Source: A nnual R eport Housing T ru st Federation o f M alaya, 1957

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In order to implement the programme, the Housing Trust required cooperation from State governments and local authorities. The State governments were responsible for identifying suitable land for low cost housing and contributed financially towards the provision of infrastructure. A subsidy in the form of land, either free or with a nominal premium, was required from the State governments. Meanwhile, local authorities allowed for faster planning approval for low cost houses built by the Trust. The arrangement between the Housing Trust, State governments and local authorities continued until 1970 for low cost housing production.

In 1967, the Housing Trust implemented the ‘Crash Programme' to overcome the housing shortage (MLGH, 1968a). The main objective of the programme was to build small schemes of 50 or 32 dwellings per scheme in the smaller towns which had not previously had a low cost housing project. The essence of this programme was speed, and the ministry, through the Housing Trust, paid for land acquisition and was responsible for infrastructure. The whole programme emphasised standardisation to the highest possible level. It began with standardised layouts of 2.3 acre plots to accommodate 50 dwellings or 1.66 acre plots to accommodate 32 dwellings and continued with a standardised house design and standardised tender and contract procedures. A total of 14,175 low cost housing units were completed under this programme from 1967 to 1969.

However, the real intention of the programme was to impress voters prior to the 1969 general election (Drakakis-Smith, 1979; Alithambi, 1979). As described by Alitambhi v i 979, p.51), the Crash Programme also “demonstrate[d] the ability of Federal government to harness its resources to implement the housing programmes if it really wants to do.” Clearly, the low cost housing programme’s implementation during this period was based on a ‘Tokenism’ approach. The goal of a tokenism housing programme was mainly to gain political mileage rather than solve a housing problem (Pacione, 2009, p.538). Pacione added, “...the programme [was] implemented to be [a]

visible symbol of government concern for the poor rather than meeting the housing need and usually taking [the] form of high rise block irrespective of their fiscal or cultural suitability.” The “Crash programme” also demonstrated the importance of political intervention in low cost housing production and allocation during the 1960s.

In terms of financing, before 1960 the Federal government channelled all the funds directly to the Housing Trust as part of revolving fund for housing construction (Housing Trust, 1956, p.3). When the purchasers or tenants repaid the loans to the

Housing Trust, the money was used for future low cost housing projects. However from 1964, Federal funds were loaned directly to the State governments and municipalities, as described by MLGH:

“The Ministry controlled the allocation of loan and funds and invited bids annually from the various State governments to undertake low cost housing schemes. On approval o f a project a loan agreement was drawn up between the Federal Treasury and the State government for the amount allocated and the State government was granted the architectural and supervisory services of the Housing Trust free of charge. The Trust in conjunction with the State P.W.D. (Public Work Department) and the State Town Planner, designed the project, supervised the construction and on completion handed over the houses to the State governments” (MLGH 1966, p.3).

The construction of low cost houses for the Housing Trust was always undertaken by private building contractors from 1956. The Housing Trust was only involved in project design and supervision, but relied on private contractors to build the houses which were later handed over to State government for sale or rental.