Make public housing sustainable by balancing price with profits
> International Property Advisor Pte Ltd CEO Ku Swee Yong recommends that affordable homes be priced three to five times the annual household income
KUALA LUMPUR: Public or social housing must be affordable but at the same time, profitable for the government or developer to build in order for the scheme to be sustainable in the long term.
International Property Advisor Pte Ltd CEO Ku Swee Yong recommends that affordable homes be priced at three to five times the annual household income of the family that is purchasing the home.
“Of course you could give it away for free but then the developer and the government would make no money out of it. If somebody makes no money out of it, it is not really sustainable in the long term,” he said at the Affordable Housing Conference 2018.
Ku said when pricing public or social housing, the government must consider the buyer’s ability to service the monthly payment and the family’s cashflow as well as maintenance charges for the property.
In terms of funding public housing projects, he suggested using commercial elements within these projects to subsidise and help fund the maintenance of the residential component. For example, shophouses within these projects can be sold at full market price and the profits channeled towards subsidising the homes.
“When you price them at full commercial value, the buyer can rent it out for motorcycle repair, handphone shop or hairdressing salon at full market value because in this project there are 5,000 families moving in and you have got 300 shophouses,” he said.
In addition, the construction cost of the shophouses and the homes are not that far off and there are economies of scale with the size of the project.
If the project is big enough, the developer can also build a shopping mall integrated with the local government’s town council office, a community centre, pre-school and sports hall with facilities like swimming pool and football stadium.
“The commercial element is the profit that helps you also with future sustainability in terms of the maintenance cost of the neighbourhood, because people will pay to come to use the services. The hairdressing salon, the food court, the stallholders contribute to maintenance and that money can be used to subsidise the future maintenance of the housing units,” said Ku.
He said in Singapore, a lot of Housing Development Board (HDB) flats have shops on the ground floor that are sold to help subsidise the flats above.
Another way to ensure that the housing scheme is sustainable is to adopt the builtto-order (BTO) concept whereby construction only begins if at least 70% of available units are selected by buyers.
“If we have 1,000 units in five different blocks in Tampines, we invite applications. Then, when there are more than 70% who have selected their units, we will start construction,” he said.
In the event that less than 70% select units, the developer will delay the piling process and wait for more applications to come in. This ensures that the government or developer will make a profit.
“Of course when buying, some families may step away during the construction period and not complete the purchase; hence, it becomes sale of balance flats or re-offer of balance flats. Some families do get into financial hardship and cannot collect the keys,” said Ku.