If something is too expensive for people to be able to afford it there are two easy solutions at hand. The first is that those people simply do not get whatever it is. I am fortunate in my work and my income but BMW is still well out of reach; I’ll simply have to do without it.
But when it comes to housing of course that is not an acceptable option. We don’t all need to have a mansion to live in but in a rich country basic to reasonable shelter for all is something that we think is possible.
In which case the second solution comes into play. We should increase the supply of whatever it is, in this case housing, and the price will decline.
That means we believe in more housing. If the number of housing units meets or exceeds the number of people that want and need them, they will have more freedom of choice, more mobility and more opportunity. It also means a smaller percentage of their income has to be spent on the basic necessity of shelter.
This economics law really does work: increased supply leads to reduced price. We thus need to look at what is reducing the supply of housing, increasing the price above what we consider a reasonable level. Once we’ve done that then we can go fix the problem.
How about more money? Simply increasing the amount of money in any form chasing a limited supply of housing isn’t going to do that. But producing one million more affordable housing units within the next 10 years might actually do it though: increase the supply and we might as well reduce the price.
However, more affordable housing supply alone is almost certainly not the right way to do it. For two reasons.
Firstly, in some areas, it’s just not the price of building that is the major problem. It’s the price of the land which you may build upon that is. That is, zoning is the problem. The answer to which is to relax or abolish zoning and thus make land which you may build upon cheaper.
As for land, there is no shortage of it in the area after all. Sure, there could be a shortage of enough land for every house to be a nice little urban/suburban with a yard large enough for a swimming pool in it.
But then, so is Kuching city for the number of people who wish to live there. Housing is expensive in the city because more people want to live there than there are houses for them to live in.
We really like someone to go out and build some more. If prices are spiralling that’s simply what should be done.
Why? Because you don’t get to do both things; demand that land be used extensively and also that it be reasonably priced in an area of high demand. You either build more intensively or you watch the prices rise. There is no alternative.
If we think prices are spiralling because of profiteering, then we are mistaken. Since housing is essential for living, developers price as high as they can, regardless of people’s ability to pay.
So those who are willing to pay the current price are getting the house they wish, so there shouldn’t be any claim such as imbalance or mismatch between supply and demand at all. Complaining that there are not enough RM500,000 below is misunderstanding the price system.
And no, artificially cutting the price someone can sell a house for does not magically produce more houses for people to live in.
Secondly, it’s also true that low-cost housing is not usually something that was built as low-cost housing. Instead, it tends to be old housing that is low cost. New places are quite expensive: it’s as they age that they become cheaper.
And again no, this isn’t because old places are not maintained and so on. Rather, it’s because as we’ve generally been getting richer, we’ve ended up taking some of that new wealth as larger houses. Old houses tend to be smaller and thus cheaper than what people look for in a new build today.
That then means that we don’t actually need to subsidise the building of low-income housing today. Instead we can just build the sort of housing that higher income people want today.
Higher income people will move into this larger and more desirable housing, vacating the older buildings they currently inhabit, leaving that to decline in price and be this generation’s affordable housing.
We don’t have to build low-cost housing in order to increase the supply of low-cost homes. We only have to build more housing to do so. And that is something that will be achieved in many areas simply by relaxing or abolishing zoning regulations and just allowing people to build more housing.
My point is that, spending billions on subsidising house building as well as interventions aren’t what the market needs at all. What it does need is for the government to stop making building houses so expensive.
That is, we don’t need a plan for the government to do more, we need a plan for the government to do less.
For example, new rules to reduce compliance cost. Let’s say that Kuching city doesn’t have enough affordable housing. That’s a reasonable enough assumption given their high price at least.
So, what would we like to happen? We would like more houses to be built. And Minister of Housing and Local Government Zuraida Kamaruddin is agreeing that less compliance cost and others would lead to more houses being built sooner.
So, err, why don’t they just pull their finger out and grant more less this and that? This is, after all, something entirely created by the bureaucracy itself, they can create it in any amount they wish in whatever timescale.
If less is better why not just issue more in a shorter period of time? They have, after all, again by the minister’s very own statement, just agreed that the ministry can reduce less this and that more quickly if they should care to. So, why aren’t they?
Of course, as a society, we should take care of those who cannot take care of themselves. Quite how far up we should go with such support is another matter.
We can all agree that we should all chip in to aid orphans, or those afflicted by one of the dreadful genetic conditions that can derail a human’s life. Similarly, not that many of us object to the provision, through our taxes, of at least a basic lifestyle for the poor.
How basic is basic does become a bone of contention but the essential idea is held by pretty much all. Shelter, clothing, food, everyone should have at least the bare essentials of these, as with education and health care.
So, that’s fine. But there’s then that question of how far up the income level that should go?
When we are talking about subsidising housing for people on moderate income families, for example, there’s a very definite feeling that, perhaps, this is certainly the wrong way to deal with it.
We never know, sometimes a moderate income family will buy a low-cost home because family members may want to spend more of their budget on something else, say education or health care.
We should abolish these affordable housing targets too. We don’t make housing cheaper by having a mark to market affordable houses; we make housing cheaper by just having many more houses of whatever type.
The views expressed are those of the author and do not necessarily reflect the official policy or position of the New Sarawak Tribune.