The term ‘low cost housing’ has been widely used in housing literature and policy throughout the world. Low cost housing generally means housing for people with a low income (Ural, 1980, p.1). However, it is difficult to standardise the meaning of low cost housing, since the definition of a low income differs from one country to another.
Nevertheless, many scholars agree that the term low cost housing relates to the construction cost of the house (Drakakis-Smith, 1981; Lai, 1995; Kilham, 2008).
According to Lai (1995. p.38), “...low cost housing may be defined as the provision of housing which caters to the minimum requirements of masses within their income
capabilities, without scarifying the quality of construction...” Meanwhile, Kilham (2008, p. 175) explains the meaning of low cost housing from the designer’s point of view “...it is important to strike the balance between comfort and the minimum construction cost for low cost housing provision." To ensure the large group of people with a low income can afford to buy low cost houses, the state should intervene to reduce the construction costs in terms of land, building materials, labour and planning/building standards (Drakakis-Smith, 1981, pp. 172-181).
Therefore, it can be established that the meaning of ‘low cost housing’ is different from
‘affordable housing’ which has also been widely used to describe housing for people with a low income. As Stone (2006, p. 154) explains “affordable housing is not necessary low cost housing...typically encompasses not only social housing and low income housing but also financially assisted housing for middle income households that find it difficult to purchase houses in the private speculative market”. Hence, there is no specific price threshold or construction cost limit for affordable housing as long people can afford to pay for the house.
Meanwhile the United Kingdom government, based on Circular 9/98, uses the following definition: “... affordable-housing or affordable homes used in this circular to encompass both low cost market and subsidised housing (irrespective of tenure, ownership whether exclusive or share or final arrangements that will be available to people who cannot afford to rent or buy homes generally available on the open market” (cited in Cullingworth and Nadin, 2006, p. 168). In conclusion, the implementation of low cost housing requires state intervention in order to reduce the construction costs and the selling price (supply side subsidies). Meanwhile, affordable housing requires state intervention to ensure people with a low income can afford to buy the houses, regardless of the price, either by providing financial assistance or housing allowance (demand side subsidies).
In Malaysia, the term ‘low cost housing’ has been used to describe housing for sale or rental targeted for low income people since 1956 (Housing Trust, 1956, p.1).
Moreover, the term was politically acceptable to reflect government efforts to help people with a low income. Low cost housing in the context of Malaysia always refers to conventional housing provided by both public and private sectors for people with a low income rather than squatter upgrading or aided self-help housing programmes. The conventional housing provision represents housing that is produced through the official
societies and land development companies and observes formal legal practices, building standards and land use subdivision regulations (Drakakis-Smith, 1981, p.40).
The selling price, the target group and building specifications have been used by the government to define low cost housing in Malaysia (Malaysia, 2006, p.55). The selling price of low cost housing is subject to review from time to time by the government to ensure people with a low income can afford to buy houses. The government also constantly reviews the building specification and design standards of low cost houses in order to minimise the construction costs (CIDB, 1998). Therefore, low cost housing in Malaysia can be defined as housing provided for people with a low income either for sale or rent by both the public and the private sector, according to appropriate building standards. However, for the purposes of this research, only low cost housing for sale will be discussed further.
People with a low income in the context of selling low cost houses means people above the poverty line (see Table 5.1). The Poverty Line Income (PLI) method has been used to determine the poverty line in Malaysia since 1977 (Mat Zin, 2007 p.31).
The PLI was estimated based on the minimum requirements of a household for three major components, namely food, clothing and footwear, and other non-food items such as rent, fuel and power, furniture and household equipment, medical care and health expenses, transport and communications and recreation, education and cultural services (Malaysia, 2001, p.58). The PLI is also updated annually to reflect changes in the levels of prices by taking into account changes in the Consumer Price Indices (CPI). It is important to note, low cost housing is not targeted for people below the PLI since they are categorised as hard core poor in Malaysia and most likely would not be able to afford to buy a house. Instead, they have received assistance directly from the Federal and State governments through a special programme known as Program Pembangunan Rakyat Termiskin (Hard Core Poor Development Programme) since 1993 (Malaysia, 2001, p.59). Assistance given to this group in terms of housing includes free building materials for house construction in rural areas or subsidised monthly rental for public low cost houses in urban areas. However, analysis of the housing programme for hard core poor people is beyond the scope of this research.
Meanwhile, the determination of the income ceiling for low cost house buyers was derived from the affordability of monthly instalments; effectively a buyer should not spend more than 30 percent of their income to pay for the instalments. Based on that formula, the ceiling income for low cost house buyers was set between RM500-750 for
a house price of RM25.000 per unit (1981-1998). When the sale price for low cost houses was increased to RM42.000 per unit in 1998, the ceiling income for buyers was raised to RM1,500 per month. Based on PLI and the income ceiling, the target group or ‘people with low income’ in the context of selling low cost houses is determined by the government from time to time.
Table 5.1: Poverty Line Income, Income Class and Target Group for Low Cost Housing in Malaysia, 1970-2007
1970 1979 1989 1999 2007
Poverty Line Income (RM)1
Peninsular n.a. 272 370 510 661
Sabah n.a. 352 544 685 888
Sarawak n.a. 304 425 584 765
Income Class (% household)^
RM499 and below : 89.3 57.0 25.7 6.0 1.7
RM500 - 999 7.5 25.7 35.3 19.0 6.8 ;
R M 1 .0 0 0 - 1,499 1.8 8.5 17.0 18.8 15.8 ;
RM 1 ,5 0 0 - 1,999 0.6 3.6 8.5 13.9 13.5
RM2.000 - 2,499 0.3 1.9 4.8 10.1 11.2
R M2,500 - 2,999 0.2 1.0 2.9 7.3 8.6
RM3.000 - 3,499 0.1 0.6 1.7 5.7 7.1
RM3.500 - 3,999 01 0.5 1.0 3.9 5.8
RM4.000 - 4,999 0.0 0.5 1.3 5.5 8.6
RM5.000 and above 0.1 0.7 1.8 9.8 20.8
Total 100.0 100.0 100.0 100.0 100.0
Low Cost Houses"
Target Group (Income) > RM300 RM300-750 RM500-750 RM750-1500 RM750-1500
House Price (‘000) RM15-18 RM15-18 RM25 RM25-42 RM25-42
Note: ; 1 Target Group for low cost house
S o u rc e s : 1 & 2 Economic Planning Unit Malaysia, 2010 3 Asek, 2007, p. 144
Similarly, the percentage of households within the target group according to income class was also used by the government to justify the 30 percent low cost house unit requirement for private sector residential development from 1981. However, by 2007 only 22.6 percent of the population was eligible to buy low cost housing based on their income level. Although the government established the number of households within the target group, it was difficult to determine demand according to location and status of homeownership. Therefore it was important for the government to establish a low cost house buyer registration system to address the issue.