NATIONAL housing policies must change to reflect new realities and concerns. Today, the debate is shaped by concerns about housing affordability, particularly for the middle- and lower-middle-income group.

According to Khazanah Research Institute (KRI), at the national level, median house prices are 4.4 times median annual household income last year. This signifies a 'seriously unaffordable' market.

In Kuala Lumpur and Penang, it is 5.4 and 5.2 respectively, or 'severely unaffordable', KRI says.

An 'affordable' market should be 3 times annual median household income. For Kuala Lumpur, given the annual median household income of RM91,440, an '˜affordable house' should be about RM280,000 compared to median price of about RM500,000 today. Easy credit is a contributory factor.

Malaysian Rating Corp Bhd chief rating officer Rajan Paramesran wrote a paper

'The Role of the Banking System' for a publication initiated by Cagamas Holdings Bhd in 2013.

'Housing the Nation: Policies, Issues and Perspectives' is the second publication after its first 'Housing the Nation: A Definitive Study' in 1997. Here are his views.

Some property analysts define affordable housing as RM1mil as early as last year. What do you think the price should be, bearing in mind that Klang Valley would be among the more higher priced locations?

The heart of the housing issue is what really constitutes an affordable price range and to which demographic this applies. It would be different for a first time single buyer and young married couple on the cusp of starting a family. For a single person, a unit priced at RM300,000 would be considered as affordable in the KL, never mind if the unit size is about 500 sq ft. Not so for a couple. So it's not just the price but also the built-up area.

Location is another key factor, even within the greater Klang Valley, prices are relatively low in the outskirts but when one incorporates transportation costs and travelling time, staying in these areas may not be attractive. Access to home financing is also a consideration. So it's difficult to arrive at a 'one-size-fits-all' kind of situation.

A complex issue, nonetheless. A widely used benchmark provides a guide of sorts to evaluate affordability ie the ratio of median price of a unit to median gross annual household income which is around 3 times.

Another way of assessing affordability is by working out the would-be buyer's mortgage repayment ability which should not exceed a third of his income. By these metrics, the median household income level is not in sync with house prices in the urban areas.

We have PR1MA housing, Rumahku Selangor, Syarikat Perumahan Negara, Skim Rumah Pertamaku, Rumah Mesra Rakyat, state-runned programmes and developers' own schemes. Do you think a single housing board the likes of Singapore's Housing Development Board would be a solution, bearing in mind that land is a state matter?

Each country has its way of addressing housing depending on land availability and regulations. In the past, Malaysia has required developers to have a 30% low- and medium-cost allocation for which banks provided favourable financing then. Developers needed to cross-subsidise these from their higher margin offerings.

This requirement led to delivery of sizeable number of units.

Restrictions have also been put in place on eligibility, and incentives provided to enable only deserving ones a leg up on to home ownership.

Again, the question is the supply-demand dynamics. In the past, the urban poor and the marginalized were targeted through the low-cost housing schemes.

Currently, even those with decent employment records are facing challenges to find acceptable dwellings.

What are your recommendations?

Housing issue is not unique to Malaysia.

This is a common problem the world over, particularly in major cities be it London or Hong Kong, where the familiar cry is that many people have been priced out of the market. Urban immigration, foreign purchasers, asset inflation in the era of prolonged low interest rate environment are cited as reasons.

There are no easy fixes to the problem, though one understands the easy tendency to apportion blame to the players in the housing chain, be it the developer, banker or housing authority.

To be fair, domestic banks in the past have provided preferential lending for housing units below RM100,000.

Ironically, this is the segment that has been associated with high impairment in the housing loan segment.

If one looks at the auction list, there is a preponderance of low and medium cost units being up for auction.

So suggestions that making financing readily available should be also tempered by these factors.

Are our developers too profit-oriented and too demanding with high margins?

One reason cited for the rise in property price is the undeniable increase in land price. Regardless of social considerations, it stands to reason that developers, like all business people everywhere, will seek to maximize on their investments; in this case by tailoring their offerings at a price level so long as there is demand.

You mentioned in your paper the following. Providing housing for the population has been a cornerstone of the government's socioeconomic policy since Independence. Should the provision of social housing be viewed as a socioeconomic issue or should the housing sector be viewed as a key economic driver?

As mentioned, the Malaysian Government for a very long time has played a significant role in the housing industry, and as a result we, in general, do not suffer from illegal urban slums that continue to blight many cities.

Through a raft of housing programmes, it is again addressing housing issue, albeit for different demographics compared to the past.