A property developer has called for a change of approach to the provision of affordable housing to one focused on renting and driven by the government.

Speaking to FMT, Melaka-based developer Anthony Adam Cho said the present model of getting private developers to cross-subsidise the construction of affordable housing was a mere treatment of symptoms.

He said it was regrettable that authorities in the past redeveloped low-cost properties like the Pekeliling Flats and Razak Mansion into mixed developments for sale.

“When you redevelop and sell them, the prices of the units will skyrocket,” he said. “What the government should do is redevelop them into for-rent-only units for the B40.”

He suggested that the units be rented for five years to give tenants time to work towards increasing their incomes, after which they could look into renting or buying better houses.

The units could then be rented out to others in the B40 group, he said.

“This is what the government should do with the Kampung Baru redevelopment,” he added. “If it buys the land at RM1,000 per square foot, the prices of the properties there will be sky high and unaffordable to those now staying there.

“So the government should build affordable housing units there for rent, ensuring that generations to come can rent houses cheaply.”

Cho said he believed the need to change the approach to affordable housing was more pressing than the issue of overhung properties.

If the government were to build affordable houses for sale, he said, they would be affordable only for the first buyer. After, that the houses would be resold at market value and this could see the B40 priced out again, he added.

He suggested that the government focus only on affordable housing and let private developers concentrate on selling properties demanded by the market.

The cross-subsidising of affordable housing by developers, he said, only burdened developers with more costs and the building of houses that might not find buyers even among the B40.

He said it would be better for developers to contribute funds towards the construction of affordable houses built by the government.

He urged the government to start reserving or buying land close to existing public infrastructure, particularly rail lines, to develop for-rent-only housing for the B40.

Referring to the stock of unsold houses, he said the market would naturally correct the overhang over time, “whether by means of people being able to afford higher-priced properties or developers lowering their prices or a mix of factors”.

“But providing shelter for the B40 is going to be a persistent challenge, and that needs a more sustainable solution,” he said.

Another developer, Asas Dunia managing director Jerry Chan, said private developers could be relieved of having to build affordable houses if the government could deliver on its rent-to-own schemes and public housing.

“Anything that is imposed as subsidised housing should be borne by the government,” he said.

Referring to developers facing foreclosure or cash flow problems due to the overhang, he said “all options” would have to be considered in their interest, including repackaging the bank loans they had taken.

“It’s not in anyone’s interest that non-performing loans should go up, asset values get hit and foreclosures get rampant,” he said. “The knock-on effects are far from desirable.”

He said he was against the idea of renting out unsold units because the yields were unattractive and developers could not afford to have their capital tied up.