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Factors lead to overhang in affordable housing: A content analysis in

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ICRMBEE 2019 IOP Publishing
IOP Conf. Series: Earth and Environmental Science 385 (2019) 012073 doi:10.1088/1755-1315/385/1/012073

Factors lead to overhang in affordable housing: A content

analysis in qualitative approach
N Ab Rahim1, S M Adzhar1, N Basrah1, R Ab Majid1 and S Mustafar1
1Facultyof Architecture, Planning and Surveying, Universiti Teknologi MARA, Shah Alam, Selangor,
Malaysia

Email: norbayaabrahim@gmail.com

Abstract. Housing issue is one of the key challenges and has its social repercussions if not well
managed. The numerous affordable housing programs have been introduced and intended to
increase the supply of affordable housing. The programs are meant to alleviate the affordable
housing issue in the country. Although the lacking units of affordable housing persists, the slow
market trends have also led to an increase in overhang units. The number of property overhang
partly in affordable housing units were reported increased continuously year over year and does
not attract the target market nor able to cater the housing needs of the targeted house buyers.
Industry players were of the opinion that the perceived slow demand in low cost housing units
are mainly due to difficulty in securing financing, unsuitable location as well as a shift in demand
towards better quality projects and other factors. The purpose of this study is to identify the
current overhang scenario in affordable housing and factors that lead to the issues. There is a
need to have an in-depth study in addressing the issues. Otherwise, the overhang will exert
pressure on prices and rental in the market and gives impact in near future.

1. Introduction
Housing issue is one of the major challenges for the government and has its social repercussions if it is
not well managed. Part of the initiatives taken by the Federal and State Governments to increase the
supply of lacking units including introducing projects such as Perumahan Rakyat 1 Malaysia (PR1MA),
Residensi Wilayah (formerly Rumah Wilayah Persekutuan-RUMAWIP), Rumah Selangorku, Program
Perumahan Rakyat (PPR), MyHome 2, Rumah Mesra Rakyat Plus (RMRplus). The housing program is
meant to alleviate the housing affordability issue as well. Affordable housing is defined as an adequate
housing in quality and location, and not so costly that prevents its occupants from meeting other basic
living needs [1]. The standard definition for affordability in housing is that households should pay not
more than 30% of their income for housing including utilities. The term is referring to the households’
capacity in meeting the costs of housing while maintaining the capability to encounter other basic of
living costs [2].
The introduction of more affordable housing in Malaysia such as PR1MA and Residensi Wilayah
housing programs were initiated with the main objective to provide sufficient units of affordable housing
as to cater the demand especially for the middle-income class earners. However, despite of the lacking
of affordable housing, the issue of property overhang in Malaysia is worsening where the report reveals
that the statistic is increasing year by year. On the other hand, there are also issues about the lack of
supply of affordable housing which has becoming the common news in the property industry. According
to the National Property Information Centre (NAPIC), there were a total of 29,227 overhang residential
units in Malaysia as at the first half of 2018, valued at RM17.24bil [3]. Part of the figure represents the
affordable housing statistics. This comes to the scenario where the success rate of affordable housing
depends on some factors which affect the take-up rate and the overhang statistics. Hence, the aim of this
paper is to identify the current scenario of affordable housing and to determine factors that affecting
overhang in affordable housing in the country.

2. Literature Review
2.1 Affordable Housing Landscape in Malaysia
Providing affordable housing especially in big cities remains to be a challenging task since the price of
housing units are continually increasing while the supply of units is still inadequate to meet the demand
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IOP Conf. Series: Earth and Environmental Science 385 (2019) 012073 doi:10.1088/1755-1315/385/1/012073

of the middle-income group. The supply of affordable housing in Malaysia is still insufficient especially
at the urban area. The undersupply of housing is particularly serious in the affordable housing
segmentation [5]. The shortage and lack of supply of affordable housing in Malaysia, especially in Klang
Valley is a renowned issue and widely discussed where the housing market in Malaysia has not been
able to provide an adequate supply of affordable housing for the masses [5].
In Malaysia, more than 20 national and state level agencies are involved in the provision of affordable
housing. One of the program introduced is PR1MA with the aims is to establish, plan, develop, construct
and maintain affordable lifestyle housing for middle-income households in urban centres. The
government plans to build more affordable housing in the cities and towns in Malaysia. The PRIMA
project was launched on 4 July 2011 by the former Prime Minister, Najib Razak. The program is
managed by the government owned company known as Perbadanan PR1MA Malaysia under the
Ministry of Housing and Local Government.
Perbadanan PR1MA Malaysia was established under the PR1MA Act 2012 with the focus to plan,
develop, construct and maintain high-quality housing with lifestyle concepts for middle-income
households in key urban centres. PR1MA homes come in various types and sizes within an integrated
community sensibly designed to suit different household needs with the price between RM100,000 to
RM400,000. Earmarked for development in key strategic urban areas nationwide, PR1MA is open to all
Malaysians with a monthly household income between RM2,500 to RM15,000 and these houses are
sold about 20%-30% lower than the market prices. The funding of PR1MA projects is from the
government. It is learned that PR1MA needs about 12,500 acres of land in accomplishing the mandate
to build 500,000 units by 2020 [6].
Residensi Wilayah or formerly known as Rumah Mampu Milik Wilayah Persekutuan (RUMAWIP)
is the Malaysian government's initiative to build 80,000 affordable housing units throughout Kuala
Lumpur, Putrajaya and Labuan by the year 2020. Up to 80,000 units of affordable houses were targeted
to be built in the Federal Territory under the RUMAWIP scheme in 2018, with 50,000 units to be built
in Kuala Lumpur. The classification of affordable housing is known as properties that intended to cater
for the median population specifically to the middle-income groups and are priced between RM150,000-
RM300,000 (up to RM350,000 in prime areas) and with a build-up of at least 800 sq. ft. (excluding the
balcony) and with 3-bedrooms. The criteria of affordable housing have to be priced below RM300,000
and any price above RM300,000 is not considered as affordable housing. This criterion is set by the
government in 2019. This is different from social housing where the definition of social housing is
defined as low cost to medium cost housing which developed for the lower income groups or those
classified as in the urban poverty groups. In order to be qualified for this, typical household income need
to be below RM3,000 monthly. The social housing usually has 1-2 bedrooms. The price is ranging
between RM35,000-RM60,000 with built-up of 650 sq. ft.
The housing affordability in Malaysia is a function of house price and income. The median house
price was 4.4 times median annual household income in 2014 which signifies to ‘seriously unaffordable’
state [7]. The affordability levels are different from each state as dictated by supply and demand. The
lack of definition in threshold of maximum affordable price levels in the country has led to the use of
varied pricing structure in affordable housing. The house prices are depending highly on location, hence
some states in the country have more affordable housing markets than other states. Kuala Lumpur and
Penang are both severely unaffordable with median multiple of 5.4x and 5.2x [8].
Based on NAPIC statistic, over a 10-year period, the overhang value has increased to more than
100% from RM4.48bil in 2008 to RM10.08bil as at March, 2017. Although the number of residential
launched have dropped compared to 2008, the overhang value has risen dramatically, due to high
property prices. The houses priced between RM200,000-RM400,000, are considered in affordable
range, make up 28% of total overhang as at 1Q17, rising from 25.4% at 4Q16. From the highlighted
data, it indicates that housing market is still trapped in the consolidation mode on a weakening bias [3].
However, despite of the launches of more affordable housings, report shows that overhang in
affordable housing is in worrying state. Based on the statistic obtained in PR1MA’s website as of 31
March 2018, PR1MA had approved 268,537 housing units for development with various stages of

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IOP Conf. Series: Earth and Environmental Science 385 (2019) 012073 doi:10.1088/1755-1315/385/1/012073

construction. However, the take up rate is only 11.5% with the total value of 16,000 units. In 2018, The
Housing and Local Government Ministry recorded a property overhang of RM22.5 billion worth in
unsold houses nationwide, with 73% of the statistic comprises affordable houses priced at RM250,000
and below [4]. A substantial portion of those statistic is from government affordable housing projects
that has failed to gain a buying traction. In 2015, residential property with the price of RM500,000 and
above were accounted for less than one third of the housing property overhang statistics. On the flipside,
the house with price range RM300,000 or less became half of the overhang numbers. Furthermore, house
with price of RM100,000 and below were included for about 15% of the overhang statistic. This shows
the statistics of overhang is involving the affordable housing segmentation [11].
The terms of ‘property overhang’ (including residential or housing) as indicated in Malaysia Property
Market Report have been changed for three times since the year of 1999, 2000 and 2003. In 1999,
overhang is referred as the total number of housing units that was remained unsold after it was launched
for sale on or after 1 January 1997. In year of 2000 to 2002, the term of `property overhang’ refers as
property that remained unsold for more than 9 months after it was launched for sale on or after 1 January
1997 (completion units, under construction and not built).The term also changed with effective from
2003, whereby ‘property overhang’ has obtained a new definition which is to only include the completed
housing unit with Certificate of Fitness for Occupation (CFO) by local authorities and remained unsold
for more than 9 months after it was launched for sale on or after 1 January 1997 [4]. Table 1 illustrates
the residential property overhang in Malaysia.

Table 1. Residential Property Overhang Units in Malaysia

Price Range (RM) 2015 2016 2017 1H2018

50,000 or less 414 456 1,023 873
50,000-100,000 1,348 1,299 1,430 1,672
100,001-150,000 603 822 1,056 914
150,001-200,000 907 975 2,069 2,670
200,001-250,000 888 920 1,303 2,320
250,001-300,000 1,213 1,358 1,648 1,935
300,001-400,000 1,006 1,472 4,469 4,983
400,001-500,000 846 1,438 2,585 2,516
500,001-1,000,000 1,967 3,943 5,612 7,525
More than 1,000,000 971 2,109 3,543 3,819
Total 10,163 14,792 24,738 29,227
Source: NAPIC (2019)

2.2 Factors Lead to The Overhang of Affordable Housing

The related factors that lead to the overhang units in affordable housing are economic, political and
environmental. The search for factors that relates to affordable housing has been discussed widely. It
has been argued that one of the main affecting factors is due to its poor location and unattractiveness to
aspire homeowners [6]. However, for some affordable housing, such as low-cost units, the lack of
demand for low-cost units could be due to a mismatch in location and product type [6]. This reflects the
general cautious mode of buyers, dampened by high cost of living, job worries and the lack of income
growth due to the softening economic conditions in recent years. The unattractive location factor of the
affordable housing projects such as the distance from work places and low transport connectivity has
led to this overhang issue.
The overhang and unsold units are reported did not attract the target market nor cater to the housing
needs of the targeted house buyers [6]. Imperfection of the housing market which is distorted by external
influences such as unethical speculation by housing developers has contributed to the market failure on

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the affordable housing. It is learned that some of the overhang issue were originated from the weakness
in the planning approval system by the local authorities whereas the housing applications were being
permitted without the consideration of the actual demand. The approval process at the Local Planning
Authorities and State Authorities which focus on the technical requirements without taking an equal
consideration of the actual demand also contributes to the issue of overhang and oversupply [14].
Some of the industry players pointed the overhang issues was due to Bumiputra quota which varies
and not just from state to state, but also between zones in a state [10]. There is also a social stigma in
young Malaysian in purchasing a designated affordable housing projects such as PR1MA and Residensi
Wilayah that deter a chunk of targeted demographic. Meanwhile, the Association of Valuers, Property
Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) were in the
opinion that the high unsold was due to the factors of the indiscriminate building by developers, lack of
market studies and financial feasibility studies, no coordination on planning among local authorities,
indiscriminate approvals by the various local authorities, delay in gazetting of local plans, which lead to
uncontrolled development, the higher cost, and artificial demand .
The inability to secure end financing is another factor that worsen the issue [9]. The two main issues
that led to unsold of affordable housing units are identified as end financing and unreleased Bumiputra
units [12]. The financing issue include lower margin of financing offered, buyer’s income ineligibility
and also adverse credit history.

2.3 Critical Success Factors (CSFs) of Affordable Housing

The Critical Success Factor (CSFs) were proposed by Daniel in 1961 and popularised by Rockart’s in
1979 [16]. The CSFs method has been widely implemented and has been used in different fields of
researches as to determine on the most critical factors influencing success. The CSFs defined as those
characteristics, conditions or variables that, when properly sustained, maintained, or managed, can have
a significant impact on the success of a firm competing in particular industry [17]. In affordable housing,
there are factors that are identified as the Success Factors. The need of thorough and complete
knowledge of the CSFs, will able to produce good result. Without applying the CSFs concept, the
organisation’s performance will not able to produce the expected results. The identified CSFs in
affordable housings are ‘time, cost and quality management’, ‘satisfaction, health and environmental
safety’, ‘user affordability and design consideration’ and ‘cost of individual units and technology’ [13].
Meanwhile, some researchers highlight that there are other seven CSFs for affordable housing which
are known as the ‘institutional framework for public housing’, ‘availability of competent personnel’,
‘effective project management’, ‘good maintenance management practice’, ‘appropriate design and
good location’, ‘effective housing finance system’ and ‘adequate political support’ [14]. First time
buyers in Malaysia are considering several factors in choosing their first unit. The related factors are the
demographic, financial, location, structure, neighbourhood and economic. The identified major factors
that influence property buyer’s in choosing a living place are location, building size, type of unit, the
number of bedrooms, design and layout, amenities, facilities, view, density, developer’s reputation,
promotional effort, security, and convenience [15].
Among the researchers, there is no exact consensus on what constitutes projects success. This is
because every project type may have different criteria in determining success [14]. In measuring a
successful housing programs, it is not merely measuring the supply of the affordable housing. Other
criteria are to be included to ensure the programs are able to meet the need of the household especially
on the accessibility and also the affordability term. In Nigeria, four criteria for measuring public housing
product success namely meeting the project purpose, end user’s satisfaction, environmental impact and
aesthetic appearance of the property [14]. A good affordable housing can be proven by the take up rate
by the purchasers and no issues on unsold units of the affordable housing.
The policies and programs are key to the affordable housing success. This can be done through the
implementation of proactive preservation and the policies development for affordable housing. By
enacting to the policies, government can stem the associated issues of like the placement and
accessibility to transit, employment hub and neighbourhood amenities. The housing programs have to

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be designed to address needs across all income segments and accounts for changes that may occur in
residents’ circumstances and also the city demographic. Therefore, the policies and programs have to
be comprehensive and can be addressed systematically by setting targets, employing cost reduction
levers and strengthening local delivery [24].
Vast literatures discussed on the nature, the measurements, and the barriers of the issue. In the
supplier’s side, more developers should focus on the affordable housing, and try to make these properties
available to certain quarters of the community, and to incorporate with a range of community amenities
in these developments. In term of the demand and supply side of housing, the interventions have been
largely on the demand side while the supply side have been direct provision of low-cost housing or
subsidizing the cost of housing. The land costs and its use, the planning policy, the construction cost are
the driven factors in supply [1].
The CSFs are the crucial factors of any housing development as it will be able to determine the
success rate. It is significantly being used in order to present or to identify a few key factors which the
focus should be given by the organisations in order to succeed.

Figure 1. Model of Project Success Criteria

Source: Pinto and Slevin, (1988)

Figure 1 shows a model developed by Pinto and Slevin (1988) in order to assess on the project
success. This model comprises of two components specifically on ‘Projects and Client’. The first
component consists of time, cost and performance aspects. The second component includes three main
criteria namely use, satisfaction and effectiveness [14].
The criteria for project success are measured by satisfaction from clients, meet all the projects’
objectives and requirements, meet the agreed budget, deliver the key project or products on time, able
to add value to the organisation, meet the quality requirements, and have sense of professional
satisfaction for the team [22]. The success of a project is measured by product and project quality,
timeliness, budget compliance and degree of customer satisfaction. The success also must starts with
two other measures known as the measure of effectiveness and measure of performance [23]. Three
most important criteria for measuring project management in public housing are client’s satisfaction,
completing the projects on time and achieve the specified quality standard [14].
The success of the project can be described as a complex and often illusory construct, but nonetheless
it is of crucial importance for an effective project implementation [21]. One of the factors in affordable
housing is the location and access. The accessibility factor distresses the opportunity and able to ease
on the individual at a given location that participates in their activity [18]. One of the house buyer
preference in choosing units for own staying is accessibility. The house buyers are not willing to pay
more than required for transportation to workplaces, hospital, parking and others [25]. The accessibility
factor also include the occasion of diversity of facilities and the amenities. These two items definitely
securing the lifestyle and its quality.

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In order to meet the increasingly affluent and discerning house buyers, developers instead of just
offering dream homes in prime locations, they should provide intangible benefits in the neighbourhood
that just as sought after by today's house buyers, such as a sense of security in the landscape compound,
a feeling of harmony with one's surroundings, and an infrastructure which supports the lifestyle of house
buyers [19].
The efficiency of public amenities will able to reinforce the quality and the wellbeing of society. The
convenience access to the service of transportation is one of the vital problems for low income earners.
An improper transportation service will be one of the obstacle for the employees to success. Good
quality of public transport and job accessibility are the key success for employees to perform well [20].
This could result in a desegregated urban poor area that has less-than-equal access to public services and
facilities, including schools and heath care, and challenge sustainable local development in economic
inequality. Those employees need to commute for long distances as they are unable to find affordable
housing near to their job place. As they have to spend excessive amount of time to travel, they will be
less productive and more frustrated compared to others.
The importance of public service accessibility for affordable housing is also driven by spatial equity,
a notion associated with the degree to which services or amenities are equally distributed across different
economic and political groups. In comparing to economically advantaged households, low-income
households are limited to access public facilities which influenced substantially by the allocation
policies of affordable housing. In the absence of government intervention, the allocation of dwellings is
driven by ‘market forces’ determined by the interactions of buyers and sellers, each with their own
interests. In general, depending on affordability, households can make decisions based on housing size
and other characteristics when choosing housing locations. This does not mean that market allocation
always leads to equitable outcomes, but it does suggest that public provision and allocation of housing
replace household choice with some forms of local government bureaucratic decision based on
comprehensive consideration of expenditures and benefits. An affordable housing household attach
greater importance to commuting convenience due to the remote residence locations [7].
Other factors are future potential, speculation, financial loan, physical attraction and demography.
The CSFs are the few key areas where 'things must go right' for the business to flourish and for the
manager's goals to be attained. The CSFs create impacts on the affordable housing. This concept
applicable in defining the CSFs of affordable housing.
The CSFs are the key elements to ensure the future success of the affordable housing projects and
able to prevent the overhang issues especially in affordable housing market segmentation. There are
several factors as listed in influencing on the successes of the affordable housing. In relation to the
impact of branding, the earlier research was done by Ashworth and Voofd (1994) which suggested that
the geographical marketing mixes are defined as promotional measures, spatial functional measures,
organisational measures and also financial measures [26]. This is applicable to the affordable housing.
The scope and effectiveness of property marketing is largely determined by the selection and application
of the appropriate combination of these measures. The role of branding is increasing important to the
property industry. Property developer need to increase the roles and importance of the branding as the
branding should no more be used as a marketing gimmick but as a driving force in becoming the
direction and focus in any property company’s strategic planning.
There are three key factors considered as in realising the success factor of affordable low-cost
housing project namely community involvement, affordable loan and integration of economic activities.
However, in figuring out the success factor of affordable housing, an upgrading method which is
citywide, programmatic, channelled through and managed by government, and combines a community
demand orientation with supply side rules of access are the keys to lead the affordable housing to become
success. The explicit longer time goal such as infrastructure upgrading strategy are also the success
criteria of affordable housing. The hampering sales of affordable housing would include the
inconvenient location, lack of accessibility and the unsuitable design and product [8].
An affordable housing process takes into account on the accessibility measures for intending
occupants, adequacy and quality, availability measures and affordability measures. There are six

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categories that have to be satisfied when providers deliver affordable housing, namely appropriateness
of the dwelling, housing and social mix, tenure choice, and location, the quality of environmental
planning, design and cost. This includes the delivery speed that maybe the most important factors in
affordable housing project success. In affordable housing, the value of social capital or known as
technology is crucial as it can produce economic benefits and should it is neglected, it is able to create
the economic disadvantages. The satisfaction of low-cost residents, from where it was found that it is
critical to improve neighbourhood facilities to increase residents’ satisfaction [18].
The appropriate location is one of the most important CSFs in developing a successful affordable
housing. In developing a successful affordable housing, the projects must be built where residents are
able to reach jobs in reasonable commuting times, access to school and vital services and able to connect
with their society around them. Hence, the right location is one of the factor to be considered. If the
decision is wrong, the affordable housing projects will not be a success regardless of how well the
construction, operations and financing are managed. The travel time to workplace is one of the factors
to be considered by homeowner. The house buyers prefer the residential units with similar price and size
with better connectivity to the city centre. The connectivity and distance factor of affordable housing
units are also contributing to the property overhang issue.

Table 2. The Factors Affecting Overhang in Affordable Housing

Factors lead to overhang in affordable housing Authors

1 Unattractive location Ling, 2017
2 Price (Escalating house prices in major cities) Ling, 2017
3 Mismatch of the product, location and price Ling, 2017
4 Imbalance of property market Ling, 2017
5 Imperfection of the housing market distorted by external Rameli et.al, 2007
influences such as unethical speculation by housing
developers contributed to market failure
6 End financing and unreleased Bumiputra units Soam, 2018
7 Time, cost and quality management, satisfaction, health and Kwofie et. Al, 2012
environmentally friendly, user affordability and design
consideration and individual units and technology
8 Supply and demand (Mismatch in demand and supply of KRI, 2016
affordable houses)
9 The accessibility Li, 2018
10 Poor integrated planning and implementation of affordable Ali et. al, 1988
housing provision
11 Social Stigma in purchasing an affordable housing Kamaruddin, 2018
12 Indiscriminate building by developers, lack of market PEPS, 2018
studies and financial feasibility studies, no coordination on
planning among local authorities, indiscriminate approvals
by various authorities, delay in gazetting local plans
13 Affordability and design consideration Mukhija, 2014
Community involvement, affordable loan and integration of
14 economic activities Crisp , 2016
Technology and costs
15 Institutional framework of public housing, availability of Mammela, 2018
16 competent personnel Mukhtar, 2017
Effective project management and good maintenance
17 practise Mukhtar, 2017

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18 Effective housing finance system and adequate political Anyanyu, 1991

support
19 Demographic, structure, neighbourhood and economic Oliver, 2005
20 Connectivity, distance and commuting time, low transport Wu, 2017
connectivity

3. Methodology
An extensive literature review was conducted as to achieve the aim of the research. This involves the
discussions, the thorough study of various published sources such as articles and journals, other research
papers and other research materials. This research will be using the content analysis and thematic
analysis as the preliminary method. Content analysis is a research method for making replicable and
valid inferences from data to their context, with the purpose of providing knowledge, new insights, a
representation of facts and a practical guide to action. In order to achieve the objectives as to establish
a structural modelling of CSFs in affordable housing, the research interview will be conducted as to
explore for the views, beliefs, and experiences of individuals on the specific matters. The data will
be collected through the interviews with the relevant authorities and suppliers’ side such as PR1MA,
Residensi Wilayah programs, Real Estate and Housing Developers ‘Association (REHDA) as
respondents. The interview method provides a deeper understanding of social phenomena and then
would be obtained from purely quantitative methods such as questionnaires.

4. Result and Findings

The purpose of this study is to develop a CSFs structural modelling for the affordable housing projects
and involving three (3) phases of research strategy. The theoretical frameworks have formed 20 listed
factors and managed to identify the related success factors. The outcome of the research is shown in
Table 2. The study reveals the related factors on the successful of affordable housing in general. The
focus of the research is mainly in urban areas. The analysis is of the related journals are done
accordingly. The main keyword on the journals are overhang, the success factors, affordable housing
and urban areas.

5. Conclusion and Discussion

The key roles of the research are about the establishment of a framework for the successful affordable
housing. This research aims to design and develop a framework on affordable housing at urban areas in
Malaysia. This framework will able to determine factors that leads to the overhang issues in affordable
housing with the focus on the affordable housing project that are located at the urban areas. By
developing a structural modelling on the CSFs of affordable housing, it is intended to figure out the
CSFs in affordable housing as to reduce the issue of overhang in affordable housing. The determined of
the CSFs is able to provide an informative guideline to both developers and purchasers. The
establishment of the framework is hoped to gives benefit to the public and also to the industry players.

Acknowledgements
The authors would like to acknowledge the Universiti Teknologi MARA (UiTM) for the financial
support under the LESTARI grant (600-IRMI 5/3/LESTARI (007/2018)).

References

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