News and Views

Ensuring PPR flats serve the deserving eligible tenants

December 22, 2022
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MALAYSIA

PPR units built are only temporary living quarters for those looking, in future, to buy their own houses. They should only be rented out by the relevant agencies.

The objective and aspiration of the Government is for these transit homes to provide a temporary living place for those who want to save enough money before embarking on buying their own homes.

Those renting the PPR flats should not regard them as their permanent homes but merely a temporary abode to shelter their family and have a roof over their head whilst striving to look for a permanent home.

Eligibility of tenants

In the Federal Territory of Kuala Lumpur, the ownership of these PPR transit homes is the Kuala Lumpur City Hall referred to as Dewan Bandaraya Kuala Lumpur (in short ‘DBKL’) who will rent out these units out for a nominal rent of RM124 per month for families with a monthly household income of RM3,000 and below, with each unit having 3 bedrooms and 2 toilets with a total measurement of 700 sq. ft.

These PPR homes is where they stay at subsidized rental charges. They then can build their savings to buy a property or move to a better location when their economic conditions improve. These eligible Tenants should be given priority to buy low-cost project, medium cost projects or other affordable projects.

The rental agreement for the PPR units clearly bars the tenant from subletting the rooms or handing over the entire unit to others. Those found flouting the agreement will be given a rental termination notice by the state government or local authority.

PPR are for self-occupation and not legible to ‘sublet’

The PPR flat Tenants are supposed to self-occupy until they improve in their social standing and to move out and allow those on the ‘waiting list’ to take over possession of their units. Those who flout the rules by subletting their units for obvious gain should be evicted and enforcement should be meted without delay. Without strict enforcement, those PPR homes could end up in the hands of underserving individuals who will only rent them for profits.

They act like landlords and sublet rooms to foreigners and those singles who migrate from their villages to the town. These have been going on for years but it seems enforcement action is slow or sometimes thwarted by ‘outside’ interference. This issue of ‘renting a rented’ PPR unit is not new and has existed for some time now. All this is due to the greed of a few tenants who are out to make a quick profit and lord over their units.

It is a betrayal of the purpose of building such PPR housing in the first place, which is to provide a roof for the poor and should not be used by rent seekers a.k.a ‘profiteers’. By right, the PPR is aimed at providing needy people, who have landed jobs in the midst of a rapidly developing capital city, with a roof over their head. These PPR homes are not an investment tool.

HBA has been calling for stricter enforcement of existing rules to ensure that low-cost housing and PPR flats are not rented out to third parties and are allocated to the correct target group. The authorities should crackdown on those who take advantage of such social housing schemes. It should check on those who abuse the benefits. You could identify them from the expensive cars and bikes parked thereat and with Astro satellite dish installed.

Means Test and Exit Policy

The Tenants should go through a process of ‘means testing’ the process of measuring how much income a person has in order to decide if they should deserve to qualify and continue for PPR ‘handouts’. These social benefits and welfare offered to tenant in the form of renting PPR flats to them should be review every 3 years by a committee within the agencies so that the tenants do not overstay and should gradually allow those incoming target families to take up occupation. They should conduct ‘door-to-door’ spot checks to verify that occupants of PPR homes are the intended ones. Stern action must be taken against those tenants who abuse the scheme. This includes imposing hefty fines or evicting the Tenants and offering them to more deserving parties.

This is where enforcement must be strict so that those no longer continue to be eligible must give way to those deserving one but of course not to the extent of ‘throwing them onto the streets’. We understand that there is a long queue for these PPR homes.

Tenants who are no longer eligible for the PPR units should be honest and give up their units so that the houses can be given to those who truly deserve them.

PPR ‘Disewa’ (rented) and PPR ‘Dimiliki’ (owned)

For the record, there are 2 categories of PPR: PPR ‘Disewa’ (rented) and PPR ‘Dimiliki’ (owned). According to the National Housing Department website, PPR ‘Disewa’ was introduced in February 2002 and its objective was to rent out the units to people in the low-income group and squatters at RM94 to RM124 a month.

PPR ‘Dimiliki’, on the other hand, was introduced to enable the B40 group to buy the units at RM35,000 (Peninsular Malaysia) and RM42,000 (Sabah and Sarawak).

Segregating those PPR units to be converted to RTO

The Government should review certain PPR blocks to be converted to ‘Rent-To-Own (RTO) to enable those Tenants to buy their units through the scheme. Be forewarned that any units sold to buyers must be issued with individual strata titles and management and maintenance will be under the purview of the Strata Management Act and its related regulations and hence, the formation of Joint Management Body / Management Corporation come into play.

Through these initiatives the Tenants will be more proactive and make their neighbourhood a better place to live in. These PPR flats were found poorly maintained and managed as tenants only considered their units as a rented space. Currently, many of them do not bother to take care of their surroundings since they do not have a sense of belonging to the units which ultimately turned to slums. These will create social problems for society when the young are not brought up in a conducive environment.

It was reported in the news media that Tenants at the PPR Harmoni transit homes would be eligible to buy the 590 units at RM35,000 each through a rent to own scheme and these are welcome by all.

Tips for a successful RTO

In principle, the National House Buyers Association (HBA) supports RTO schemes if such schemes can truly help the rakyat, especially the low- and middle-income groups, to buy their first homes. With the current high property prices compounded with the rising cost of living, a majority of the rakyat, especially the low-income, and even the middle-income segments, find it very challenging to buy their first homes. This is especially true for the younger generation and single income families.

HBA had, in the past, called for the RTO schemes to be expanded to include the middle-income segment or M40 segment. Traditionally, RTO schemes were meant for the lower-income segment or those in the urban poverty or B40 segment in the form of public housing programmes.

Due to escalating house prices and the rising cost of living, even the M40 with median monthly household incomes of RM6,275 find it challenging to buy their dream homes. HBA believes that developing RTO schemes for the M40 would go a long way towards helping the rakyat own homes.

A typical RTO scheme is supposed to provide a lower entry cost to owning a unit as the tenant does not need to pay for the hefty 10% down payment to secure the unit, and legal fees and stamp duties for tenancy are typically cheaper compared to that of loan agreements and sale and purchase agreements.

The Tenant merely needs to rent the unit by paying the security deposit (typically up to 2 months’ rental) and some utility deposits and can immediately rent said property with an option to purchase in the future. The Tenant needs to pay the monthly rental and when the Tenant is financially ready to purchase said property, the Tenant can exercise the option and will need to pay a revised monthly instalment payment.

In order for RTO schemes to succeed, it has to have the following key features.

• Price of the property

The price of the property must be locked in based on today’s price and not the prevailing market price, say, five years in the future. This is because the rate of increase in property prices are normally higher than the inflation rate or rate of increase in salaries. If the property price is going to be based on the prevailing market price in the future, the tenant/ aspiring buyer may not be able to afford it.

• Monthly rentals (before execution of option to purchase)

The monthly rent of such housing units (before executing the option to buy) should be cheaper compared to the prevailing market rentals or equivalent to monthly loan instalments for similar housing units. In addition, the rent and any rate of subsequent increase should be stated upfront.

• Protection for both Tenant and Landlord

So long as the tenant is paying his monthly obligations on time and in full, the Tenant must be guaranteed the right to occupy the property during the contract period. The Landlord cannot arbitrarily evict the Tenant/Buyer. At the same time, should the Tenant/ Buyer default on his or her obligations, the Landlord must be able to evict the recalcitrant Tenant/Buyer.

• Option to buy is exercisable at the sole discretion of Tenant

The Tenant should not be legally obligated to purchase the property. In the event that the Tenant does not wish to exercise the option to purchase the property, the Tenant must be allowed to continue renting the said property based on terms that has to be stated upfront. Should the Tenant wish to exercise the option to buy the said property, the Landlord or Owner of the said property cannot decline.

• Obligations after executing the option to buy

Any payments required to execute the option to purchase the property must be clearly stated upfront together with the revised monthly payments required. It is envisaged that the monthly payments will be higher and the Tenant must be clearly informed of the revised amount in order to make an informed decision whether to exercise the option.

HBA also calls for careful screening of all participants of this RTO scheme to ensure that it reaches the intended target group. In addition, HBA calls for regular checks to be conducted to ensure that such RTO units are not sub-leased out.

As there are plenty of overhang properties (completed but unsold housing units), HBA calls for the government and private developers to offer these overhang properties for the RTO schemes. This will offer some cash flow relief to developers and offer immediate housing units to the participants of the RTO schemes.

This article is written by Datuk Chang Kim Loong, Honorary Sec-Gen of the National House Buyers Association (HBA), which is a voluntary non-government and not-for-profit organisation manned wholly by volunteers.

HBA may be contacted via: www.hba.org.my  / email: info@hba.org.my