THERE has been a buzz on the internet lately with regards to the comparison between 1Malaysia People’s Housing Program (PR1MA) and Rumah Selangorku program.
Many issues have been mentioned by netizens – some commenting that they were shortlisted to buy PR1MA houses, but the houses offered to them are too expensive.
Some said that they were on the waiting list for Rumah Selangorku, but have been ‘waiting’ for as long as forever. Nevertheless, what bothered me was when some netizens thought that Rumah Selangorku is better and closer to the needs of the people, because the houses are priced lower than PR1MA housings.
These social media users have been harping on the houses being so cheap, which is at RM42, 000, and goes up to only RM250, 000, as compared to PR1MA housing that is priced from RM100, 000 to a maximum of RM400, 000.
Rumah Selangorku has always been a very popular topic of discussion. Some even uses it to emphasize that the Selangor state government is more concerned towards the people’s need, due to the low selling price.
Having said that, there is one thing that weren’t addressed, which is the economic consequences of the low starting price. Don’t get me wrong. It’s great that we have a policy to address the citizens’ need to have good affordable houses.
But, economically, does low house prices really help?
The construction of Rumah Selangorku is a policy imposed by the Selangor state government unto developers doing development in the state. However, in order to do so, these developers still have to bear the cost of the land conversion and the Development Charges cost imposed by the state government.
After all of the charges, these developers will then have to bear the burden of selling really cheap houses.
What’s wrong with selling cheap houses, you might ask. Well, the problem is that microeconomic theory has stated, “There Is No Such Thing as Free Lunch.”
This means that you cannot get something out of ‘nothing’. There is always a cost, no matter how indirect or hidden it is.
When the developers need to fork out a large sum of money to subsidize for low cost housing, they will eventually compensate their losses by increasing the selling price of other housing projects.
For instance, if these developers initially intended to sell an open-market unit at RM200,000 they would now have to sell the same house at RM250, 000 to compensate for their losses.
Hence, people who are buying from the open-market are actually ‘subsidizing’ the affordable housing projects. That’s what it actually means by saying “there’s no such thing as free lunch.”
The difference with PR1MA housings is that the Federal government help its developers by subsidizing the cost of the land, instead of pushing the cost toward them.
Perhaps Selangor state government can consider to exempt the cost of conversion premium and the Development Charges, which relates to the construction of its Rumah Selangorku projects. The people should be clear of the impact of a low housing price and understand that on a larger scale, cheaper doesn’t ultimately means better.
Balqis Rayhana is an independent analyst and Malaysian Access reader. Article written is strictly her personal view. Malaysian Access does not necessarily endorse the opinions given by any third party content provider.