Malaysia’s resettlement programs and the Zero-Squatter policy of the 2000s, as well as the facilitation of low-cost housing in the 1970s, arguably worked well to provide shelter as a basic human need and curb the formation slums in cities across the country.

But neighborhoods with more affluent landlords might develop prejudice and resistance to nearby low-income housing developments.

It is a global dilemma. Known as the “not in my backyard” (Nimby) phenomenon, it boils down to the “protectionist attitude” of communities who are opposed to what they see as “less desirable” low-cost, high-density housing. “. projects in their immediate environment.

In a working paper titled “Living Next to Poor Housing – A Regression Analysis of Greater Kuala Lumpur” (Khazanah Research Institute, 2021), Gregory Ho Wai Son and Lim Han Hsuen used house prices to quantify the effects of life near LCH in Malaysia.

The research, which used the hedonic price model to measure house price regression, was conducted by geotagging traded residential data for the entire greater Kuala Lumpur area from 2015 to 2019.

This model is based on the premise that the price is determined both by the internal characteristics of the property and by external factors that affect it.

Since June 1998, properties selling for RM42,000 and below have been categorized as low cost in Malaysia, based on land value and location, for families with monthly household income below RM1,500 RM.

Ho and Lim were able to quantify that living near low-cost housing contributed to lower house prices in Malaysia. In an unrestricted model, the Nimby effect showed a regression of about RM9,000 for land holdings.

As they gradually reduced distances to examine properties closer to LCH, Nimby effects were found to be much higher compared to other attributes – between RM29,000 and RM39,000 for land properties, and between RM63,000 and RM71,000 for non-landowners.

Using median regression rates, the data indicated that residents of landed properties exhibited or experienced the Nimby effect more consistently, compared to those in non-landed properties where the results were more varied.

The number of LCHs at a specific distance also affected property prices, although this was weaker compared to the effects of proximity.

The presence of non-land LCH complexes within 1 km radius has lowered housing prices by RM8,000 for non-land properties and around RM14,000 for land properties.

Within a radius of 3 km, the presence of each nearby LCH resulted in a decrease of RM 3,000 for land properties and RM 2,000 for non-land properties, but the Nimby effects died out at distances above the threshold of 3 km.

Private vs Government Run

In the greater KL area, researchers noted 728 privately run and 86 government run LCHs. As 90% were privately managed, they sought to examine whether Nimby effects differed for properties next to low-cost public housing.

The number and distance of land holdings from the government-run LCH did indeed have a negative impact on land holding prices, but was statistically insignificant within 1 km.

However, non-land properties closer to the government-run LCH actually posted positive price increases, suggesting that the presence of the public LCH was supportive.

In contrast, Nimby effects were significant at all distances within 1 km, 3 km and 5 km radii for terrestrial properties near the privately managed LCH.

While the distance of non-land properties from the privately managed LCH showed mixed results, the effects were still significantly negative within 1 km and 3 km.

Overall, one could infer from the results that the negative impact of privately managed LCHs on property prices is greater than that of their publicly managed counterparts.

The paper also noted the following observations that corroborated other studies:

  • freehold vs lease – freehold properties seemed to fetch a higher price between RM60,000 and RM80,000;
  • accessibility – the further a property is from KL city center the lower its price;
  • connectivity – the further a house is from train stations, the cheaper it is.

Maintenance issues

In line with the social objective of providing affordable housing, the government requires private property developers to meet a set quota of LCH construction.

Ho and Lim have observed that this has had a positive effect where LCHs are fairly evenly distributed, creating an inclusive city where poorer communities have access to shelter no matter where they are in the greater KL.

Additionally, the government LCH tends to be in fairly accessible areas, allowing these poorer communities access to public transport and central business districts.

The even spread also means that most neighborhoods will generally have nearby LCH development, which may explain why presence/number effects are weaker than distance effects from these developments.

However, researchers noted deteriorating physical conditions of LCH, due to lack of maintenance, as the reason for the decline in surrounding real estate prices.

Private non-land properties managed by Joint Management Bodies (OCG) are plagued by non-payment of maintenance fees and sinking funds by residents. These sums are necessary for the improvement and maintenance of the building.

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Other studies have also shown that some private LCH premises completely lack a JMB to collect maintenance fees and undertake maintenance.

The LCH government, on the other hand, is run by a general public body, not an individual collective. While the retention of the LCH government still leaves a lot to be desired, Ho and Lim acknowledged that the government has emphasized retention in recent years via allocation of funds.

They also believe that another reason for the decline in surrounding property prices is the substandard nature of LCH which is not conducive to cultural or social ambitions. For example, the units are too small to accommodate a family, which leads to overcrowding; or a lack of parking spaces leads to rampant illegal parking along neighborhood roads.

Ho and Lim also noted other qualitative issues beyond the scope of the working paper that could contribute to a decline in property prices in the neighborhood.

They called for paying more attention to improving living standards within LCH and proper maintenance of buildings.

# This article was written by Vigneswar Rajasurian from PropertyAdvisor.mythe most comprehensive source of property data, analytics and property information in Malaysia.