Homeownership: Good Or Bad?

Hafiz Noor Shams on the government’s drive for greater homeownership (excerpt):

Homeownership isn’t the only way

OCT 24 — It is not a crime to dream of a place to call one’s own. It is hard to beat having a roof none can take away in the worst of times. If anything happens, at least there is a home to run to. It is a comforting feeling to have a haven. That is the sort of sentiment fuelling the dream of homeownership. So pervasive is the thought that the inability to own one is seen as a problem by many.

…It is no different in Malaysia. Homeownership occupies the collective mind. The high prices of ordinary homes stand as a barrier. That barrier is stirring up discontent among the middle class and down.

The Malaysian government knows this and it has introduced various incentives to make homeownership a cheaper endeavour for Malaysians.

For the longest time, the government has relied on low-cost housing projects to encourage homeownership. Despite the name, the term low-cost can be a misnomer. What is cheap for the financially well-off Malaysians may not be cheap for the impoverished. The whole enterprise can add too much financial burden to would-be owners, pulling them down into a deep unsustainable debt hole.

That concern does not stop the Najib administration from expanding its pro-homeownership policy by introducing the 1 Malaysia Housing Programme. Proponents of the programme tout the initiative as an affordable home programme. Just as the term low-cost can be misleading, so too can the term affordable…

…The debates on homeownership ignore other housing options altogether.

For one, renting can be a superior option to ownership. That can be so when rental cost can be much cheaper than mortgage payment, when mortgage payment eats too much of current income and when the financial market is sophisticated enough to handle the substantial saving arising from the difference between the mortgage and the rental rate. The saving can present a whole lot of possibilities that homeownership cannot. There is virtue in flexibility and whatever virtue homeownership has, flexibility is not one of them.

…Despite an alternative that focuses on having a decent home instead of homeownership, many individuals and the government continue to believe in the virtue of homeownership without question. The former complains about the affordability of homeownership and the latter, indulging the former, refuses to believe and to adapt to a new reality.

Ownership must have made sense in the past but just as time changes, so too can the justification for homeownership. It could very well be that individual and societal preferences, formed after years when the financial logic actually made sense, lag behind the market. When expectation lags behind market and with the government supporting the indulgence, something bad is bound to happen.

What can I say? I absolutely agree.