HBA proposes 10%–15% profit cap and independent price review for affordable housing

The National House Buyers Association has proposed that affordable homes be priced using independently verified development costs plus a regulated profit margin of 10% to 15%. It also called for an Independent Housing Price Review Commission to oversee cost verification, profit approval and price ce

PETALING JAYA (Oct 23): The National House Buyers Association (HBA) has called for affordable homes to be priced using independently verified development costs and a regulated profit ceiling, suggesting a 10%–15% range.

In a statement on Friday (Oct 22), HBA proposed a transparent cost-plus-profit model, saying government assistance for affordable housing should translate into lower selling prices for buyers. The association said the government should determine the precise profit ceiling after consulting industry stakeholders, economists and consumer organisations.

It acknowledged that developers should receive reasonable returns for their capital investment, project management and business risks. However, it argued that affordable housing should not become a vehicle for maximising profits. Under its proposal, selling prices would reflect verified expenditure on land acquisition, construction, infrastructure, financing, professional fees, statutory contributions, compliance, marketing and other legitimate development costs, together with an approved profit.

HBA also proposed establishing an Independent Housing Price Review Commission under the Ministry of Housing and Local Government to verify development costs, approve allowable profit margins and certify maximum selling prices for affordable housing projects receiving government support. Developers participating in government-supported housing programmes would submit comprehensive cost statements for independent verification before selling prices were approved. HBA said commercial confidentiality could be protected while allowing regulators to assess whether prices were reasonable.

The association said scrutiny was particularly warranted where projects benefited from subsidised land, higher development densities, tax incentives, reduced development charges, publicly funded infrastructure or accelerated planning approvals. It argued that concessionary land and permission to build more units on a site should translate into savings for purchasers.

The proposed commission would include representatives from the ministry, the Valuation and Property Services Department, HBA, relevant professional bodies, economists, consumer organisations and the housing development industry. It would publish an annual affordable housing pricing report covering development costs, construction cost trends, land values, financing costs and the effectiveness of government incentives in improving affordability. The commission would also recommend periodic adjustments to allowable profit margins where justified by changing economic conditions, inflation or construction costs.

HBA further proposed periodic post-completion audits for affordable housing projects benefiting from public incentives to assess compliance with approved cost structures and pricing commitments. Developers found to have deliberately inflated costs or misrepresented financial information should face penalties, including repayment of government incentives, financial sanctions and possible suspension from future affordable housing programmes, it said.

To discourage speculation, the association called for strict enforcement of existing restrictions on resale periods. It also proposed considering shared-equity or profit-sharing arrangements where substantial government subsidies had been provided. Such arrangements would help retain public subsidies within the affordable housing system when homes were resold, HBA said. The association said affordable housing should primarily serve owner-occupiers, with programmes assessed by whether households could afford to purchase, finance and live in the homes, rather than solely by the number of units launched or completed.