Local Counsel - Rent control again!

HERITAGE properties in Penang are in the limelight again. According to an executive director of a property consultant company, the price of heritage buildings, which used to be around RM500 to RM600 per square foot, has "skyrocketed" to RM2,000 and more per square foot. The hike has at least quadrupled in just a few years!
Consequently, the value of a building of 2,000 sq ft, which was priced in the market from RM1 million to RM1.2 million a few years ago has suddenly increased to RM4 million or more. There is a rumour that some property owners have been evicting their tenants who cannot afford or are not willing to accept the increase in rent.
Making things more interesting, there have been reports that Chief Minister Lim Guan Eng said the state government is considering reinstating rent control in Penang with a difference.
According to him, house owners will have a say on the rental rate, but not be allowed to increase rates exorbitantly. This is to curb unreasonable increases in rental rates forcing the eviction of tenants, especially the elderly.
Is imposing rent control the solution?
It is useful to recall the days when Penangites, especially those living in George Town, were living in rent-controlled premises.
Rent control was an important instrument for about 40 years in George Town until 1997. The last rent control act in Malaysia was the Rent Control Act 1966.
Under this act, the owners of houses built before 1948, commonly known as pre-war buildings, were not allowed to increase rents indiscriminately. It was estimated that about 12,000 houses were under rent control.
The rentals were only 10-25% of the amount if there was no rent control. The Rent Control Act not only prevented the property owners from imposing huge increases in rents, it also did not allow them to evict the tenants indiscriminately.
Although the poor tenants could not be forced to vacate their rented houses or pay hefty rents, it did not mean that they were living in safe and comfortable houses.
One of the bad consequences of rent control was the neglect by the owners to ensure that the rented houses were well taken care of. Instead of upgrading, the premises were left to deteriorate.
Making things worse, most of the rent control premises were occupied by numerous households. Six to 10 households in each house was common.
In many cases, the front portion of the house was a business area. Each household was allocated a bedroom. The tenants had to share the use of kitchen stoves. And in many houses, there was only one bathroom and one toilet to cater to six to 10 families.
At that time, there were few low-cost houses to cater for the poorer section of society.
Penang was lucky to have several people who fought very hard to ensure that the heritage buildings in the inner George Town area were conserved and not demolished to allow for new houses.
One of them was Alex Koenig, a German. Koenig came to Penang to study in Universiti Sains Malaysia.
He stayed back in Penang and was attracted by its beautifully designed but dilapidated buildings. He helped those interested in conserving heritage buildings. As part of his efforts, Koenig also worked in the Penang Island Municipal Council, now the Penang Island City Council for two to three years.
The success of the World Heritage status in Penang has led George Town to attract not only visitors but also enthusiastic local and foreign businessmen. Many of the heritage buildings have been turned into restaurants, pubs, cafes and hotels.
The repeal of the Rent Control Act had resulted in a sharp increase in the values of affected houses. It has encouraged entrepreneurs not only to redevelop and refurbish pre-war buildings, but also new ones.
However, reinstating rent control on pre-war properties in the heritage enclave may have a setback on these buildings. Their values will drop with lower returns on investment. In the long run, it will have a detrimental effect as there will be less maintenance and more neglect of these prime properties.
If the state government wants to ensure that the hardcore poor have adequate housing, it should build more low-cost houses and rent them out to the target group at very low rentals. House owners should not be forced to rent out their houses at low rates.
Datuk Dr Goh Ban Lee is interested in housing, urban governance and planning. Comments: letters@thesundaily.com