Low-cost housing represents a serious national problem in both developed and developing countries. The acuteness and magnitude of the problem are obviously more pronounced in developing countries, but increasingly the issue of low-cost housing cuts across economic, social, technological and political aspects. The Malaysian government realized this fact and has created ambitious public housing programs (Agus, 2001, Tan, 2008) in order to meet this demand. Regardless of all these efforts, Malaysia’s implementation is far from acceptable, particularly the supply and delivery of affordable housing for low-income families. It is dreadful to see that the 10th Malaysia Plan is only targeting 78,000 affordable units when Malaysia is facing more than 1.3 million people under the poverty line (Bakhtyar, 2013; Tan, 2011 ). It is the opposite for the supply and delivery of houses for middle- and high-income groups, which at times has a surplus in the production of high-cost housing (9th Malaysia Plan review report, Abdul Rashid, 2000). This is mainly due to the fact that there are a high numbers of speculative demand and supply without taking into consideration the real demands of the public (speech by Deputy Minister, 20031). This has led to too many unsold properties especially high-cost condominiums and houses in unfavorable areas.

The mounting cost of housing, which has escalated greater than household earnings, has a negative impact on the housing delivery system for the poor. Moreover, it reduces the capability of the poor to sustain the expenses of buying an affordable house. The question of affordability centres on end-financing by the purchasers. Only certain low-income households can afford to purchase houses by developers and those are mostly with a fixed source of income. Financial institutions would usually decline applications that do not meet that particular minimum requirement. The implementation of the nation’s development programs has improved the cost of living for many Malaysians. The New Economic Policy (NEP), which was implemented during 1970-1990, has managed to alleviate poverty and restructure the nation’s multi-racial societies. This has created a change of economic activities from agriculture to non-agriculture and a change in population distribution. It is estimated that the future housing needs is close to 2 million new houses will have to be constructed. As a result, the public and private sectors are pressured to provide them. There were the informal settlements that also began as soon as urbanization in urban areas increased, but it is regarded as sub-standard and were soon demolished, replaced by a formal housing development.