Reader’s letter: Urban Renewal Act a necessary step forward, but tweaking needed

• A higher threshold of consensus should be required, such as 100% for buildings 60 years old and below, [and] 80% for buildings exceeding 60 years old.

Urban renewal is a vital process in ensuring the sustainability and modernisation of cities, enabling them to remain vibrant, safe, and conducive to contemporary living. In Malaysia, the proposed Urban Renewal Act (URA) signifies a transformative step in this direction. The act addresses challenges specific to Malaysian urban centres while incorporating insights from international models, particularly those of the UK and Japan. We need this act more than ever to better utilise our land, which is a scarce commodity in Malaysia.

Urban renewal typically involves redeveloping areas that are underutilised, outdated, or in decline. Countries around the world have adopted urban renewal initiatives to combat urban decay, improve infrastructure, and enhance residents' quality of life. In the UK, the post-World War II era saw large-scale redevelopment efforts, such as the New Towns Act of 1946, which led to the construction of 32 new towns to alleviate housing shortages and decentralise population from congested urban centres. Similarly, Japan enacted its URA following World War II, focusing on the reconstruction of war-torn cities and enhancing disaster resilience through projects like Tokyo’s ARK Hills.

In Malaysia, urban renewal has become increasingly essential because of aging infrastructure, congestion, and socio-economic shifts. The URA, scheduled for tabling in Parliament by the first quarter of 2025, aims to rejuvenate dilapidated urban areas while ensuring a balanced approach to development. The Housing and Local Government Ministry (KPKT) has identified 534 potential redevelopment sites in Peninsular Malaysia, with 139 located in Kuala Lumpur alone, representing an estimated gross development value (GDV) of RM355.3 billion.

A significant aspect of the URA is its streamlined redevelopment process. Under the current framework, unanimous consent is required under Section 57 of the Strata Titles Act 1985 for terminating strata titles. This has often hindered redevelopment projects. The URA proposes lowering the consent threshold, making it more feasible to redevelop aging properties. Additionally, the act aims to balance development with the rights of property owners. Critics have argued that it may lead to the displacement of low-income residents, particularly among Malays and Indians in urban centres. However, safeguards are in place to ensure equitable compensation for affected property owners, with mechanisms for professional valuation services provided at no initial cost to homeowners.

Consensus should incorporate views from important stakeholders

One of the most debated aspects of the URA is the level of consensus required for property acquisition in en-bloc sales. Currently, Malaysian law mandates unanimous consent for such acquisitions, making large-scale redevelopment challenging. The URA proposes reducing the consent threshold to 80% for buildings 30 years old and below, 75% for buildings over 30 years old, and 51% for abandoned developments or buildings.

I am of the opinion that the threshold of consensus should incorporate views from a few important stakeholders, such as the National House Buyers Association (HBA) and the various valuation professional groups.

Contrary to what have been politicised, property owners would still be entitled to equitable compensation, ensuring that their rights are protected. However, questions remain on what constitutes an equitable compensation and what would happen to the homeowners after the acquisition. Will the state ensure that these homeowners will have roofs over their heads after the acquisition? What if even after such compensation, they are still unable to secure a similar property in the vicinity?

It should be noted that while the land prices can be worth a lot, the strata property, which is based on the building itself only, constitutes a small fraction of the total profits earned by the developers. In addressing this, valuation methodology needs to be developed to ensure that these owners are adequately compensated with consideration to the GDV as a whole.

Moreover, the government and professional valuers should promote awareness among homeowners regarding their rights to fair compensation, including access to registered valuers whose fees for initial valuations would be borne by the acquiring authority. There are also a lot of sham consultants who are not registered valuers offering such services, which will be very detrimental to the public. As such, the Bar Council and the various professional valuation groups, such as the Royal Institution of Surveyors Malaysia (RISM) and Association of Valuers, Property Managers and Estate Agents in the Private Sector (PEPS), should have more engagements with the public to advocate awareness on their rights to equitable compensation and access to proper registered professional valuers.

Comparison with other countries’ URA

Internationally, various countries have adopted different thresholds for property acquisition. In the UK, compulsory purchase orders allow the government to acquire land for redevelopment when it serves the public interest, often requiring a simple majority (more than 50%) for approval. In Japan, urban renewal projects typically require a two-thirds majority (66%) from property owners before proceeding. Additionally, in Japan, the consent threshold for urban redevelopment projects varies, depending on the type of project and the initiating entity. For projects led by private associations, at least two-thirds (66%) of landowners and land lease right holders within the designated area must agree to the redevelopment plan. Additionally, the consenting parties must collectively own at least two-thirds of the total land area involved in the project. Malaysia’s proposed thresholds are also consistent with regional peers such as Singapore, which requires 80% consent for buildings over 10 years old, Western Australia, which mandates 90% for buildings under 30 years old, and New Zealand, which enforces a 75% requirement.

When compared to the UK and Japan, Malaysia’s URA offers several advantages. First, it is tailored to local socio-economic conditions and cultural dynamics, making it a more contextually relevant framework. Second, the act emphasises inclusive development, ensuring that modernisation efforts do not erode community heritage or displace residents without proper compensation. Lastly, the proactive approach of the government, particularly under the leadership of KPKT minister Nga Kor Ming, has been instrumental in identifying potential redevelopment areas and fostering transparency in the urban renewal process.

Loopholes and concerns

However, it is also concerning whether the quantum of 30 years is appropriate when, generally, buildings have a lifespan of 60 years. At the same time, I am of the opinion that a higher threshold of consensus should be required such as 100% for buildings 60 years old and below, 80% for buildings exceeding 60 years old, and 51% for abandoned housing projects. However, the government should still establish frameworks to ensure that the original owners have roofs over their heads; even after such compulsory acquisition takes place. The quantum of compensation shall be equitable and that they will have a place to stay post-acquisition.

In conclusion, Malaysia’s URA represents a pivotal step in the country’s urban development agenda. By adopting best practices from international models while addressing local challenges, the act aims to rejuvenate cities, making them more liveable, resilient, and inclusive. As the nation moves forward, it is essential to cultivate informed discussions, address public concerns, and ensure that urban renewal efforts are executed equitably for the benefit of all stakeholders.

Asst Prof Dr Sr Tham Kuen-Wei
Tunku Abdul Rahman University of Management and Technology
Registered valuer, property manager and estate agent
Licensed auctioneer (Perak) (Penang) (Melaka) (Selangor)

Note: The views expressed in the article reflect the personal opinions of Assistant Prof Dr Sr Tham Kuen-Wei and may not necessarily represent the positions or perspectives of the University. The opinions offered are based on Dr Tham's professional experience as a registered valuer, property manager and estate agent.

The article has been edited for clarity. The views expressed are the writer’s and do not necessarily reflect EdgeProp’s.