2/4  BIS central bankers' speeches  Second, innovative financing models to fund affordable housing projects should be further developed. Current intervention measures largely focus on subsidising home-buyers or the direct provision of housing. Over the longer term, these need to be complemented by new, more sustainable alternatives that combine public and private funding for affordable housing development and investment. In other parts of the world, public-private partnerships through joint ventures have replaced traditional methods of financing for the supply of public housing. Public funding could also be deployed more efficiently to crowd in private capital for affordable housing developments – for example, by providing cost-efficient funding to institutions that finance affordable housing projects. Regardless of the measure, it will be crucial to build in mechanisms that promote programme efficiency and effectiveness. These include business models that are based on sound commercial principles, good governance and appropriate risk management strategies. Schemes introduced could specify minimum technical standards, execution guarantees and other conditionalities for financing or payment. ‘Social impact bonds’ – which have gained interest in some countries such as the United Kingdom, United States, and Australia – are a useful example. These investment structures operate on a “pay-for-success” model, where the Government repays the costs of a programme plus a return, only if pre-defined social outcomes are achieved. Third, there is a need to foster more diverse collaborative partnerships to deliver affordable housing. This includes a vibrant community of social housing enterprises, private foundations and non-profit organisations that support or complement the Government’s affordable housing agenda.

Encik Abdul Rasheed Ghaffour: Sustainable development of affordable housing Keynote address by Mr Encik Abdul Rasheed Ghaffour, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Dialogue on “Sustainable Development of Affordable Housing”, Kuala Lumpur, 4 July 2017. * * * I am sure many of us here can still remember when we set out to buy our first house, which may be between 20 to 30 years ago. Back then, a typical terrace house or a 3-bedroom apartment came at a price tag of between RM200,000 to RM300,000. The monthly repayment would be around RM1,200 to RM1,600. It was a big commitment. But it was manageable; it made financial sense, and it was affordable. That was many years ago. Those who are starting out today face much higher barriers to buying a house. The numbers speak for themselves. Lets take a widely used measure – the Median Multiple, for example. Under this measure, a house is considered affordable if the median house price is less than three times the median annual household income. For Malaysia, this ratio has consistently been above four since more than 10 years ago. In our major cities, the ratio can be as high as ten. Even if we look at other measures, the broad conclusion remains: housing in Malaysia is becoming less affordable. This dialogue on “Sustainable Development of Affordable Housing” is therefore very timely. Confucius once famously said that the strength of a nation derives from the integrity of the home.