Urban Renewal Act: A Necessary Step Forward, But Refinements Needed

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The Importance of Urban Renewal

Urban renewal is crucial for maintaining the sustainability and modernisation of cities. It helps ensure that urban centres remain vibrant, safe, and conducive to contemporary living. The proposed Urban Renewal Act (URA) in Malaysia marks a transformative step in this direction, incorporating insights from international models like those of the UK and Japan. Given Malaysia’s limited land availability, the need for urban renewal has never been more pressing.

Urban renewal typically involves redeveloping areas that are underutilised, outdated, or in decline. Globally, countries have implemented such initiatives to combat urban decay, improve infrastructure, and enhance residents' quality of life. The UK’s post-World War II New Towns Act of 1946 led to the development of 32 new towns to alleviate housing shortages and decentralise congested urban centres. Similarly, Japan enacted its URA after the war to rebuild cities and improve disaster resilience through projects like Tokyo’s ARK Hills.

Malaysia’s Urban Renewal Act (URA)

In Malaysia, urban renewal is becoming increasingly essential due to aging infrastructure, congestion, and socio-economic shifts. The URA, set to be tabled in Parliament by early 2025, aims to rejuvenate dilapidated urban areas while ensuring balanced development. The Housing and Local Government Ministry (KPKT) has identified 534 potential redevelopment sites in Peninsular Malaysia, with 139 in Kuala Lumpur alone, representing an estimated Gross Development Value (GDV) of RM355.3 billion.

A key feature of the URA is its streamlined redevelopment process. Currently, unanimous consent is required under Section 57 of the Strata Titles Act 1985 for terminating strata titles, often hindering redevelopment projects. The URA proposes lowering the consent threshold to facilitate redevelopment while balancing the rights of property owners. Critics argue that the act might lead to displacement of low-income residents, particularly Malays and Indians in urban centres. However, safeguards, including equitable compensation mechanisms, are in place to protect property owners.

The Issue of Consensus and Stakeholder Involvement

One of the most debated aspects of the URA is the required level of consensus for property acquisition in en-bloc sales. Malaysian law currently mandates unanimous consent, making large-scale redevelopment challenging. The URA suggests reducing the threshold to:

• 80% for buildings 30 years old and below

• 75% for buildings over 30 years old

• 51% for abandoned developments or buildings

However, I believe that the consensus threshold should include input from key stakeholders such as the National House Buyers Association (HBA) and valuation professional groups. Additionally, a more appropriate threshold could be:

• 100% for buildings 60 years old and below

• 80% for buildings exceeding 60 years old

• 51% for abandoned housing projects

Contrary to some political narratives, property owners will still receive equitable compensation, ensuring their rights are protected. However, questions remain regarding what constitutes fair compensation and whether affected homeowners will have secure housing post-acquisition. While land prices can be high, strata property values—based solely on buildings—represent a small fraction of developers’ total profits. A valuation methodology must be developed to ensure adequate compensation based on overall GDV.

Raising Public Awareness and Professional Guidance

The government and valuation professionals should enhance public awareness of fair compensation rights, providing homeowners with access to registered valuers. Currently, unregistered consultants offer valuation services, which can be detrimental to property owners. The Bar Council, the Royal Institution of Surveyors Malaysia (RISM), and the Association of Valuers, Property Managers, and Estate Agents in the Private Sector (PEPS) should engage with the public to ensure homeowners understand their rights and access legitimate valuation professionals.

Comparison with Other Countries

Internationally, different countries have adopted varying property acquisition thresholds:

• UK: Uses compulsory purchase orders, often requiring a simple majority (>50%) for approval.

• Japan: Requires two-thirds (66%) majority for private-led urban renewal projects.

• Singapore: Requires 80% consent for buildings over 10 years old.

• Western Australia: Mandates 90% for buildings under 30 years old.

• New Zealand: Requires 75% consensus.

Malaysia’s proposed thresholds align with these international standards while considering local socio-economic conditions and cultural dynamics. Moreover, the act prioritises inclusive development, ensuring that urban renewal efforts do not erode community heritage or displace residents without proper compensation.

Addressing Loopholes and Concerns

A key concern is whether 30 years is an appropriate age threshold for redevelopment, given that buildings typically have a lifespan of 60 years. There should be clear frameworks ensuring that original homeowners have secure housing after compulsory acquisitions. Compensation should be equitable, providing affected residents with a comparable place to live.

Conclusion

Malaysia’s URA represents a significant step forward in urban development. By adopting best practices from international models while addressing local challenges, the act aims to make cities more liveable, resilient, and inclusive. As Malaysia moves forward, informed discussions, public engagement, and equitable implementation will be crucial to ensuring a successful and fair urban renewal process.