Rising Housing Costs Push Malaysia Toward Green Affordable Housing Reform

Malaysia is facing a growing housing crisis as home prices continue to rise faster than incomes, making homeownership increasingly difficult for many families. A new report by the Asian Development Bank (ADB), Cagamas Berhad, and Ernst & Young Consulting Sdn Bhd warns that the country must now deal with two major challenges at the same time: making housing affordable and making it environmentally sustainable.

The study says many Malaysians, especially low- and middle-income households, are struggling to buy homes as property prices have increased sharply over the last three decades. Government affordable housing programs have helped, but supply still falls far short of demand. By early 2025, fewer than 180,000 affordable homes had been completed under the 12th Malaysia Plan, far below the original target of 500,000 units.

The government has now announced a new goal of building one million affordable homes between 2026 and 2035. However, researchers argue that future housing projects must also address climate and sustainability concerns rather than focusing only on price.

Green Homes Still Rare in Malaysia

The report highlights that green housing remains limited across Malaysia despite increasing global concern about climate change. Buildings are responsible for a large share of carbon emissions worldwide, making sustainable construction an important part of climate action.

In Malaysia, only around 2% of residential buildings are officially certified as green. Most of these homes are located in major urban areas such as Kuala Lumpur, Johor Bahru, and Petaling Jaya. Green housing developments are still uncommon in many parts of the country.

Malaysia already has several green certification systems, including the Green Building Index (GBI), GreenRE, EDGE, LEED, and Green Mark. These systems encourage developers to use energy-saving technologies, renewable energy, better ventilation, water-saving systems, and environmentally friendly building materials.

However, the report says green standards are still mostly voluntary, and there is no single national standard defining what qualifies as green and affordable housing.

Why Affordable and Green Housing Are Not Connected

One of the report’s key findings is that Malaysia treats affordable housing and green housing as two separate issues. Affordable housing programs mainly focus on reducing costs, while green building initiatives often target premium or higher-income developments.

As a result, very few homes in Malaysia are designed to be both affordable and environmentally sustainable.

Researchers say many low-income households prioritize affordability over green features because they cannot afford higher upfront costs. At the same time, banks have introduced only a limited number of green mortgage products, and most are targeted at middle- or upper-income buyers.

Still, surveys conducted for the report found growing public interest in green homes. Many respondents said they would consider buying sustainable homes if governments and banks offered incentives such as lower interest rates, subsidies, reduced legal fees, or assistance with down payments.

Green Housing May Not Be as Expensive as People Think

The report challenges the common belief that green housing is too expensive. Researchers estimate that adding basic green features to residential projects increases construction costs by only around 2.2%.

Many sustainable features can also be introduced at low cost through simple design choices. These include natural ventilation, better daylighting, rainwater harvesting systems, thermal insulation, and energy-efficient lighting.

Over time, these features can reduce electricity and water bills, lower maintenance costs, and improve living conditions for residents.

The study also points out that green homes can help protect communities from climate risks while improving indoor comfort and reducing pollution.

Women and Low-Income Families Face Bigger Challenges

The report highlights that women-led households often face greater barriers in accessing housing and financing. Many women work in informal sectors, earn lower incomes, or lack formal credit histories required by banks.

Researchers say Malaysia still lacks enough gender-focused housing data to fully understand the challenges faced by women, particularly single mothers and low-income households.

To solve these issues, the report recommends stronger cooperation between government agencies, banks, developers, and financial institutions. It also calls for national standards for green affordable housing, better financing support, and new mortgage products designed for low- and middle-income families.

The report concludes that Malaysia already has many of the tools needed to expand green affordable housing, including supportive climate policies and a growing financial sector. But without stronger coordination and long-term planning, the country risks falling behind on both its housing goals and climate commitments.