“Affordable homes” should be simply that, affordable. Limited income people struggle to meet day-to-day costs of living. People should not be forced to pay more than one third of their income to obtain a decent home.
The average income in the government sector is more than those in the private sector. Let us assume that the average income of a Saudi youth in his 20s is SR4,000. The salary may reach SR10,000 when he becomes 40, and he will try owning a house then in his 30s or 40s.
Thirty years ago, the cost of land was very cheap and loans for real estate development could be acquired in a matter of weeks if not days. Loans would cover the cost of building a medium size villa. Nowadays, loans are given after several years of waiting. The housing situation could improve if the government interferes and reduces costs.
The market has failed to provide homes and there is, therefore, a need for interference. “Market failure” is the term used to describe the market when it fails to provide a product or service to the optimum level, something that then justifies government interference.
Comparing the cost of land and a building with one’s income makes the idea of owning a home something impossible for many people. It is important to note that there is no funding to build or buy a decent home because of two points -- the first is a lack of attractive returns for purchasers and the second one relates to unreasonable conditions for potential creditors.
Mortgage laws will solve some people’s problem. The government must interfere and support a mechanism for home financing. In short, there is a failure in the housing market. This means that the housing market does not provide housing to the majority of people. In the past, the government has intervened through the Real Estate Development Fund, the role of which has now diminished. What is the solution?
