INTRODUCTIONThe First Malaysian Plan (1966-1970) officially introduced low-cost housing to "promote the welfare of the low-income population" (Unit of Economic Planning [EPU ], 1965, p. 182), and implemented through the state with financial assistance from the federal government. Most low-cost housing was built to resettle squatters in urban areas and for rental purposes during the First Malaysian Plan (Aziz, 2007; EPU, 1965). As reported, Chief Minister Datuk Seri Musa Aman said 38,000 exterminated squatter families still occupy state government land and private land. The land is supposed to be used for economic development in Sabah, but squatters are hindering the process. This shows that squatter settlement remains a major problem in Sabah and will pose a challenge to construction development in Sabah. Even though there are various programs implemented by the Malaysian government in collaboration with the private sector to provide housing for low-income families, squatter settlements continue to grow. This problem is caused by an inefficient allocation system. The squatter problem in Sabah can be solved by providing more low-cost housing under PPR units through an efficient and transparent allocation system. BACKGROUND PARAGRAPH One of the main roles of the MHLG is to create harmonious and better livelihoods for the society through the provision of adequate and suitable housing and shall be equipped with social and recreational facilities. The government has decided that the houses to be built by MHLG under the People's Housing Program (PPR) must be people-centered. Furthermore, MHLG must ensure that the bottom 40% of households, families below RM2,500 per month and squatters can live in permanent housing...... middle of paper .... .. intervention in the allocation of low-cost housing, which could compromise the chances of real buyers. Under this new system, all states would use a standard application form to sign up for a low-cost home. in the absence of a centralized database, it would be possible that a person could register in more than one state and therefore could acquire more than one low-cost housing unit in a few different states. (Wan Nor Azriyati and Nor Rosly Hanif, 2005) stated that few buyers of low-cost houses rent or sell the houses soon after their purchase. This behavior can lead to an undersupply of low-cost housing as the same buyers may re-register with the ORS. The existence of speculative buyers is seen as a constraint on ownership control of low-cost units which are intended to be owned only by the designated person..