BUMD Land, an Alternative that Addresses the Housing Emergency

October 9, 2019

Adequate housing is one of the basic human rights. In Jakarta, decent housing is often unaffordable. But can 'decent' and 'affordable' come together in the form of housing and without sacrificing one or the other?

The housing emergency is one of Jakarta's many problems. The high price of houses and limited land are latent problems that must be resolved so that the impact does not get bigger. One solution is to increase the supply of housing by building more vertical housing in Jakarta.

Unfortunately, this is difficult to realize due to the Building Floor Coefficient (KLB) which limits the amount of floor area that can be built. In simple terms, the definition of Building Floor Coefficient (KLB) is the ratio between the area of the entire floor of the building and the land area of the planning land.

In other words, the Building Floor Coefficient is a number that determines the limit of the amount of floor area that is allowed to be built. The Building Floor Coefficient figure can be seen in the DKI Jakarta Regional Regulation on the Detailed Spatial Plan (RDTR). And the way to calculate the Building Floor Coefficient is by dividing the area of the entire building floor with the planning land area. For example, if the planning land area is 1,000 m² and the buildable area is 50% with a KLB number of 4. Then the buildable floor area is 4,000 m² or 8 floors.

In relation to the housing emergency in Jakarta, land constraints mean that vertical housing can only be built by increasing the Building Floor Coefficient. The increase in the Building Floor Coefficient is necessary because the Ministry of Public Works and Public Housing's five-year data records that Jakarta has a housing shortage(backlog) of 1.2 million units. This is just the number of households with Jakarta ID cards who do not have their own housing.

The above number has not been added to migrants or households who do not have Jakarta ID cards, but live and work in Jakarta and do not have housing. Therefore, the backlog may be even greater. Another reason is that Jakarta remains an urbanization magnet that attracts migrants. The arrival of new residents keeps Jakarta competitive and economically vibrant. But, is Jakarta ready to provide space for residents?

Accommodating Jakarta residents means providing decent and cheap housing. The development of vertical housing in Jakarta is an option that the government must consider to house its citizens. This is because by promoting vertical development in Jakarta, the government can solve two chronic problems experienced by Jakarta, namely housing shortages and land limitations.

Land price is the biggest factor determining the price of a flat in Jakarta, not construction costs. Because land is limited (read: expensive), existing land must be increased in density. Otherwise, the high price of land will only make the price of housing very expensive and unaffordable.

A solution to the high price of land could be the cooperation of Regional-Owned Enterprises (BUMDs) with the private sector. The cooperation is a means for developers to carry out their obligations to build low-cost flats. On the other hand, the supply of housing is maintained and makes house prices stable while overcoming land limitations.

Let's calculate with the assumption that the price of one unit of cheap flats in Jakarta with an area of 24 square meters is IDR 350 million, according to the provisions of the DKI Jakarta Government. Can a flat at that price be provided near the center of Jakarta? The answer: it can! But, the land must be allowed to build a larger floor. In other words, the Building Floor Coefficient (KLB) must be raised.

A concrete example is in Karet village, the Golden Triangle. Located about 500-600 meters from Jalan Sudirman or Jalan Rasuna Said, the land price reaches Rp 50 million per square meter. In order for a flat unit of 24 square meters to be sold for Rp 350 million(the price ofcheap flats in Jakarta), without subsidies from the government, the land plot needs to be given a Building Floor Coefficient of 14. This assumes construction costs of Rp 8 million per square meter (market price), no burdensome building permit fees (IMB), and the developer does not take profits.

If the government is willing to give a Building Floor Coefficient (KLB) of 14 for the land in Kampung Karet, then cheap flats in strategic areas of Jakarta for Rp 350 million can be built almost without government subsidies. A Building Floor Coefficient (KLB) of 14 is not unusual. Assuming a land area of 2,500 square meters, the flats would probably be 35 stories high. If managed well, there is no problem, and the provision of cheap flats in Jakarta can be realized.

For this to happen, regulations such as the Detailed Spatial Plan, which sets density limits for each area in Jakarta, must be changed. The Building Floor Coefficient of each parcel/building must be increased. The density must be increased, so that the high cost of land can be spread over more units of flats.

Unfortunately, the local government seems to be allergic to increasing the Building Floor Coefficient. It is feared that Jakarta's carrying capacity will not be sufficient, if the KLB (density) increases. In fact, increasing the carrying capacity without damaging the environment is precisely the government's job. If the existence of new buildings and functions is feared to cause congestion, then the government is tasked with building a mass public transportation system. If the use of water pumps by the community is feared to cause land subsidence, then the government is tasked with building a well-functioning and wide-reaching water supply system.

While the RDTR amendment to increase the Building Floor Coefficient was half-hearted, a breath of fresh air came from the Ministerial Regulation No. 16/2017 on Guidelines for the Development of Transit-Oriented Areas (TOD). This regulation on transit oriented development (TOD) encourages mixed space functions and higher intensity of space utilization in TOD areas.

Jakarta has also issued a regulation to support the implementation of TOD, namely DKI Jakarta Governor Regulation No. 67/2019 on the Implementation of Transit-Oriented Areas. In line with efforts to realize affordable housing in Jakarta, this Pergub requires the construction of low-cost flats within each land parcel in the TOD area, including next to the entrance gate to the Jakarta MRT. Then, what about the very high land prices in Jalan Sudirman and Jalan Thamrin?

As illustrated above, in principle, the high price of land can be overcome if the government is willing to allocate a higher Building Floor Coefficient. But how much Building Floor Coefficient should be allocated if you want to build cheap flats on the edge of Sudirman Street or Thamrin Street? Assuming a Tax Object Sale Value of IDR 100 million per square meter, the KLB that must be given is 33. The bad news is that a KLB of 33 is not realistic for cheap flats. Still assuming the total land area is 2,500 square meters, the building will probably be about 80 floors high. Whereas the tallest buildings in Jakarta today are the Westin Tower on Jalan H.R. Rasuna Said and the Treasury Tower in SCBD with a height of 60-70 floors.

Moving away from the business center, vertical residential development in Jakarta can also be done in other locations. Utilizing land owned by Regional-Owned Enterprises such as markets, for example, can minimize the costs that must be incurred to obtain land in the city center. Take the Senen Market owned by PD Pasar Jaya in Central Jakarta. By implementing vertical development, it is not impossible if the lower part of the building functions as a market and the upper part is developed as a residential area. The market function can be supported by the presence of residents and the residential area can be supported by the existence of the market.

The idea of developing Pasar Senen has been more or less realized in Pasar Rumput, South Jakarta. The Pasar Rumput area, which previously only functioned as a market, has now become a mixed-use building with the addition of vertical housing above the building. The flat complex has also been integrated with the Pasar Rumput Transjakarta bus stop. Not only that, within a radius of about one kilometer from the Pasar Rumput Flat there is Manggarai Station. In the future, it is not impossible that cheap flats for Jakarta residents will also be built on other BUMD lands such as terminals.

Optimal land utilization by increasing its density is a necessity. In Jakarta, the increase in population due to urbanization is not impossible. Even if the capital city moves from Jakarta, Jakarta's attractiveness will not automatically fade because more than 85 percent of Jakarta's economy or GRDP is driven by the private sector.

Therefore, the hard work to realize more affordable housing in Jakarta must continue. One way to address the high cost of land is to increase the intensity of land use by raising the Building Floor Coefficient in the city center, and preventing development in places that should be protected.

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