Housing Provision in Jakarta Needs Holistic Policy

Opinion - published in CNBC Indonesia

Providing livable and affordable housing is a problem in Indonesia. Various programs rolled out by the government are not significant in reducing the backlog (the difference between the number of needs and the availability of houses). Houses are still being built, but the number of backlogs continues to increase. National Housing Day 2021, which falls on August 25, is a good momentum for housing stakeholders to formulate holistic policies that cover all housing supply chains.

In Jakarta, for example, if the focus is on reducing the backlog without a holistic policy, there will be no meaningful change in the medium-to-long term. In Jakarta, property developments with more than 5,000 square meters of land are required to also build low-cost flats covering 20 percent of the commercial area. The execution of this obligation is often a complicated and convoluted process.

Ironically, as of early August, around 26 thousand units of simple rental flats (rusunawa) of the DKI Jakarta Government are empty. The Pasar Rumput flat in South Jakarta, which was just completed in September 2019, has also not been occupied.

The supply of zero DP flats in Pondok Kelapa, East Jakarta, is even difficult to absorb. Occupancy data provided by the DKI Jakarta Public Housing and Settlement Area (PRKP) Office as of March 5, 2021, the realization of zero Rupiah DP houses that have been sold has only reached 681 units. That number is less than 1 percent of the occupancy target of 232,214 occupancy in the DKI Jakarta Regional Medium-Term Development Plan (RPJMD) 2017-2022.

If the same problem occurs in many cities in Indonesia, the backlog figures that often appear in the mass media become irrelevant. This is because continuing to build houses is not a solution to reducing the housing backlog if it is not followed by policies that ensure that the current supply of housing is absorbed. Fulfillment of the obligation to build low-cost flats is only in the form of construction. The government is in charge of ensuring that the apartment units are absorbed.

Reducing the backlog is done by, in the first step, making more people eligible for bank loan facilities. Financial policies and housing loan schemes that allow people to access them are in the form of low interest rates, lowered minimum down payment values, and extended loan tenors. This step is also accompanied by providing a variety of housing types that can be selected according to the needs and capabilities of prospective buyers. Singapore has already implemented both methods.

Policy aspects related to housing finance have actually existed from the national and regional levels. However, the results and impact have not been able to overcome the housing backlog problem. This is because building a house and the construction process can be done in a short time. The development will be in vain if the supply of houses remains unaffordable to the community.

The second step, ensuring the sustainability of occupancy, must be considered by the government even after construction. In rusunawa, the problem of rent arrears has become a news topic in the mass media. On this National Housing Day, it is appropriate for stakeholders to expand the definition of providing housing for the community to the process of absorption by the market and sustainable management - and no longer just building.

Massive socialization of the rights and obligations that residents, owners and tenants must comply with. For example, paying regular management fees so that there are no arrears and maintaining all facilities in the common area. Professional management is also an absolute requirement regardless of the type of flat. Poor management leads to damage and waste.

Not only that, the third step is that the government must also ensure the availability of land to build housing for the middle and low classes. This can be started by utilizing non-optimal government assets such as markets. Markets at the bottom and housing at the top. Moreover, the locations of government-owned markets are almost all strategic. Meanwhile, the current rusunawa is located very far from the city center. Again, simply building residential construction is not a solution to reduce the backlog.

This is because land prices are already exorbitant, causing housing prices to become more expensive. The government guaranteeing the availability of land means tying the price that prospective buyers will pay and making it affordable. Meanwhile, the construction can be funded and carried out by private developers from their obligations. With a note, the top two steps - holistic policies to ensure the supply of houses is absorbed - must also be carried out in order to realize affordable housing for many people.