November 1, 2024
JAKARTA – President Prabowo Subianto wants to build 1 million apartments per year to address the country’s urban housing backlog, but experts warn the plan may come up short if those properties are out of reach for the middle class.
Jakarta Property Institute (JPI) executive director Wendy Haryanto said adding 1 million apartments a year, from land procurement to construction and occupancy, was feasible, but the real challenge was to ensure these properties were affordable for Indonesians in search of a home.
“The difficult part is making sure these units are priced to meet market demand, particularly among young middle-class buyers,” she told The Jakarta Post on Wednesday.
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The growing supply of high-rise apartments, especially in Jakarta, remained largely unaffordable, Wendy pointed out, hampering uptake even as demand for urban housing soars.
The housing backlog amounted to 9.9 million units in 2023, according to Statistics Indonesia (BPS) data, with an annual increase of about 700,000-800,000 units.
Meanwhile, Jakarta’s cumulative apartment supply reached 386,000 units, with an occupancy rate of 64.7 percent, largely driven by secondary-market stock, according to a third-quarter report from property consultancy firm Cushman & Wakefield Indonesia.
Apartment absorption rates had stagnated since the pandemic but showed improvement in the third quarter, reaching the highest level in three years, according to the analysis. This uptick occurred despite a slower take-up rate for projects still under construction.
The government’s program could provide affordable housing for the younger generation as long as costs could be kept low, said Arief Rahardjo, strategic director at Cushman & Wakefield Indonesia, adding that partnerships to use state-owned land at lower costs could help keep unit prices in check.
Moreover, general market prices “would remain unaffected” if the government proceeded to use strategic spots in the city and on state-owned land, “as the project targets a lower-cost segment and serves a different market than current apartment buyers in Jakarta,” Arief said.
On Monday, Public Housing and Settlements Minister Maruarar Sirait vowed to find “a creative way” to make idle housing accessible to all as part of Prabowo’s campaign pledge of providing 3 million homes annually. Part of the effort, he said, would involve repurposing state- and city-owned properties.
To reduce housing costs, he also plans to cut land expenses by utilizing confiscated land, a strategy he estimated could lower prices by up to 40 percent.
During a visit to the previously idle state-owned Rusun Pasar Rumput in South Jakarta, an apartment complex left vacant since its use as a COVID-19 isolation facility in 2021, he slashed rent from around Rp 3.5 million to Rp 1.25 million per month. The rent reduction, he noted, was “to make housing more accessible for low-income residents.”
“It’s really sad knowing that [thousands of apartments have been empty] for two years, showing how bad housing management is in the country,” Maruarar said on Monday, as quoted by Kompas.com, adding it was ironic that many Jakartans did not have access to affordable housing.
He also announced a plan to allocate specific units of the Rusun for millennials working in Jakarta’s business districts, such as Thamrin, Kuningan and Sudirman, to ease their commute and improve access to affordable housing.
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Policy intervention
Experts maintain state intervention at every development stage is essential for the housing program to succeed. They also note that affordable housing policies could simultaneously address the issues of the country’s housing backlog and low apartment occupancy rates.
Wendy of JPI said measures such as setting up exclusive economic zones for housing, capping land prices and offering developer incentives were crucial in the long run.
Freezing land prices in designated economic zones “could stabilize home costs,” she explained, “and supporting first-time buyers with broader loan access, especially those in the informal sector, would be key to reaching young buyers.”
Such policies, Wendy noted, would keep prices manageable for middle-income buyers by limiting speculative land sales in these areas, preventing the price hikes that tend to put housing out of reach for most.
Issa Tafridj, an urban studies lecturer at Pembangunan Jaya University, pointed out that, without clear state regulations to curb property prices, all housing, whether landed properties or apartments, would remain unaffordable, as the prices would follow the general market.
“This is the issue with Tapera,” she told the Post on Wednesday, referring to the public housing savings program. “The idea might sound promising, but without firm policies, it falls short.”
Moreover, the rental market was also largely unregulated, she added, and monthly rental prices in central locations were often as high as mortgage payments for homes in peripheral areas, which discourages younger, middle-income residents from renting or buying in city centers.
“Most of the apartment rental market is left to the private sector, with government housing available only through subsidized schemes for low-income residents,” she explained, pointing to the lack of oversight on rentals in the affordability gap, which ultimately squeezed the middle class out of affordable housing.
Today, the general market leaned toward landed houses, which many buyers viewed as “true assets”, indicating that they prioritized investment gains over accessibility, Issa said, adding that that view had to change.
“Seeing housing as purely an investment turns homes into commodities, not basic necessities,” she argued. “The government must address this, not just with fuel and food policies, but by prioritizing affordable housing.”