Affordable housing pushed further out of Indonesia's city centres

JAKARTA (The Jakarta Post/Asia News Network): Those looking for a subsidized home – the only type of property affordable to most Indonesians – must look further and further away from the city as prices rise in urban centres.

Tri Dewi Virgiyanti, director of housing and settlement at the National Development Planning Agency (Bappenas), said on Thursday (Oct 14)that most houses located near city centres were already unaffordable for an increasing number of middle-to-low-income groups.

While cheaper accommodation is available further out, living in or beyond the outskirts of the city generally means putting up with higher transportation costs and longer commutes.

This is not just a personal problem, according to Dewi, but also detrimental to overall economic efficiency, while urban sprawl disrupts city planning.

“If Indonesians want to purchase a subsidised house, they will likely get it [only] in the outer layer of the city. In fact, if you want a subsidised house in Jakarta, it's impossible,” Dewi said in a webinar titled Indonesia Housing Forum.

It was vital to address the issue, she said, as subsidised housing comprised most of the Indonesian property market.

Mortgage lending for subsidised housing, in terms of outstanding loans, grew at an average annual rate of 26.5 per cent between 2014 and 2019, four times faster than nonsubsidised mortgage lending over the same period, according to a World Bank analysis.

Indonesia is expected to see rapid urbanisation, which would drive demand for subsidised housing in years to come.

In 2045, 70 per cent of Indonesians are projected to live in urban areas, up from 56 per cent last year, according to data from the World Bank and Statistics Indonesia.

“The government must intervene. Leaving this up to the market mechanism means [people] will continue to struggle with access to affordable housing,” Dewi warned, adding that failure to respond to the trend would have bitter consequences for the economy.

“We’ve called it congestion diseconomies, which causes our economy to not perform as well as we hoped because of traffic jams, a lack of affordable infrastructure, pollution, unaffordable housing and other costs like stress and longer commuting,” Dewi said.

Dao Harrison, senior housing specialist for the World Bank, said at the same webinar that, as one of several necessary measures, Indonesian cities needed more vertical housing in the urban centre.

This stood in contrast to the fact that 99.5 per cent of subsidised housing comprises landed houses. Due to space constraints, 70 per cent is located at the rural periphery.

“We see that there is now a very good strategy that is being pushed by Bappenas, which is what we call ‘back to the cities.’ That means that there needs to be housing, vertical housing,” Harrison said.

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