Professional Documents
Culture Documents
January 2015
Indonesia
A ROADMAP FOR HOUSING POLICY REFORM
Acknowledgments
This report was produced with advisory from the World Bank and nancial support provided by
the FIRST Initiative and the Australian Department of Foreign Affairs and Trade via the Indonesia
Infrastructure Support Trust Fund. It has been prepared for the Government of Indonesia, in
collaboration with Bappenas, Directorates of Housing and Settlements and of Land and Spatial
Planning, and the Ministry of Public Works and Housing.
The recommendations put forward in this report originated from a consultative planning process,
supported by Focus Group Discussions held by Bappenas and the Ministry of Public Works
and Housing, stakeholder forums, one-on-one meetings and regular inputs by the Core Team
for Housing Policy Reform and the Inter-Ministerial Working Group for Housing and Settlements
(Pokja PKP). Technical ndings and policy recommendations also beneted from the input from a
large team of international and national housing experts.
We are grateful to all the government counterparts and stakeholders who participated in this
process. In particular, we would like to express our special gratitude to the following individuals
whose facilitation and guidance has been essential to the development of the Roadmap:
Mr. Dedy Supriadi Priatna, Director Minister for Infrastructure, Bappenas
Mr. Nugroho Tri Utomo, Director of Housing and Settlements, Bappenas
Mr. Oswar Mungkasa, Director of Land and Spatial Planning, Bappenas
Mr. Hardi Simamora, Head of Bureau of Planning and Budgeting, Ministry of Housing
While the comments and inputs to the proposed Roadmap have come from many contributors,
all shortcomings of the work rest solely with the authors.
ii
Contributors
Government of Indonesia
WB Team Leads
National Contributors
Dodo Juliman Widianto, Incremental Housing Specialist
Mahditia Paramita, Rental Housing Policy Specialist
International Contributors
Andrey Milyutin, Sr. Housing Finance Specialist, GFMDR
iii
Contents
Acknowledgments
ii
Contributors
iii
Government of Indonesia
iii
Chapter 1
Chapter 2
Chapter 3
Chapter 4
17
Chapter 5
21
Chapter 6
25
1.
26
2.
29
3.
34
4.
37
5.
43
6.
49
Chapter 7
Roadmap Implementation
Annexes
iv
53
59
1.
59
2.
61
3.
74
4.
Sector-Specic Context
78
78
90
100
109
116
129
5.
142
6.
144
7.
157
8.
Glossary of Terms
159
List of Figures
Figure 1. Estimated Housing Affordability in Indonesia in Market Conditions*
Figure 2. Total Budget Allocation to Programs by Ministry of Housing,
2011-2014 (tr. IDR)
Figure 3. Number of Substandard Housing Units by Decile
Figure 4. Goals, Policy Solutions and Scenarios
9
10
12
19
62
63
65
67
70
82
83
84
87
98
111
131
List of Tables
Table 1. Percentage of Substandard Housing Units by Decile
Table 2. Various Housing Backlog Estimates for Indonesia
Table 3. Estimated Characteristics of Housing Need
8
13
14
vv
List of Box
Box 1.
Box 2.
vi
viivii
viii
01
Key Messages of the
Roadmap
Indonesias Roadmap for Housing Policy Reform aims to shape the government
action plans and investment in the housing sector, with a focus on forming an
immediate government response to urgent housing needs, while building the
foundation for rolling out more fundamental structural changes in the sector through
the next National Medium Term Plan (2015 2019).
Build delivery systems that strengthen and transfer responsibilities from the central to local government and specialized actors
to share the responsibility and cost of implementing national
housing policy.
Expand and enable the market for affordable housing for the
middle class, without exhausting public funds, by introducing
mortgage-linked down-payment assistance and supporting development of the housing micronance and real estate sector.
02
Objectives of the
Roadmap
Target 1 - Slum Alleviation: Comprehensively improve the living conditions of 3.9 million
households estimated to be living in slums.
Target 2 Meeting Affordable Housing Needs: Enable the delivery of around 14 million
safe and affordable housing solutions to overcome existing decits and meet demand from
new households.
2.3 Roadmap
Recommendations
The six priority recommendations of the
Roadmap are to focus investment and
resources toward:
Action 1: Developing and implementing a
comprehensive slum upgrading program
to improve the living conditions of residents in
existing slums and informal settlements.
Action 2: Redesigning public housing policy
to improve the efciency and effectiveness of
spending on public rental, vertical and core/row
housing solutions.
Action 3: Strengthen the design of the home
improvement subsidies, to broaden the
number of beneciaries reached and enable the
03
Why Indonesia Needs
Housing Policy Reform
Table 1.
Nationwide
Overcrowding
Decile
<7.2m2
No Water
No
Sanitation
No
Water &
Sanitation
Roof
Wall
Floor
All Substadard
Overcrowded
or No Basic
Utilities or
Substandard
Material
Overcrowded
and No
Basic
Utilities
and Substandard
Material
27%
27%
61%
22%
12%
19%
22%
4%
69%
7%
19%
21%
51%
16%
9%
16%
16%
2%
60%
4%
15%
18%
46%
13%
9%
14%
13%
2%
55%
2%
13%
16%
43%
12%
8%
11%
10%
1%
51%
1%
12%
14%
38%
9%
9%
8%
9%
1%
48%
1%
8%
12%
32%
8%
9%
8%
7%
1%
42%
1%
8%
11%
29%
7%
10%
7%
6%
1%
40%
0%
7%
8%
22%
5%
10%
4%
4%
0%
35%
0%
5%
6%
16%
3%
10%
3%
2%
0%
29%
0%
10
3%
3%
9%
1%
10%
1%
1%
0%
21%
0%
Total
12%
14%
35%
10%
10%
9%
9%
1%
45%
2%
No. of
Units
7,543,340
8,758,632
22,316,246
6,266,012
6,125,329
5,852,233
5,804,551
785,497
28,915,894
1,112,974
Combination of
Substandard
Characteristics
Only 20 percent
of the highest
income households
in Indonesia, are
capable of acquiring
housing in the
formal market
Housing Supply
Government Measures
Indonesia has developed a broad set
of policies and institutions to support
housing provision, yet these have not been
effective at improving housing outcomes
Estimated Affordable
Home Price w/ Down
Payment (m, IDR)
661 million
9
8
7
6
5
4
7
5.2
4.2
3.6
3.1
2.6
2.6
1.8
1.4
1.1
0.9
0.7
216 million
99 million
74 million
44 million
38 million
18 million
309 million
110 million
82 million
49 million
43 million
19 million
3
2
2.1
1.8
0.5
0.4
13 million
6.7 million
14 million
6.7 million
1.2
0.1
2.3 million
2.3 million
Can Afford
Commercial
Units
Cannot afford
even basic
core unit
FLPP
14
10
Other Programs
BSPS
Rusunawa
2
Source: Ministry of Housing, Budget Division
10
In 2013, GOI
spent 0.05% of
GDP on housing,
significantly
less than the
housing budgets
of international
and regional
comparators
11
Overcrowded
No basic services
All poor quality materials
4,500,000
4,000,000
No. of Units
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
Overcrowded or no basic
services or poor quality
500,000
12
34
56
78
91
Decile
Source: BPS Susenas Survey, 2013
12
Table 2.
Backlog Estimates
Classication
Total Units
Low Estimate
3.9 million
Middle Estimate
High Estimate
7.5 million
1,500,000
13.5 million
2,700,000
13
Table 3.
Annual Need
to Address
Housing Decit by 2024
Annual Need
to Address
Housing
Decit by
2029
Slum Units
780,000 units
390,000 units
260,000 units
0% Slums
Decile 1-4
(Non-Slum
Households)
1.20 m units
780,000 units
650,000 units
New subsidized
public rental and
core starter units.
Decile 5-8
1.25 m units
810,000 units
660,000 units
Increase supply
of low-cost
housing to
reduce backlog
and meet new
demand.
Introduce
more effective
mortgage-linked
subsidy scheme
to enhance affordability.
Decile 9-10
390,000 units
290,000 units
250,000 units
Enable formal
housing market
to work.
Total
3.6 million/yr
2.3 million/yr
1.8 million/yr
14
Objectives
Example of
Policy Solution
15
16
04
Strategic Framework for
Housing Policy Reform
The Roadmap for Housing Policy Reform provides a framework for the design and
investment in national policy, programs and systems that aim to achieve housing and
settlements sector goals. The following diagram presents the strategic framework
for housing policy reform in Indonesia, which is organized in three sections: (i) what
should be done; (ii) how it should be done; and (iii) pre-requisites for success.
Action 2. Reformulate the Approach to Formal Subsidized Housing including different typologies (core starter units, row houses, vertical housing) and tenure options,
(rental, shared-equity, owner-occupied) to respond to different stages in the housing
career.
Action 4. Enable the Affordable Formal Housing Market and Increase Private Sector Participation to make formal housing more readily available to a greater number
of lower-middle-class households, by stimulating low-cost housing supply and a mortgage-linked down payment assistance approach on the demand side, while supporting
and enabling non-subsidized and market sources of liquidity to banks and nancial
institutions providing mortgages for low-cost housing.
17
Implementing this ambitious set of six integrated policy actions will enable the Government of
Indonesia to make a transformative impact on reducing the number of Indonesians living in slum
areas and increasing the availability of affordable housing solutions for all Indonesians.
18
Goals
Increase
0%
slums by 2019
Policy Solutions
Slum alleviation
and upgrading
Home improvement
and core housing
Formal
Subsidized Housing
Support market
for formal housing
Scenarios
to address deficit by
2019
to address deficit by
2024
= 100,000 Houses
= Slum Households
= Deciles 5-8
= Deciles 9-10
to address deficit by
2029
19
20
05
Targets and Budgets
The following scenarios provides some rough estimates of the total annual central
budget allocation and balance between programs, based on three scenarios
achieving full access to affordable housing by 2019, 2024 and 2029, respectively.
21
Number of
Units
(thousands)
620
830
290
230
1,300
25% of costs
Budget
Required
(IDR tr)
9.4
12.5
4.4
3.4
18.8
16.2
Totals
3,200,000
65 IDR tr
Number of
Units
(thousands)
312
416
294
152
811
25% of costs
Budget
Required
(IDR tr)
4.7
6.2
4.4
2.3
12.2
9.9
Totals
1,985,000
units
40 IDR tr
22
Number of
Units
(thousands)
208
277
294
126
663
25% of costs
Budget
Required
(IDR tr)
3.1
4.2
4.4
1.9
9.9
7.8
Totals
1,570,000
units
31 IDR tr
Totals
Number of
Units
(thousands)
96
129
27
11
145
25% of costs
408,000
units
Budget
Required
(IDR tr)
1.4
1.9
0.7
0.5
2.9
2.5
10 IDR tr
23
Description of Policy
Actions
The six priority actions described in Section 4 will enable government to structure
a exible housing policy that responds to the needs and preferences of households
from different income levels in diverse urban settlements throughout Indonesia.
Decile
9-10
Decile
5-8
Enabling the Market
Decile
1-4
Home
Improvement
Slum
Upgrading
New
Subsidized Housing
25
1. Develop a Comprehensive
Slum Upgrading Program
Recommendation
Make a high-level government commitment to build and implement a comprehensive
national program on slum upgrading to ensure that no Indonesians live in slum areas
by 2019. This policy will include: (i) the design of a national program, which builds
the technical, institutional and nancing framework for city-led slum mapping and
action plans for slum upgrading, redevelopment and resettlement; (ii) kick-starting
of the program with a select set of interested and committed large cities; and (iii)
scaling of the program to a broader set of cities and areas.
Rationale
Public investment in slum upgrading is a
strategic and efcient approach to target
poverty as it allows the government to exploit
the positive characteristics of slum settlements
and to mitigate the negative externalities of
urban slums. Slums are spatially contiguous
and concentrated clusters of shelter
deciencies and of mainly poor and very poor
households, which allows the government
to target and reach a population that may be
difcult to identify otherwise. In-situ upgrading
allows slum dwellers to strengthen their existing
social networks, and to continue to pursue
their economic activities (the two main reasons
they choose to live where they live), without
increasing their transport time and costs, while
improving their
living conditions
A national slum
and giving greater
upgrading program
opportunities
could improve the
for
schooling
living conditions
and
health.
Furthermore,
of 3.9 million
slum upgrading
households living in
p r o g r a m s
37,400 ha of slums.
p r o d u c e
26
Approach
1.1 Design the Framework for a National
Slum Upgrading Program
In preparing the national slum upgrading
program, central government will need to
develop a set of tools and frameworks to
support local governments in the design
and implementation of city-specic slum
management strategies.
Design will include, an eligibility framework for
participating cities, resource kits for cities with
methods to map and assess slum and squatter
settlements, Standard Operating Procedures for
planning and preparation of in-situ upgrading,
slum redevelopment, and resettlement, steps
to develop city slum management action
plans and investment strategies, institutional
development, legal channels to recognize or
regularize squatter settlements, as well as
structuring of nationally-administered capital
grants, a technical appraisal framework for
eligible investments under the program, and
systems for monitoring and maintaining a
settlements information database.
27
28
Rationale
The bottom 40 percent of Indonesian
households cannot afford formal market-rate
housing solutions. The only housing alternatives
available to these households are to either
produce incrementally on a self-help basis or rely
on highly subsidized public housing provision.
Self-built housing constitutes the majority of
new housing construction in Indonesia. While
support for low-income households to build
incrementally is a critical part of the proposed
policy mix in this Roadmap, the government will
also need to reformulate public housing policy
and expand public housing production in order
to effectively address the housing decit. A
robust and diversied system of public housing
production will be necessary to respond to
different characteristics of household and
regional demand.
An enhanced program of public housing
production would need to carefully consider
accommodating a range of tenure options,
including rental, lease-to-own, leasehold and
full ownership, based on the underlying needs
29
Effectively
implementing
and
managing
public
housing
p r o g r a m s
is
inherently
challenging. The
government
approach
to
public
housing
would consider
concentrating
land and public
housing development with specialized public
actors. Enabling both Perumnas and the private
sector to assume more proactive roles will be
critical to jump-start large scale public housing
production. Lastly, public housing programs
must be closely matched to local demand and
public housing assets maintained at the local
level. A key component of the government
public housing strategy would be to facilitate
the transfer of knowledge and responsibilities
for designing and implementing public housing
program to local governments.
Perumnas has
reduced its
production capacity
to only around 4% or
16,000 units
in 2013, yet expects
it could scale up
to 50,000 units per
year given the right
support.
Approach
2.1 Revitalize Perumnas Role as Master
Developer in Public Housing Production
A core recommendation of the Roadmap is to
revitalize and renew the mandate of Perumnas
to act as the Government of Indonesias master
developer for public housing production. GoI
30
31
32
(i) Rusunawa
2.0
beneciaries
and
affordability. Rusunawa 2.0 projects should
give rst priority to households displaced by
redevelopment activity or necessary slum
relocation. Maximum allowable beneciary
income should be set annually. The
program could use local minimum wages to
correspond to the lesser of local minimum
wage or to households that rank in the
lower 4 deciles nationally and adjust rent
levels based on income.
(ii) Roles and capacity building under
Rusunawa 2.0. Authorities, responsibilities
and resources will be pushed to the local
level of government where there is existing
capacity, allowing the central government
to focus on policy and strategy. Where
local capacity is limited, nancial and
training resources will be made available to
increase the ability of local governments to
participate in the provision of rental housing.
Interim delivery methods will be established
in the short and mid-term, calling upon the
capacity of Perumnas to ll in the gaps.
Roles under Rusunawa 2.0 include:
1. Central Government, can be charged
with sizing production goals and
budget, allocation planning, monitoring
and evaluation.
2. Provincial Government takes on the
role of advisory and consultation on
policy and program development and
evaluation.
3. Local
Government,
depending
on capacity, will propose projects,
accept funding from MPWH and act
as developer and owner or may joint
venture with Perumnas or a private
developer. Local governments who are
deemed to have insufcient capacity
can also nominate projects for funding
by MPWH for development and
ownership in joint venture by Perumnas.
They will also be the recipients of
capacity-building funds from MPWH.
33
3. Redesign Support to
Home Improvement
Recommendation
Redesign the government support to home improvement and incremental housing,
by: (i) strengthening the design and delivery systems of the existing BSPS subsidy
program; (ii) link home improvement subsidy with other public housing programs,
including slum upgrading and expandable core houses; (iii) promote incremental
middle-class home expansions; (iv) support development of local and regional
building industries; (v) support the development of and crowding in of housing
micronance.
Rationale
The current government subsidy program
to support home improvement (BSPS) is
successfully being implemented and is fullling
its goal of helping lower income households to
effectively improve and expand their homes.
However, the program is limited in terms of
reach and effectiveness. Key constraining
characteristics of the program include: (i)
the BSPS program primarily reaches rural
households, and may have more impact if
coupled with an explicit focus on growing
demand for home improvement support in
urban areas; (i) central government plans and
manages all the functions to support beneciary
households, which makes implementation of
the program costly and difcult to scale for
the public sector; (iii) grant funding delivered
to beneciaries could be better leveraged
by private sector participation to improve its
effectiveness.
The BSPS program has substantial potential
to broaden its reach by improving program
efciency and leveraging housing micronance.
Most importantly, increasing overall funding
and inecting the program towards urban areas
could improve housing conditions in urban
34
An estimated
threequarters
of all units
in Indonesia are
built by households
incrementally.
Approach
3.1 Strengthen the Design and Delivery
of the Existing Home Improvement
Subsidy
The current subsidy program could
strengthened in the following ways:
be
35
36
Rationale
Housing nance to help lower income
households purchase or build formal houses
requires specic conditions. Loan tenors
must be as long as possible to make nance
affordable, risks created by oating interest
rates must be mitigated if income levels are
not sufcient to cushion their uctuations, and
risk management tools and policies must be
available to help lenders manage the additional
credit risk inherent to the target.
37
Approach
A. Improve the Economic and Social
efficiency of Government Support to
Deepen the Mortgage Market.
4.1 Develop a Down-Payment Subsidy
linked to Mortgage Finance
The under-achievement of the FLPP scheme
is due to several factors: (i) housing price
ination; (ii) insufcient public allocations, which
have been not only under-calibrated15, but
also irregular, with a sharp decline in 2013 and
2014; and (iii), a very low leverage of private
resources (limited to the 25% of loans nanced
by the lenders).
The two latter factors can be addressed by a
change of mechanics: reduce the government
38
contribution and turn support into a demandside subsidy, which would directly benet
borrowers and combine with a much larger
amount of credit, which would multiply the
number of households that the system could
serve at the same level of affordability16. This
was the principle of the up-front and buy-down
subsidies schemes previously deployed prior to
2010.
The structuring of a new scheme would
require feasibility studies and cautious design,
in particular to draw the lessons from the
checkered success of the previous program
As an example, a possible scenario for
structuring of the down payment assistance
could be as following:
The core of the system could be a new
interest buy-down subsidy, coupled with
a buffer against interest rate surges.
An upfront subsidy payment would be
made to participating lenders, for instance,
at the level of a down-payment subsidy,
with the same affordability impact.
This up-front payment would be divided
in two parts: the provision to cover buydown interest charges for a certain number
of years 8 years for instance, requiring
an initial contribution of 13.5% and an
allocation to the interest uctuations buffer
for the balance (16.5% of the loan).
The buffer would be drawn down when
needed to maintain debt servicing-to
income ratios as constant as possible. At
the end of the coverage period possibly
longer than the subsidy period itself, any
balance left would be returned by the
lender to the government
16
39
40
41
42
Rationale
Central Government has an important role to
play in building the structures and systems
that allow government to be more effective
in the structuring and formulation of housing
policy, with a view to enable and leverage
broader stakeholder participation in policy
implementation. Key characteristics of central
government operating in an enabling role would
include:
1. Create effective tools for developing
and disseminating improved sector
information, by investing in the building
blocks of good housing sector
governance..
2. Enhance inter-ministerial and agency
coordination.
3. Transfer project-level responsibilities to
sub-national governments, specically
urban local governments.
43
44
Approach
Part A: Strengthening and Empowering
Local Governments
This Roadmap outlines a path towards
operationalizing the role of urban local
governments as the entities that plan for,
co-nance and deliver affordable housing
solutions, while beneting from capital
investment and technical assistance from the
central government.
guidelines,
t r a i n i n g
m a t e r i a l s 21
and templates
for
local
gover nments,
dissemination
of information
and capacity-building services. The TAF will
also maintain on-demand support or advisory
services for activities such as project preparation
and implementation of local reforms acting as
a safety net where local governments are taking
on greater responsibilities in planning, nancing
and executing activities.
45
46
47
48
Rationale
The rapid growth of urban areas in Indonesia
has increased pressure on land in urban and
peri-urban areas. Private developers and
investors have acquired large land banks for
speculative purposes which, together with
a failure of formal sector supply to keep up
with demand, has forced up prices of welllocated and serviced land dramatically over the
last three years. As a result, land is no longer
affordable to the poor and even many middleincome groups in many urban agglomerations.
An estimated
15,000 to 60,000
hectares of urban
land is required
annually for
housing needs
Government
will
need to secure urban
and peri-urban land
to
implement
the
proposed
housing
and
settlement
programs,
including
slum
improvement,
incremental new housing and formal subsidized
housing programs. Securing or releasing such
land to market is challenging and will require a
range of strategies in the short and mediumterm. Acquiring or banking land can prove
extremely costly in Indonesias current urban
49
Approach
6.1 Develop a National Land for Housing
Program to Assist Low-Cost Housing
Delivery
Create a National Land for Housing Program,
for land provision to support the implementation
of national housing programs, supported by
appropriate regulation and managed by a
high-level supervisory board. Land provisioning
would aim to mobilize publicly-controlled land
assets for public and affordable housing, without
requiring complex and costly acquisition of
land by one central agency. A program design,
oversight and an implementing agent will need
to be established. Various points of entry are
feasible, including a BLU entity within MPWH,
a BLU within BPN, a new agency staffed from
different ministries with a time bound mandate,
or a Cross-Ministerial Special Unit. Irrespective
of where the entity is located, it will be important
to ensure a clear mandate for the entity through
either presidential or ministerial regulations.
The functions of such a program and the
scope of the mandate to be provided the
implementing entity could include:
Prepare Land Needs Assessments for
local governments at current density
norms and estimated needs to: (i)
relocate settlements not suitable for
in-situ upgrading; (ii) address existing
backlog; and (iii) accommodate projected
population increase.
Carry out an inventory and identication
of developable public land (including
50
Local governments
have a major role
to play in the use
of spatial planning
and tax instruments
to mobilize private
land for low-income
housing
51
52
53
54
07
Roadmap
Implementation
To move forward on each of these policy priorities, the following diagram lays out
the series of actions that the government will need to take, in the Immediate, Short
Term and Medium Term.
Priority
Slum Upgrading
Immediate Actions
6-12 month
Subsidized Housing
Introduce further
market reforms and
measures that increase private sector
incentives to develop
and manage public
housing.
Home Improvement
Strengthen delivery of
existing home improvement
subsidy program (BSPS)
and introduce a greater
urban-focus.
07 | Roadmap Implementation
55
Priority
56
Immediate Actions
6-12 month
Enable Market
Fully transition to a
demand subsidy and
market-based liquidity support, including strengthening of
mortgage insurance and
SMF. Explore access
to developer nance to
stimulate low-cost housing supply.
Introduce a suite of
associated marketenabling reforms to
deepen mortgage
markets and support
real estate developers increase supply
of low-cost affordable
housing.
Delivery Systems
Urban Land
Continue to build
LG capacity in land
management and
provision.
| Annexes
57
58
Annexes
| Annexes
59
e. Local governments to take an active role. Local governments are in an important position of
direct accountability and responsibility to local residents to develop and execute development
plans, monitor demographic and growth dynamics and respond to the public service needs
of their residents. As such, local governments should be actively involved in the design and
implementation of national housing policy and programs. In turn, these policies should be
exible enough so that they can be reshaped in response to local needs and regional variations.
f. Community participation. Community participation is key to the success and sustainability
of housing and settlement programs. Community participation should be part of the planning,
programming, design, implementation and supervision of activities. This will ensure that the
results of housing and settlement programs satisfy the needs of the community and that there
is sense of local ownership and responsibility toward maintaining healthy neighborhoods.
g. An integrated approach to settlement development. Adequate housing and settlements
require addressing a wide range of issues such as physical planning, quality of construction,
infrastructure provision, access to social services (e.g. healthcare, education and community
facilities), and access to jobs. Therefore, it is important to work towards enabling an integrated,
multi-sectoral approach to housing policy, whereby public transportation, provision of services,
spatial planning and project development are coordinated.
h. Housing and settlements should be integrated with broader city development. New
and existing settlement areas dene the development patterns and long term outcomes of
cities. Yet, slum areas are currently excluded from spatial planning considerations and housing
projects are often viewed as peripheral to city development. Investment in new housing and
slum alleviation should be included in urban spatial planning and management.
60
| Annexes
61
34
National
56
78
Urban
91
Jakarta
1. Families living in a single household who may wish to own but cannot due to affordability
reasons.
2. Non-Owners (renters, lessees etc.) who may not wish to own due to lifestyle preferences.
3. Units that are dened as substandard housing.
It is recommended that the BPS include a few additional survey questions in future Susenas and
the next census to further calibrate the quantitative decit ratio so that it better aligns with home
ownership desire and need.
Box 1. International Example of Housing Decit In Latin America
In Latin America, as in most places, the housing decit has two critical aspects: First, there
is a shortage of housing for those households who want to own housing units this is the
quantitative housing decit. Second, many households live in poor conditions this is the
qualitative decit. The existence of a qualitative housing decit means that many people
share overcrowded accommodation or live in shelter lacking satisfactory basic services such
as water, sanitation and electricity. In the poorest countries, the combined housing decit,
quantitative and qualitative, is actually greater than the total existing housing stock. An
example of housing decit in Colombia is as follows:
Quantitative
Qualitative
Total Decit
1985
14%
33%
49%
2005
12%
24%
36%
Source: Ten Myths Underpinning Latin American Housing Policies by Alan Gilbert
62
Overcrowded
No basic services
All poor quality materials
4,500,000
4,000,000
No. of Units
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
Overcrowded or no basic
services or poor quality
500,000
12
34
56
78
91
Decile
Source: BPS Susenas, 2013.
| Annexes
63
64
7%
5%
8,758,632
14%
8%
11%
12%
14%
16%
18%
21%
22,316,246
35%
9%
16%
22%
29%
32%
38%
43%
46%
51%
61%
No
Sanitation
6,266,012
10%
1%
3%
5%
7%
8%
9%
12%
13%
16%
22%
No Water &
Sanitation
6,125,329
10%
10%
10%
10%
10%
9%
9%
8%
9%
9%
12%
Roof
5,804,551
9%
1%
2%
4%
6%
7%
9%
10%
13%
16%
22%
Floor
785,497
1%
0%
0%
0%
1%
1%
1%
1%
2%
2%
4%
28,915,894
45%
21%
29%
35%
40%
42%
48%
51%
55%
60%
69%
Overcrowded or
No Basic Utilities or
Substandard Material
1,112,974
2%
0%
0%
0%
0%
1%
1%
1%
2%
4%
7%
Overcrowded and
No Basic Utilities and
Substandard Material
In Indonesia, almost all population growth is occurring in urban areas, while growth in rural areas is stagnating. Over 34 million residents moved
to cities in the past 10 years resulting in a total increase of 8.2 million urban households. Meanwhile the rural population has decreased by 2.1
million or around 510,000 households in the past 10 years (see Figure 3).
National housing needs are difcult to determine with accuracy. This responsibility best lies with regional and local governments, who can be
responsible for undertaking specic housing need assessments and setting regional and local housing development targets. Using population
growth, migration and decit estimates, national government can provide minimum and maximum estimates for the housing needs to inform
national program design and national budget allocation.
5,852,233
9%
1%
3%
4%
7%
8%
8%
11%
14%
16%
19%
Wall
7,543,340
8%
No. of
Units
3%
8%
3%
12%
12%
13%
10
15%
Total
6%
19%
27%
27%
No Water
<7.2m2
Decile
Nationwide Overcrowding
Table 1.
-0.17%
-2,100,000
-510,000
3%
34,000,000
8,200,000
The housing needs are diverse units in rural areas suffer disproportionately from qualitative decit
(substandard materials and/or no access to basic services), while housing needs in urban areas
are mainly part of the quantitative decit and suffer particularly from over-crowding, indicating the
need for new production.
Current production of formal units is estimated to be in the order of 400,000 units per year. To
overcome the decit, total production of new units and home improvement solutions will need to
increase to an estimated 1.8 to 3.6 million units per year. This estimate is based on the following
components:
1. Growth in urban population ranges from 2.6% to 2.9% per year, requiring an estimated 820,000
to 920,000 new urban housing units every year in order to accommodate new household
formation.
2. Home improvement or new production to overcome the decit of inadequate units in both rural
and urban areas. This requires additional production of between 900,000 and 2.7 million units
or home improvement solutions per year, depending on estimates for the current decit (see
Table 2) and time span to entirely eliminate the decit (by 2019, 2024 or 2029).
Table 2.
Decit Estimates
Classication
Total Units
Low Estimate
3.9 million
780,000
Middle Estimate
7.5 million
1,500,000
High Estimate
13.5 million
2,700,000
Of the total need, the top 20 percent of households are capable of purchasing in the formal
market (see affordability section). This leaves 1.6 to 3.2 million households per year that need
housing support through an enabling nancial environment or specic public programs. Some
units can be made adequate through home improvement or incremental home expansion. An
estimated 12.2% of urban residents or 3.9 million households live in slums requiring upgrading,
in-situ redevelopment, or relocation. In addition, there are non-slum households that require new
housing due to internal migration or population growth. This will require the production of low-cost
formal housing, as well as affordable housing nance. Table 3 illustrates certain characteristics of
the estimated housing needs according to income decile.
| Annexes
65
Table 3.
Target
Groups
Slum Units
Decile 1-4
(Non-Slum
Households)
Decile 5-8
Annual Need
to Address
Housing
Decit by
2019
780,000 units
1.20 m units
1.25 m units
Annual Need
to Address
Housing Decit
by 2024
390,000 units
780,000 units
810,000 units
Annual Need
to Address
Housing Decit
by 2029
Objectives
Example of
Policy Solution
260,000 units
0% Slums
Slum upgrading
and home
improvement
subsidies.
650,000 units
Prevent
formation of
new slums,
increase supply
of affordable
formal housing
solutions.
New subsidized
public rental
and core starter
units.
660,000 units
Increase supply
of low-cost
housing to
reduce backlog
and meet new
demand.
Introduce
more effective
mortgage-linked
subsidy scheme
to enhance
affordability.
Enable formal
housing market
to work.
Support
secondary
mortgage market
development.
Decile 9-10
390,000 units
290,000 units
250,000 units
Total
3.6 million/yr
2.3 million/yr
1.8 million/yr
Actual gures may be signicantly different from these estimates, depending on the assumptions
and statistical measures used. Variations may be caused by the following factors:
1. The model assumes that demand for new units are equally distributed among deciles. However,
new household formation tends to be biased towards the middle and lower income deciles.
Demographic analysis show that low-income households tend to have larger families and
rural-to-urban migrants tend to be lower income.
2. The spread of the housing decit across deciles is based on average spread of the basic
substandard characteristics30. However, certain characteristics may be more heavily
concentrated in lower decile households or vice versa, which would require more complex
segmentation techniques.
3. Lastly, even though income in slums is heterogeneous, the assumption is that the majority of
the current slum population is expected to be poor or ultra poor (Decile 1 4).
The goal of the Roadmap is not to dene the precise numbers. Instead, given the undisputed
magnitude of the need, its priority is identifying areas for action and improving the efciency and
equity of the policy framework.
30
66
On average, Decile 1-4 households make up 60% of substandard units, hence qualitative backlog, Decile 5-8
households make up 33% of the qualitative backlog; and Decile 9-10 make up 7% of the qualitative backlog.
Mo. HH Expenditures
1.17
1.42
1.59
1.83
2.06
2.35
2.66
3.21
4.26
10
8.20
Avg
Jakarta
IDR 5.99 MM
1.5
Urban
2.6
IDR 3.64 MM
Nasional
IDR 2.88 MM
6.2
2.88
The Susenas Survey also records existing spending on housing. The Imputed Housing
and Housing Related expenditures31 as a percentage of total household expenditures gives an
indication of the share of their total expenditures that households from different deciles are willing to
allocate toward housing. Lower decile households tend to have less income available for housing,
as they must spend a larger proportion on essential goods like water, food and transport. In the
case of Indonesia, nationally households allocate 19% of their total expenditures, on average,
to housing. This ranges from 32% for Decile 10 households to 15% for Decile 1-4 households,
reecting international studies that show that poorer households have a much lower share of
income available for spending on housing. While the imputed housing cost reects more the
affordability of rentals rather than that of home ownership, this housing indicator is an important
ratio to track.
Table 4.
As a % of Household Expenditures
National
Urban
Jakarta
19%
21%
25%
11%
12%
15%
8%
9%
10%
| Annexes
67
Analysis of household income32 gives an indication of household savings and funds available for
investment in housing purchase, improvement, or extension as a starting point for the affordability
analysis. As can be seen in Table 5, household savings (income less expenditures) increases quite
dramatically as one moves from lower to higher income deciles. Analysis of various subsets shows
that there is a lot of variation in the median monthly household expenditure in different geographic
regions.
Table 5.
HH Decile
Monthly HH
Income
(IDR mm)
Monthly HH
Expenditures
(IDR mm)
Percentage HH
Savings
(IDR mm)
Decile 1
1.2
1.2
7%
0.2
Decile 2
1.8
1.4
21%
0.5
Decile 3
2.1
1.6
24%
0.6
Decile 4
2.6
1.8
30%
1.0
Decile 5
3.1
2.1
34%
1.2
Decile 6
3.6
2.3
34%
1.5
Decile 7
4.2
2.7
36%
1.8
Decile 8
5.2
3.2
39%
2.4
Decile 9
7.0
4.3
39%
3.2
Decile 10
13.9
8.2
41%
6.6
Average
4.5
2.9
30%
1.9
32 Household income formula for Decile 5 has been calculated from the Median of Greater of Minimum Wage and
Minimum Decent Living (Ministry of Labor) for 24 provinces multiplied by the Number of Working Adults. Household
income for other deciles has been extrapolated from the median point, Decile 5, using the household expenditure
curve provided by BPS Susenas data.
68
| Annexes
69
10%
7.25%
20
5-8
Subsidized FLPP
Loan
20%
12%
15
8-10
Commercial Loan
1
1,248,841
1,166,502
101,339
1,065,163
183,677
15%
10%
124,884
2,453,720
3,067,150
HH Decile
HH Income
HH Expenditures
Housing Cost (Imputed)
HH Spends less Hsg Cost
Available for Housing
Available for Housing (%)
DTI %
Max EMI
Max Loan
Max Home Price
2
3
1,793,549
2,096,882
1,418,486
1,590,485
101,780
124,020
1,316,706
1,466,465
476,843
630,417
27%
30%
20%
25%
358,710
524,221
MFI Loan
7,047,924 10,299,878
8,809,905 12,874,847
5
3,116,215
2,064,460
196,689
1,867,771
1,248,444
40%
30%
934,865
6
7
8
9
10
3,576,109
4,154,031
5,234,344
7,006,839 13,882,924
2,349,395
2,664,861
3,205,574
4,258,883
8,201,534
240,641
278,102
349,744
475,604
934,338
2,108,753
2,386,759
2,855,829
3,783,279
7,267,196
1,467,355
1,767,272
2,378,515
3,223,560
6,615,728
41%
43%
45%
46%
48%
30%
33%
35%
37%
40%
1,072,833
1,370,830
1,832,021
2,592,530
5,553,170
FLPP Loan
Commercial Loan
14,421,198 118,280,989 135,736,991 114,219,844 152,647,000 216,013,940 462,699,327
18,026,498 131,423,321 150,818,879 142,774,805 190,808,750 270,017,426 578,374,159
4
2,621,352
1,832,597
163,545
1,669,052
952,299
36%
28%
733,978
20%
Table 7.
20%
Down Payment
Rate
1-4
MFI Loan
Deciles
Table 6.
IDR
10.2 MM
Deciles 5-8
IDR 4.0 MM
Deciles 1-4
IDR 1.9 MM
Decile 9-10
IDR > 270 MM
IDR +/-145 MM
IDR <20
MM
D1-4
D 5-8
D9-10
Median HH income
1,945,215
3,865,070
10,444,881
Median HH Expenditures
1,391,585
2,247,756
5,525,238
553,630
1,617,313
4,919,644
25%
33%
40%
40% / 3 yrs
7.25% / 20 yrs
12% / 15 yrs
486,304
1,275,473
4,177,953
10,108,134
161,375,470
348,113,956
12,635,168
179,306,078
435,142,445
0.5
3.9
3.5
N/A
300,000,000
1,000,000,000
N/A
6.5
8.0
70
Approx. Subsidy
Approx.
Affordable Loan
4.7 million
20.9 million
13.5 million
31.9 million
19.8 million
39.7 million
27.7 million
49.6 million
78.9 million
97.4 million
89.4 million
112 million
114 million
143 million
153 million
191 million
216 million
463 million
270 million
578 million
2
3
6
7
Down-Payment
Subsidy and LongTerm Finance
8
9
10
e.g. 15 million
for home
improvement
Progressive
demand-side
subsidy, linked to
income
Commercial Loan
No subsidy.
| Annexes
71
72
Estimated
Cost of
Subsidy
(IDR m)
No. of
Units
Budget
Reqd
(IDR Tr)
D1-D4
15
624,000
9.4
19%
D1-D4
15
831,900
12.5
D1-D4
25
294,400
D1-D4
50
D5-D8
All
No. of
Units
Budget
Reqd
(IDR Tr)
14%
312,000
4.7
16%
12%
26%
19%
415,950
6.2
21%
16%
4.4
9%
7%
294,400
4.4
15%
11%
229,600
3.4
7%
5%
151,600
2.3
8%
6%
20
1,253,600
18.8
39%
29%
810,800
12.2
41%
31%
25%
16.2
25%
9.9
25%
3,233,500
65
1,984,750
40
6.5
4.0
3.5%
2.2%
Program
Type
Slum
Upgrading
Home
Improvement
Core Units
Public Rental
Housing
DownPayment
Assistance
Management
& Admin
Totals
Program
Type
Slum
Upgrading
Home
Improvement
Core Units
Public Rental
Housing
DownPayment
Assistance
Management
& Admin
Share Share
of
of
Units Budget
Estimated
Cost of
Subsidy
(IDR m)
No. of
Units
Budget
Reqd
(IDR Tr)
D1-D4
15
208,000
3.1
13%
D1-D4
15
277,300
4.2
D1-D4
25
294,400
D1-D4
50
D5-D8
All
Share Share
of
of
Units Budget
Share Share
of
of
Units Budget
No. of
Units
Budget
Reqd
(IDR Tr)
10%
96,490
1.4
24%
12%
18%
13%
128,638
1.9
31%
16%
4.4
19%
14%
27,314
0.7
7%
11%
125,600
1.9
8%
6%
10,651
0.5
3%
6%
20
663,200
9.9
42%
32%
145,384
2.9
36%
31%
25%
7.8
25%
2.5
25%
1,568,500
31
408,477
10
3.1
1.0
1.7%
0.5%
Totals
No. of Times Approx. Current
Budget
% of Total Budget for 2014
| Annexes
73
74
The third Five Year Plan or Repelita III (1979-1984) emphasized social equity. Housing was viewed
as a basic need and social good. It was therefore provided at a subsidized rate to the poor. The
government acted as service provider, while KIP was scaled up to cover 200 cities. A pilot to
integrate KIP with broader urban development goals was undertaken such that basic services
provided by KIP (water, drainage, solid waste management, health posts etc.) were now linked
to the urban network. Supported by booming petroleum revenue, the Indonesian government
implemented a massive top down housing and infrastructure development program. The formal
housing sector was well-supported by a wide range of supply side instruments.
The fourth Five Year Plan or Repelita IV (1984-1989) retained this emphasis. After a successful pilot, the
integrated urban development approach was scaled up as the Integrated Urban Infrastructure
Development Program or IUIDP in several cities, retaining KIP as one component. In the mid
1980s, IUIDP was ofcially launched by the Ministry of Public Works in 400 cities alongside KIP
and the Market Infrastructure Improvement Program or MIIP in 100 cities. However, the
upgrading or improvement of informal/illegal settlements was not included and largely addressed
through eviction and the construction of low-rise apartments.
Repelita V (1989-1994) continued the emphasis on social equity. IUIDP was implemented in more
provinces and cities. Slum upgrading not only covered infrastructure but included urban renewal
on state land. The emphasis on low-rise apartments remained. Law No. 4/1992 on Housing
and Settlement now recognized the role of the community in housing development. However,
the top-down and supply-driven approach continued to receive more attention than incipient
community-based initiatives.
The Second Long Term Development Plan (PJP II) commenced in 1994 from Repelita VI
(1994-1999). But the sixth Repelita was not completed due to the fall of the New Order Regime
in 1998. Mainstream housing development continued, yet much of the subsidized provision of
housing for low-income groups was captured by the not so poor.
| Annexes
75
Policy and Strategy for Housing and Human Settlements. However, the central government
failed to transfer resources to local governments for its implementation, and local governments
were not ready to assume additional responsibilities, given funding and capacity constraints. In the
case of the Rusunawa, which was the Program for Public Rental Apartments, the municipal role
was limited to identifying the location and available land. The design, procurement of contractors,
actual construction and civil works supervision continued to be a central line ministry responsibility.
The local governments did not own the program, did not see it as a priority and were reluctant to
allocate municipal land for what was viewed as a central government program.
In the case of the Perumahan Swadaya or the Self-Help Housing Program, the central
government provided funds to eligible households to repair their homes. The central government
has struggled to identify data on who was eligible to receive nancial assistance. The central line
agency insisted on undertaking the survey and preparing the budget. The lack of preparation,
capacity-strengthening, transfer of resources, and coordination between central agencies and
local governments after decentralization has resulted in limitations to the implementation of
housing programs.
With the success of engaging communities directly in urban poverty alleviation activities, the
national PNPM Urban program initiated a community driven neighborhood (infrastructure)
development program, through block grants provided to communities. The trend was to integrate
community driven slum improvement efforts with poverty reduction.
The Government of Indonesia reiterated its commitment, however, to the right to adequate housing
in the Long-Term Development Plan 20052025 (RPJPN), the Medium-Term Development
Plans: RPJMN (2004-2009) and the RPJMN (20102014). Law No 1 of 2011 on Housing and
Settlement Area was enacted to replace the previous Housing Law No 4 of 1992.
76
housing, settlement development, slum alleviation and provision of land for housing. However,
there is a lack of enabling regulations to support implementation. The four mandated government
regulations36 have not been issued. Further, Law 1/2011 fails to address the role of the community
or to adequately dene a slum.
Conclusion
Housing policy moved from social housing to the construction of housing units below the market
price for low-income people, who have been largely public sector employees (e.g. in the case of
Yayasan Kas Pembangunan). There was a massive production of low-cost housing by the private
and public sector that failed to address the needs of the urban poor.
Area development schemes, like the KIP, linked basic services within the settlement or kampung
to broader urban development. However, individual housing development and area development
have remained supply-driven.
Some pilots emphasizing a demand-side approach were launched. This included the Community
Based Housing Development or CBHD, CoBuild, and NUSSP. These were peripheral to the
national housing police and, as a result, the poor have suffered from the high and inating price
of housing and land.
As of today, most local governments do not drive low-income urban housing programs. The
municipal budget apportioned for low-income housing is limited. There is a lack of systematic data
related to slums and informal settlements. The National Housing Board has ceased to function.
The community-driven programs of housing improvement were pushed through by the central
government and not by the municipalities concerned. In 2013, an Inter-Ministerial Working Group
on Housing and Settlements chaired by Bappenas was established to review performance.
Indonesia continues to have a substantial housing decit. Subsidized loans and a provision of
infrastructure and tax exemptions were introduced for low-cost housing, yet these steps meet
just 20% of the housing needs and have not addressed the underlying reasons for the decit.
Most households still meet their requirements through incremental owner-driven construction that
remains in the informal sector. The needs of the poorest, who often live in illegal and squatter
settlements, have not yet been addressed through policy.
36 Government Regulations are now in the formulation process which are: i) Supervision of Housing and Settlement
Areas, ii) The Development of Housing and Settlement Area, iii) Housing Finance Mobilisation and iv) State Housing,
| Annexes
77
4. Sector-Specific Context
Annex 4.1 Housing Sector Governance
Summary of Sector Findings
There are four long-standing structural issues that have limited the effectiveness of housing sector
governance in Indonesia:
1. Central government implements most housing policy and programs with a limited role
for local government. Many local governments have been unable to take on an effective
role in supporting housing provision because of a lack of adequate funding, political interest
or technical capacity. It will be difcult for central government to meet Indonesias housing
needs alone. Increasing the participation of local governments is important because of the
scale and diversity of the countrys housing challenges. Indonesia has over 500 subnational
governments, each of whom have a unique, geographically-specic set of housing and
settlement challenges. National programs could be redesigned with more exibility and a
clearer transfer of responsibilities and support to local governments. This approach would help
programs reach scale while maintaining quality and responsiveness.
2. There are limited coordination mechanisms across central government agencies. Good
housing policy requires the commitment and coordination of a wide number of stakeholders
across central government ministries. No clear framework for the coordination and integration of
housing policy between government agencies exists, resulting in both overlap and disconnect.
Key central level ministries and agencies with a role in housing policy and programs include
Bappenas, MPWH, Ministry of Finance, Ministry of Home Affairs, Ministry of Agrarian Affairs
and Spatial Planning, the Coordinating Ministries for Peoples Welfare and Economic Affairs,
Ministry of Social Affairs, Ministry of Fisheries, BPN, among others. The Inter-Ministerial Working
Group for Housing and Settlements (Pokja PKP) is emerging as an important institution that
creates space for discussion and decision-making on policy development across government
agencies. However, its mandate and responsibilities will need to be elevated if the Pokja is to
establish coordination and integration mechanisms.
3. There is a lack of well-structured support to local governments and private sector developers
to increase their participation and contribution to national housing targets. While local
governments have the mandate to provide housing and services for low-income residents,
many need support for building capacity for policy and regulation development, program design
and implementation, as well as monitoring and information systems, and other aspects. There
are also limited incentives for private real estate developers to increase their participation in
the supply of housing for low-income households. Government can focus on fostering private
sector interest by lowering their costs. This would help channel private investment towards the
delivery of affordable housing.
4. Key building blocks for improving housing sector governance are lacking. These include
(a) establishment of a common and clear policy direction in the housing sector, (b) classication
of market segments and approach to determining affordability and targeting of programs, (c)
78
development of housing management information systems for monitoring the housing market,
informing policy, and evaluating the performance of specic programs, (e) effective means
of enforcement of regulations, (f) improved technical capacity of government agencies to
implement policies.
| Annexes
79
As per Regulation 38, 2007, local government is specically mandated to provide housing to citizens
residing in its territories and to dedicate specic areas in the municipality for affordable housing
development. Law No. 32/2004 further underlines these decentralization and deconcentration
principles. It devolves and delegates authority from central government to local government
(Articles 1.7 and 1.8), and gives local governments the right, authority, and duty to regulate their
own affairs autonomously in the interest of local communities. It also holds them responsible for
improving public welfare and services (Articles 1.5 and 2.3).
The law articulates that the scal balance between central and local government must be fair,
proportionate, democratic, transparent, and accountable, taking into account the context,
potential, and funding requirements for the implementation of decentralization (Article 1.13). Within
the housing sector, funds are usually directly channeled from central government to projects with
limited use of local government funds.
80
of affordable housing. In 2013, of the 250,000 general housing units produced by REI members,
120,000 units were affordable, which REI denes as units below the sales price of IDR 200 million.
Given that both APERSI and REI have sizeable and active memberships that participate in the
development of market-rate and affordable housing, these organizations could serve as an
important resource for government in the gathering of information to understand market trends
and needs and to increase private developer participation in housing policy formulation and
execution.
Key Delivery Blockages. The key challenges limiting private sector participation and the supply
of affordable housing in Indonesia include:
Land. Private developers of affordable housing have difculty accessing land at the right
price, condition, and location.
Taxation. In some cities, the land tax has increased well ahead of ination norms, and
many taxes create incentives for evasion, including the transfer tax and VAT. Both taxes
increase the end cost of units to both developers and consumers, thereby encouraging
under-reporting of the sale price.
Finance. Access to affordable construction nance remains a challenge to developers,
particularly small ones. Most developers rely on their own equity for construction. Larger
developers may borrow from commercial banks or issue bonds at rates around 13% per
annum for a 12 to 24 month period.
Permitting and zoning. Currently, there are wide disparities between local governments with
regards to the time and costs of permitting. This creates a lot of uncertainty. Construction
cannot begin until permits are issued. These delays in permitting may raise the costs of
development by as much as 20% in a 12 month period, due to the high cost of capital.
Infrastructure. Some local governments provide support to developers of FLPP-qualied
landed housing in terms of trunk and site infrastructure, yet this support is not consistent and
there is not usually infrastructure support for vertical developments of FLPP projects.
Policy does not take into account to market difculties. The Ministry has announced that
from March 2015, FLPP loans will only be available for vertical units. While Perumnas and some
APERSI and REI developers have the technical capacity to develop vertical housing projects,
developers are often deterred from building vertical projects due to technical challenges,
difculties in accessing longer-term development nance, and lack of governmental support
in areas such as infrastructure provision, tax breaks, and permitting.
| Annexes
81
MoH
Private sector
20%
contribution to
affordable
housing
APBN
(MoH program budget)
Deconcentration
Grant: for LG Capacity
Building
Provincial Government
(oversight)
Local Government
(needs identification)
TA funding
for LG
Direct Project
Funding
Funding of local-level housing budget: A small number of housing programs are shaped by
local governments and funded directly out of local budgets. Such local government housing
budgets consist of three main sources of funding: (a) local government revenue from taxes, charity
contributions, and Public Service Obligation (PSO) contributions from both local government and
central government general budget for housing rebated costs; (b) DAU, i.e., general purpose
grants received by every local government; and (c) DAK, i.e., special-purpose grants allocated for
a specic use, which may include housing-related infrastructure or services. This local housing
budget typically makes up approximately 3% of local governments total budget, however there
is signicant variation across them: active and well-resourced cities (such as DKI Jakarta) are
estimated to allocate between 5% and 10%, while less-resourced local governments spend
between 1% and 3% on housing.37
As there is no mechanism to transfer capital grants from central ministries to local governments, it
can be difcult for cities to tailor and direct their own programs to t local needs and build capacity
through experience. Also, it is challenging for ministries to carry out monitoring and oversight at
the local-level.
82
MoF
Charity
Contributions
PSO
Local government
revenue
DAK
Special Funding
DAU
Basic Funding
15-30%
70-85%
<< 5%
Contribution to LG
housing budget
Contribution to LG
housing budget
Contribution to LG
housing budget
Housing programs/projects
created and executed by LG
| Annexes
83
Sector Recommendations
1. Develop a System for Local Government Accreditation
The Roadmap recommends MPWH to develop a local government accreditation program for the
implementation of housing and settlements programs. Under this program, central government
would assess local governments and rank them into different tiers, based on technical criteria that
cover institutional and scal capacity, local housing needs and performance. The accreditation
program would focus primarily on city governments, where housing backlog and new demand is
highest.
This accreditation system may be used over time to qualify local governments for capacity-building
activities, increase autonomy and responsibility in program implementation, determine the funding
balance (between central and local budgets), and inform the design of national programs. There
will need to be a unit, likely best positioned within MPWH, responsible for preparing and publishing
the accreditation on a regular basis.
Figure 8. Example Structure of Local Government Accreditation System
Large Cities
Medium Cities
Small Cities/Rural
ACCREDITATION STANDARS:
Resources,
Capacity,
Readiness
Performance
Track Record
Accessible Local
Support
ACCREDITATION LEVELS:
Funding
Autonomy
TIER 1
High
High
TIER 2
Medium
Basic
Medium
Basic
TIER 3
As part of this accreditation system, central government may require that local governments report
their performance and progress on program delivery on a regular basis, as well as to implement
local-level reforms or training activities, and apply Standard Operating Procedures (SOPs) in
coordination with program delivery. Over time, high-performing local governments with successful
housing programs may be able to share their experience with less-developed local governments
through peer-to-peer learning platforms.
As the accreditation process matures, central government funding for housing and settlements
programs can be distributed on a competitive basis to provide additional incentives for improving
performance and targets.
84
| Annexes
85
MPWH should continue to maintain a basic funding pool for all local governments regardless of
capacity, but it can supplement this with additional program funding that is used to incentivize
improved accreditation and performance of local governments. This funding can initially be
allocated on a rst-come, rst-served basis based on readiness to engage in immediate housing
production. Later annual funding rounds38 may reduce emphasis on readiness (as more local
governments become ready) and increase emphasis on performance, capacity growth, impact,
and other factors.
In this way, central government can work towards standardizing and streamlining local government
activities - including planning, programming of activities, as well as improving the functioning of
local market - by making implementation of certain reforms39, SOPs, or trainings a pre-condition
for accessing program funding.
38 Criteria and conditions of funding allocation should be revised on an annual basis to incorporate learnings from
programs and shifting national policy objectives.
39 For example, streamlining and increasing transparency of building permits, fast-track approvals for affordable housing
that comply with government standards, introducing land value taxation etc.
40 Minimum construction will include construction standards, minimum floor plans, mandatory building or apartment
amenities and feature etc.
41 Non-government and private sector interest groups can be immensely helpful, both technically and politically.
Technically, private sector and community groups bring real-world insight into how systems are working. Politically,
giving these actors the opportunity to shape construction standards defuses suspicion, builds confidence and
commitment to implementation and self-governance of these standards.
86
etc.), public sector entities (BI Real Statistics Division, SMF, Askrindo, BTN, Perumnas, etc.), and
private sector entities (APERSI, REI, research agencies, etc.) to collect all housing and real estate
related data.
With the collected data, the HREIC can build capacity to analyze and report out at regular intervals,
some key housing indicators as outlined in Figure 9. These key indicators are not only critical in
planning, investment and public program development but also in affordability analyses.
Figure 9. Important Housing Sector Indicators
New Housing Starts
(Permits, Under
Construction)
Finished stocks
(Ready for Sale)
Rental Stocks
Housing Sale
Volume
Household
Income
Supply
Pricing
Demand
Financing
Housing loan
products
Mortgage rate
Loan Outstanding &
Origination
NPLs
Foreclosure
| Annexes
87
Where possible, this system should further expand local governments capacity in targeting and
beneciary selection, and utilize existing central government infrastructure. For the bottom 40%,
the TNP2K, an integrated database of Indonesian households for the targeting of social assistance
programs can be used to identify eligible households. This will allow government to maximize
integration with other central government assistance programs and not create replication or a
parallel system.
The Research Unit within HREIC could be responsible for the following activities, consistent with
an overall strategy for establishing targeting and affordability levels for the sector:
A. Development of Housing Indicators:
1. Home Ownership Rate needs to be further ne-tuned from the current BPS denition of nonownership, as those households with greater than one family may have home ownership
needs that are currently not being accounted for.
2. Housing Decit needs to capture both quantitative and qualitative needs. The quantitative
decit could be achieved through additional BPS questions to ne-tune the census
statistics, while the qualitative decit needs to address the combination of factors that reect
substandard housing (e.g. crowding effect with 7.2 m2 as the basic area per person; lack of
standard utilities such as water and sanitation; and poor quality materials for oor, roof and
wall).
3. Imputed Housing and Housing Related Cost / Household Expenditures. The ratio is available
in the BPS Susenas and can be used more actively to assess affordability levels, taking into
account that lower deciles can spare a smaller percentage of income on housing.
4. Median Home Price / Median Household Income. This ratio can easily be tracked to act as
an important indicator for affordability, which allows easy comparisons with regional and
international peers.
B. Segmentation Analysis:
The Research Unit can also be responsible for carrying out market segmentation analysis to
understand behaviors and needs of low-income household more deeply. Important data for
analysis include breakdowns of housing characteristics and needs by province and major districts,
household expenditures; head of household age, employment and education; home ownership
status; and home types (landed houses, vertical units, row houses, etc.).
C. Affordability Analysis:
An affordability analysis can start with developing a view of household income by population
deciles, as the difference between household income and household expenditures that is recorded
by BPS via the Susenas survey yields household savings or funds available for investment in
housing purchase, improvement or extension.
In this Roadmap, the household income has been derived by using Median Monthly Minimum
Wage by provinces (as dened by Ministry of Labor) multiplied by the number of working adults
per household. This household income indicator could use further investigation and checks
and balances to ne-tune over time. Using examples of existing housing loan products that
are available (from the micronance sector, subsidized loans and commercial loan), maximum
home prices can be calculated for different income segments in different geographies. In order to
ascertain affordability, these maximum home prices can be compared to the costs of construction
of a minimum standard unit, in different geographies and even within cities (peri-urban vs. central
city locations.
88
The Research and Analysis unit in MPWH should carry out this analysis and can also develop
online tools and trainings for local governments to carry out this analysis in order to determine
the targeting and need for subsidies toward making decent housing affordable for low-income
households.
Implementation Plan
Not all recommendations should or can be executed at once. The following table proposes
an implementation sequence, which requires making an immediate political commitment to a
series of actions, then designing the rst order activities (including, establishment of a housing
management information systems (MIS) and carrying out the detailed affordability and targeting
assessment), before implementing the rest of the action plan in sequence.
| Annexes
89
Short-Term
(1-2 years)
Long-term
(3-5 years)
Design
Establish
Ongoing
--
Establish
Ongoing
Design
Establish
Ongoing
Establish
Ongoing
Ongoing
Design
Establish
Ongoing
Establish
Ongoing
Ongoing
Establish
Ongoing
Ongoing
--
Establish
Ongoing
Denition of Slums
The denition of a slum in Indonesias Law No. 1/2011 on Housing and Settlement Area is
premised on both housing (perumahan kumuh) and neighborhood areas (permukiman kumuh).
The rst refers to housing with inadequate living space. The second subsumes underserved slum
neighborhoods, insufcient infrastructure services and low construction quality.
The National Socio-Economic Survey (Susenas) published by the Central Statistical Board (BPS)
enumerates slums using the number of households that live in non-livable houses (RTLH) and
42 This section is drawn from the SAPOLA Summary Report, November 2014.
90
the total number of slum households (Rumah Tangga Kumuh). These two criteria are used
ofcially to enumerate slum households in Indonesia, for example, in the Indonesian reports on
the Millennium Development Goals (MDG) and in reports of the Ministry of Housing. However,
because this metric does not capture neighborhood information, it is difcult to use the BPS data
to implement spatial programs and policies. The Ministry of Public Works (Directorate General of
Human Settlements), on the other hand, emphasizes the physical extent of a slum and its location
based on the neighborhood area. MPWH uses data from various sources at the city/district level43,
the basis for which differ from city to city. These two methodologies for enumeration have resulted
in signicantly different estimates in terms of the extent of slums in Indonesia.
According to the MDG Report (based on BPS data), in 2011, around 12.2% of the urban population
or approximately 3.9 million households resided in units that lacked safe water and adequate
sanitation.44 This was a quarter of the total urban population. At the same time, the latest data on
slum areas as measured by the Ministry of Public Works45 reveals that the extent of slum areas
is currently 37,407 Ha, spread over 3,286 slum locations in 2,870 villages in Indonesia. In order
to target and monitor a national program for slum alleviation, it will be necessary to agree on a
common denition and methodology for enumerating slums, whether by households, locations
or a combination of both.
43 Such as: i) Slum data updating in 127 cities/district in 2013, ii) Data from SPPIP documents for 222 cities/districts,
and iii) Slum Decree stipulated by 28 cities/districts government.
44 Susenas and MDGs Report, BPS.
45 The Directorate General of Human Settlements carried out a Quick Count in 2014, measuring settlements in 33
provinces (excluding DKI Jakarta Province) using a rapid assessment method.
| Annexes
91
No
Province
1
2
3
4
5
6
7
8
NAD (Aceh)
North Sumatera
West Sumatera
Riau
Jambi
South Sumatera
Bengkulu
Lampung
Bangka Belitung
Islands
Riau Islands
DKI Jakarta*
West Java
Central Java
DI Yogyakarta
East Java
Banten
Bali
West Nusa Tenggara
East Nusa Tenggara
West Kalimantan
Central Kalimantan
South Kalimantan
East Kalimantan**
North Kalimantan
North Sulawesi
Central Sulawesi
South Sulawesi
South East Sulawesi
Gorontalo
West Sulawesi
Maluku
North Maluku
West Papua
Papua
Indonesia
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
8,967
22
33
35
530.99
11.68%
25.99%
14.03%
5.05%
3.50%
7.75%
14.60%
13.23%
17.45%
20.36%
4.30%
12.80%
10.77%
7.89%
14.88%
12.55%
8.65%
16.34%
18.32%
21.18%
19.56%
13.38%
18.40%
20.48%
12.10%
47,381
681,933
1,129,177
207,312
25,342
392,904
273,250
85,021
95,193
42,323
14,019
26,223
47,234
47,067
40,695
20,231
61,575
24,394
15,907
13,306
24,617
8,423
10,129
37,555
3,905,003
7
6
27
35
5
38
8
9
10
22
14
14
13
10
5
15
13
24
14
6
6
11
10
13
29
505
18
94
117
19
62
22
18
38
28
20
15
21
28
7
110
20
50
60
11
14
10
22
14
16
1,256
29
217
379
41
124
40
50
80
79
34
32
50
42
14
169
52
126
153
33
39
36
46
21
38
2,870
29
223
275
438
82
146
51
67
120
117
35
35
63
46
16
169
53
166
153
36
65
48
46
30
45
3,286
1,002.55
1,024.52
2,289.76
4,235.84
178.83
2,957.20
489.22
415.38
1,644.51
855.56
732.27
647.92
965.21
996.23
298.35
645.62
152.53
1,085.17
1,128.27
258.88
353.44
251.14
507.25
544.71
701.02
37,407.26
*) Directorate of Settlement Development Data excludes DKI Jakarta slum data. Data on DKI Jakarta is based on
Evaluation of DKI Jakarta Slum RWs 2012.
**) Susenas Data on East Kalimantan includes North Kalimantan.
***) Susenas Data uses number of urban household based on Population Projection 2010-2035.
Sources: Susenas-MDGs, BPS (2013); Slide Presentation, Directorate of Settlement Development - Ministry of Public
Works (2014); Evaluation of DKI Jakarta Slum RWs (2013)
92
| Annexes
93
More recently, the National Program on Community Empowerment or PNPM Urban was
modied to include a component on Neighborhood Development (ND), which is intended to
improve living conditions for the poor by empowering and nancing communities to develop locallevel spatial plans and undertake their own investments in infrastructure improvements. Although
this program has already established community groups across more than 60 cities and has
shown some success, activities are limited by the fact that communities are unable to plan and link
tertiary-level investments with larger city infrastructure networks (like water supply and drainage).
Other programs have been piloted such as the Community-Based Housing Development
Project/CBHD/P2BPK (1990) to support community-driven housing and the UNDP nanced CoBILD Project (2000) to test the viability of a housing nance mechanism based on market rates
of interest. In spite of their successes, none of these programs have been scaled up because of
their lack of integration with national policy priorities.
Previous Programs have Generally not Dealt with Land and Security of
Tenure
The price of land has increased radically over the past few years because of the lack of instruments
to regulate land markets and limit speculation. Vacant urban land is in short supply in Indonesia
and land in suitable locations is too expensive for government to purchase and make available at
affordable prices for low-income housing. Thus, the urban poor have often resorted to their own
means of nding land to settle on.
Many slum settlements are legal in that slum dwellers have some form of right to the land, but
have not registered the land/building in their names either because there has been little incentive
to do so, or because their houses do not conform to regulations. Many settlements are on land
that belongs to the government (local government, line ministries, SOEs), which has been lying
unused, but because residents do not have a formal right to the land, they are unable to get
services. Others are illegally encroaching on privately-owned land.
Past government upgrading programs have focused on settlements that are legal, and have
failed to tackle the more difcult problem of enabling slum dwellers to stay on the land they have
been living on for decades and providing them with some form of tenure security. There have been
some programs for land registration of slum dwellers but these have usually been implemented
separately from upgrading programs and have had limited success.
The principle of tenure security has been largely interpreted by local governments in terms of the
letter of the law and fails to factor in customary law, the residential history of the slum dweller, or
exible forms of tenure that might allow improvements without outright provision of freehold title.
This is not to say that all settlements need to be legalized, as settlements on hazardous land,
reserved land (e.g. watershed), and land required in the short term for strategic purposes, cannot
be upgraded and will need to be resettled. However, given the acute shortage of urban land,
any national program on slum upgrading will need to examine the extent to which land already
occupied by slum dwellers can be provided to them legally.
94
the success of a comprehensive national slum upgrading policy and implementation framework.
The key lessons are as follows:
Community empowerment and participation at every stage of planning and implementation is
key to ensure sustainability. Experienced facilitators or social mobilizers are needed to assist
communities to plan and execute slum alleviation efforts and build decent homes (Mojosongo,
Gunungsari Ilir Balikpapan, Palembang, KIPs, etc).
The commitment and political will of the Mayor/Head of Regency (Bupati) is critical to the
success of slum alleviation. Committed Mayors in Pekalongan, Solo, Yogyakarta, Surabaya,
and Palembang have increased the budget for housing and settlements and have improved
slums irrespective of land tenure status (which is often cited as a roadblock to providing
infrastructure and services in slums).
It is possible to make the land that slum dwellers are currently living on legally available to them
through well designed programs of land regularization, land sharing and land readjustment
(Mojosongo, Gunungsari Ilir Balikpapan, 12 Ulu, Palembang, post-disaster areas).
Granting some form of security of tenure can strengthen the nancial capacity of the community
as their land can be used as collateral for housing improvement loans (Mojosongo, Balikpapan
and Palembang). However, affordable housing nance needs to be linked to upgrading
programs and mechanisms need to be developed to enable slum dwellers with informal and
irregular incomes to access loans.
Slum upgrading programs that focus on improving tertiary infrastructure at the neighborhood
level, without considering the impact on the broader network have often not worked optimally
or have resulted in worsening conditions in other neighborhoods. (For example, proper tertiary
drains in one area have caused increased ooding in an adjacent neighborhood because
they are not adequately connected to a secondary network that drains wastewater etc.). The
improvement of infrastructure in urban slum areas therefore needs to be integrated with citywide infrastructure networks.
Certain aspects of infrastructure maintenance can be managed by communities; for example,
road and footpath maintenance, local solid waste collection, and the upkeep of drains. Other
aspects, such as the illegal dumping of solid waste, the integration of kampung infrastructure
with city-wide networks, and the effects of pollution are beyond the control of communities and
need to be managed by local governments.
Sector Recommendations
In formulating a national slum upgrading strategy and action plan, the Roadmap calls for the
adoption by central and local government of the following key principles:
1. Housing is a basic human right, and residents, legal or illegal, should be protected from arbitrary
eviction.
2. Local governments should take the lead in designing, implementing and monitoring the
program. Central government should provide national resources, technical support and create
an enabling environment to allow them to do so.
3. Community participation is key to the success and sustainability of the program and should be
mandated its design, implementation and supervision.
| Annexes
95
96
Roadmap Implementation
The national slum upgrading program is proposed to be rolled out in three phases: preparation in
the immediate-term (0-12 months); planning in the short-term (1-2 years), and implementation in
the medium-term (3-5 years).
| Annexes
97
NATIONAL
Consensus on
National Policy
Dening
Implementation
Scheme
Advocacy to Local
Governments
IMPLEMENTATION PHASE
(2016-2019)
Program Design
Training on Slum
Mapping and Management
Framework (Bukuh Putih)
LOCAL
Submission
of Interest
Establishment of Working
Group
Program Implementation
98
allocate local budget for slums and adopt a city-wide slum strategy. It might be useful to commission
city-specic studies that explore the externalities of slums and the costs of not addressing slums
in that municipality. This advocacy will initially be carried out by SAPOLA in several proactive cities
i.e. Malang, Medan, Palembang, Jakarta, Surabaya, Banjarmasin and Makassar. Afterwards, the
Ministry of Public Works and Public Housing, as the key agency responsible for the national
program, will organize advocacy and dissemination to the remaining cities.
Submission of Interest
The cities/districts that fulll the eligibility criteria which is developed, can submit their interest for
supplementary central government funds to the National Working Group.
| Annexes
99
The City Strategies and Action Plans should be approved through a Decree of the Mayor/Head
of District and communicated to the local parliament to ensure commitment and adequate
budgets. The approved City Strategies and Action Plans will then need to be operationalized
in an Annual Program on slums to be carried out by relevant municipal line agencies.
The poor have a right to the city as with all other citizens, and need land in locations where they
can earn a living wage
Just as laws/regulations establish the need to reserve land for green space, it is vital to
reserve land specically for low-income housing, even in areas of high land value.
The primary role for government should be to regulate land and housing markets in the public
interest.
Key Issues
Land and housing markets are not meeting the needs of the majority of the urban population.
There is a possible over-supply at the top end of the market due to a private sector focus on
meeting higher income needs. At the low end of the market, private sector supply is minimal and
public sector provision is inadequate. As a result, a large proportion of the urban population lives in
a range of informal settlements with inadequate tenure security and poor access to basic services.
100
Government appears to consider the provision of housing for the urban poor as a welfare burden
on the economy that is best addressed by supplying subsidized housing in peripheral locations
where land costs are lower. However, the urban poor themselves regard housing primarily as part
of economic development and locate on marginal land in vulnerable locations or pockets of public
land in central urban areas where they can maximize livelihood opportunities. Housing quality is
therefore a lower priority for the urban poor than accessibility to economic opportunity. As such,
it is essential to integrate housing policy within the broader economic and spatial framework of
urban development.
Whilst Indonesia has been undertaking an ambitious program of decentralization since 1999, and
responsibility for the provision of land for low-income housing is now the responsibility of local
governments, their capacity to deliver has not yet increased to the level required to meet needs.
| Annexes
101
Formal land supply for housing has failed to keep pace with demand. As a result, prices of welllocated and serviced land are estimated to have increased 20% annually during the last three
years and land is no longer affordable to the poor and even many middle-income groups. This
is largely because private developers and investors have acquired large land banks that they are
withholding from supply, whilst public agencies do not appear to regard low-income housing as
a priority. City level spatial plans (RTRW) are prepared without the involvement of the housing
agency. Detailed spatial plans (RDTR) and zoning plans do not specify areas for low-income
residential development.
For the last few decades, the gap between the demand and supply of land for housing has been
lled by an extremely efcient and responsive informal sector, involving a range of social networks,
dealers who subdivide public land illegally, or rental housing on private land. An estimated 9 million
households, representing more than 40 million people, or a quarter of the total urban population,
live in housing that lacks safe water and adequate sanitation.
A further impediment to the operation of an efcient land and housing market is the limited
coordination between national agencies responsible for land and housing and between these
agencies and local governments. For example, the local ofces of BPN and the local government
authorities have a role to play in land registration, land use and zoning decisions, yet they often do
not have an active mechanism for sharing data and land use information.
Legal Framework
Land policy in Indonesia is primarily regulated by Law No. 5 (1960) on Basic Agrarian Affairs. This
law mainly classies land rights and their attributes and provides an overview of land survey and
mapping and land registration. In addition to the laws, the legal framework for land policy and
markets are also set by a number of government regulations, presidential decrees and ministerial
regulations. However, since Independence in 1945, Indonesia has not systematically repealed
previous land laws or established a hierarchy whereby higher laws take precedence over lower
ones.
Lack of clarity regarding tenure status is widespread throughout Indonesia. This is a major
impediment to local and foreign investment and represents the largest category of complaints to
the administrative courts. Land grabbing, forced evictions and coercion in urban and rural areas
disrupt livelihoods and the ability of the urban poor to escape poverty, posing an urgent need for
legislation to protect vulnerable groups.
The Spatial Planning Law was passed in 2007. However, there is still a lack of comprehensive
land use planning guidelines, approved urban development plans and transparency about the
process of acquiring and developing urban land for public purposes or housing. The legal basis for
acquiring land for housing or in the public interest is addressed by Law No. 2/2012, though this only
applies to rental housing on public land, but not owner-occupied housing, or private low-income
housing development. Terms for land acquisition for housing on private land are stipulated in Law
No.1/2011 on Housing and Settlements and Law No.20/2011 on Vertical Housing. In addition
to private land, these laws also stipulate that the source of land for housing and settlement or
vertical housing can be taken from waqaf land, state land formerly known as abandoned land, or
by land consolidation. In the case of vertical housing construction above land with building rights
(HGB), or construction above use rights over management rights (HGU over HPL), the developers
are required to resolve the status of building rights or use rights over the management rights in
accordance with the provisions of the legislation before selling the vertical housing unit.
Presidential Decree No. 34 of 2003 transferred nine land management functions from the BPN
to the local authorities. However, the capability of many local governments to undertake these
new management functions was constrained by limited nancial and technical resources. Despite
102
efforts at strengthening local government capacity, progress has been severely impaired due to a
lack of political commitment at the highest level and continuity at senior administrative level.
103
review of legislation for licensing of surveyors and assistance was undertaken, and no regulations
governing industry practice have been developed.
The governments willingness to use extralegal force and coercion to remove current occupants
or customary tenure landholders.
Spatial planning at national level is the responsibility of an inter-ministerial committee, BKPRN49. At
the local level, spatial planning is the responsibility of the local ofces of Bappeda and Dinas Cipta
Karya, which discusses it in the BKPRD50 forum. Currently, Law No. 26/2007 on spatial planning
stipulates that 30 percent of urban land should be designated as protected areas, or green space,
while Government Regulation No.15/2010 on Implementation of Spatial Planning states that of
this total, about 20 percent has to be allocated from public land and 10 percent from within private
land. This requirement reduces the area available for residential and other productive uses and
raises unit land costs. If it can be justied for purely amenity value, then there is an even greater
justication for allocating a signicant proportion of urban and peri-urban land specically for lowincome housing, at less than full land market prices. A nal concern with spatial planning is that
it takes 2 or 3 years to prepare spatial plans and developers move quickly to acquire land in key
locations, so land prices go up before the plans can be implemented.
104
Sector Recommendations
Given the wide range of issues involved, international experience shows that no single policy
instrument or agency can meet diverse needs within dynamic land and housing markets. It will
therefore be essential to develop a diversied set of options and a suite of tools and build programs
around these to regulate land and housing markets in the public interest.
Legal Framework
Change Law No. 2/2012, Presidential Regulation No. 71/2012 to include the submission of
business plans with development permit applications and require implementation of the plans
according to the development timeline. If land owners/developers do not comply within 3
years, their land can be repossessed and developed for low-income housing and other priority
uses. At the moment, the three year clause is by Decree of the Minister of BPN, but is not
backed by a law or a regulation, which needs to be developed. In addition, amendment of Law
| Annexes
105
No.2/2012 should also include the establishment of a land provisioning agency to acquire land
for public purpose, and incorporate land for housing using various instruments and different
land tenure options.
106
benecial than land clearing, it may be effective if the site is large enough. A relaxed FAR can also
provide scope for obtaining landowner agreement.
Requests for Proposals (RFPs). RFPs could bring public, SOE or waqf land into use in ways that
maximize public benets, such as the provision of low-income housing, in a competitive, marketbased manner. An RFP stipulates a number of mandatory requirements that any developer must
meet, together with a number of desirable additional benets. The winning bidder is then able to
commence development.
Planning/Design Briefs. Site development briefs can enable spatial planning agencies to stipulate
the requirements to which any development must conform in order to obtain planning permission.
It is a powerful tool provided that briefs are based on accurate assessments of market prices.
Transfer Development Rights (TDR). TDRs separate the right to develop land from the land itself.
This can provide local governments with innovative solutions to a variety of social and economic
problems. Transfer of Development Rights involve purchasing development rights in areas where
more development is desired. In effect, the owner is being paid to not develop in one location and
to develop somewhere else.
Public/Private Partnerships. The only obstacle to PPPs is the land use right which allows
developers to use government land for 30 years with an extension of 20 years. Developers usually
consider 30 years to be too short to gain prots for the large investment on the land development.
However, the approach offers scope for selective application.
Transit-Oriented Development (TOD) and Housing. If transit-oriented development is being
applied by some local governments, then by explicitly including plans for low and middle income
housing in the TOD areas, land which will be higher value in future (because of investment in
transport and other infrastructure) can be acquired or protected for public interest ahead of the
installation of the road and rail networks.
Allocating Public Land for Housing. The rst priority is to bring unused and under-utilized public
land into use for low-income housing. BPN should be required to identify all land belonging to
ministries, SOEs and other public entities as well as waqaf land so that negotiations can be
initiated regarding the release of land suitable for housing. This would require the establishment of
an institution that would have the legal mandate and authority to negotiate for land with all these
agencies.
First Refusal on Local Government and SOE Land to be Sold. Consideration could be given
to encouraging local governments and SOEs that want to sell land to offer it as a rst option
to a housing authority. This may require the development of clearer land release protocols or
regulations to ensure that the conditions of land release are transparent and that land prices are
fairly set between the agencies involved in each case. This may require legal or regulatory backing.
Housing Plans (RP3KP) to be coordinated and aligned with Municipal Spatial Plans (RTRW)
and Detailed Plans (RDTR). Instruction to BKPRD to review existing RTRWs to integrate
RP3KP. Low-income housing zones to be clearly marked in RDTR and relevant plans, and local
governments should implement tools for enforcement of these zoning conditions.
| Annexes
107
Make full use of un- or under-utilized inner-city land as well as undeveloped peri-urban land. This
can provide areas for relocating inner-city squatter settlements without adversely impacting on
livelihoods for the urban poor who depend upon good access to major commercial centers.
Enforce permit conditions. Do not renew permits easily if development has not started.
BKPRN and BKPRD need to involve MPWH and Dinas Perumahan so that housing plans and
spatial plans can be integrated.
Conversion of agricultural land to urban land should have a proportion reserved for low-income
housing.
Reinstate the social purpose of Perumnas so that it is not required to make a prot but uses
its market expertise to obtain best value for lower-income groups, using public funds to assist
low-income households obtain affordable land in appropriate locations for housing.
Instead of acquiring extensive areas of privately-owned land for public purposes such as
housing, encourage land-owners to develop land themselves through incentives, such as
further relaxations on FAR, and penalties for non-use, such as increased tax rates for land
(especially for large land-holdings or empty properties) and the repossession of land not
developed within the three year stipulated development period.
Implementation Plan
The following are the immediate, short and medium-term priorities for urban land policy.
108
Work with local civil researchers, consultants and civil society organizations to improve
assessments of the needs, resources and priorities of low income groups, since not all low
income households will have the same needs and these change over time.
| Annexes
109
Increasing the affordability of home improvement and incremental house construction should
receive the highest priority as a method of improving the availability of housing and improving the
quality of substandard units for low-income segments of the population. The following section
describes the characteristics of existing GoI support.
Since 2006, GoI has been implementing a subsidy program, known as the BSPS program, aimed
at supporting home improvement and incremental construction. The program has been managed
by the former Ministry of Housing. The key goal of the program is to increase affordability of home
improvement and incremental construction for low-income households, whereby beneciaries
receive a subsidy of either IDR 7.5 million for home improvement or IDR 15 million for new
construction.
The program has the following implementation scheme:
GoI selects several regions in each province where the program will be implemented.
The regional government selects the districts for program implementation.
A consulting company, hired by the Ministry, visits the selected district and randomly selects
poor households. By surveying the inhabitants it then selects potential beneciaries that meet
certain criteria (e.g. households have monthly income below IDR 1.5 million, own the house,
have legal land title, etc.)
After the list of beneciaries is approved, the consultants assist each beneciary in preparing
the basic design of the intended home improvement, including the set of required construction
materials and the total cost of the suggested home improvements. The cost of services of
these consultants is approximately IDR 220,000 per beneciary.
At the projects implementation stage, another group of consultants is hired to advise
beneciaries on how to select proper construction materials and conduct home improvements.
To ensure targeted use of funds, the money is distributed directly to material suppliers in
two installments, the second of which is paid only after the consultant conrms that 50% of
works are completed. The cost of services of these activities is approximately IDR 500,000 per
beneciary.
The work of the contracted consultants is monitored by a group of 300 controllers, (hired for
6 months each), as well as periodic random inspections that are carried out by staff from the
Ministry. Cost of this oversight is approximately IDR 100,000 per beneciary.
Detailed information about each beneciary, the type of home improvement made, design,
volume and cost of materials, as well as the total cost of the project, are all documented and
collected by MPWH.
The BSPS grant covers only part of the total cost of a project implemented by a beneciary.
The rest is covered by the beneciaries savings or is borrowed by the beneciary from various
sources, including family, community groups, or local money-lenders. An average total cost of one
housing project (part of which is nanced by the BSPS subsidy) is estimated to be approximately
IDR 20 million.
In total, GoI spends about IDR 1 million in overhead costs (management, supervision, control,
assistance, etc.) to distribute one subsidy of IDR 7.5 million or IDR 15 million. Such large
expenditure per grant is due to direct fulllment of all support functions by the central Ministry.
The BSPS program receives only limited government funding each year, receiving IDR 1.5 trillion
and IDR 2.1 trillion in 2014 and 2013 respectively. In comparison, disbursement of government
110
funds toward the subsidized mortgage program (FLPP), which assists households to purchase
developer-built housing stock, has ranged from IDR 3.7 5.4 trillion per year in the past 4 years,
as shown by Figure 11.
Figure 11. Government Budget Allocation to BSPS and FLPP Housing Programs
6,000,000
5,000,000
4,000,000
FLPP
3,000,000
BSPS
2,000,000
1,000,000
0
2011
2012
2013
2014
| Annexes
111
There is no support to leverage the private sector participation, either through affordable
housing micronance or links to stimulate the local building industry.
The subsidy does not use an integrated targeting system for identication and verication of
beneciary households.
Sector Recommendations
As it reaches only a fraction of those households living in substandard units, and these households
tend to be in rural areas, the existing program has a minimal effect on Indonesias overall housing
situation, particularly in terms of new high-demand areas in urban centers. This Roadmap
recommends to substantially scale the BSPS program in order to provide the home improvement
subsidy to a much larger number of households and refocus subsidy provision to priority areas,
such as slums and low-income urban communities.
Yet, the current delivery systems are inefcient. The total budget allocated to the program from
2010 to 2013 was approximately IDR 3.86 Trillion for 543,925 beneciaries (as reported by
MPWH). Overhead costs (supervision, management, control, technical assistance to beneciaries,
etc.) that were associated with providing the BSPS subsidy were estimated to be about IDR 544
Billion. Hence, it is recommended to redesign the program to streamline delivery of the subsidy,
and then to increase the budget allocation. These recommendations are elaborated in the rest of
this section.
Delivery System. It is recommended to improve the design of the subsidy and signicantly reduce
overhead expenses through:
(a) Shifting toward a local government-led implementation model where local governments take
a lead role in identifying and verifying beneciary households, administering the delivery of the
subsidy and implementation of the program, as well as monitoring and evaluation. This will
allow the local government to bundle the subsidy with other initiatives and local priorities, such
as upgrading or provision of services to specic locations.
(b) Standardize the system for the provision of engineering advice so that it is scalable. Currently
beneciaries conducting home improvements and home extensions are supported by direct,
personalized advice. This work is implemented by several teams of experts (mostly engineers)
paid by the government. It is recommended to change the approach of support to beneciaries
to utilize pre-developed tools in order to provide advice in a standardized and cost efcient
manner. The tools should be prepared for types of home improvements that are conducted
most often (informed by the home improvement data accumulated through the BSPS program).
They should also take into account regional variations in construction techniques. Examples
of tools include: (i) software calculators to prepare construction cost estimates for each home
improvement or extension; and (ii) detailed description of technological procedures necessary
for non-professionals to do the job (for example, using pictures).
c. Facilitate the crowding-in of housing micronance by connecting households to nancial
institutions offering housing micronacne, assisting with household nancial education and
underwriting. This recommendation requires more generalized support to the development of
the housing micronance sector as well.
d. Titling of beneciaries. Address bottlenecks to ensure that there is title regularization of informal
homes participating in the program. At present, BPN only has a small budget for registering
around 7,000 land titles per year. The Roadmap recommends increasing the budget so that it
covers all informal houses under the BSPS program. This, along with the tools for helping local
governments regularize land tenure (described in detail in Action 6 of this Roadmap) would
help reduce these titling bottlenecks.
Improved Targeting and Accountability. Complement the rural program with new programs
with strategic targeting characteristics, such as (a) densely populated urban clusters of slum/
squatter/starter core households in order to utilize economies of agglomeration and scale; (b)
lower and middle-income households willing to expand their homes in order to create additional
units at a low cost.
Communities could also be used more effectively to help deliver construction and nance
assistance. Currently, subsidies are administered in a group, but the potential for collective action
of the group is not well harnessed.
Implementing agencies may also consider output-based delivery systems to improve the
accountability of the use of funds and promote collaborative implementation that could improve
the efciency of the program.
Currently, a few measures for collaboration and collective action exist. Each household receives
the subsidy in their bank account, which cannot be withdrawn. Then, the households collectively
pursue market research with material shops and decide which material to buy, in bulk. Once the
material is ordered the money is transferred from the individual accounts to the material vendor(s).
In rural areas the households may collaborate to construct the houses during off-work seasons.
In urban areas, the households could hire construction labor together to minimize the costs of the
works.
| Annexes
113
Alternatively, a model could be introduced so that households are required to collaborate more
closely. For example, a parallel scheme delivered by the West Jakarta Provincial Government
follows output-based principles: it releases 60% of the total subsidy, sufcient to construct, for
example, 6 out of 10 houses. Only when the 6 houses are completed does the group receive the
remaining 40% of the funds in order to construct the remaining 4 houses.
114
over time. A housing micronance program may also help to expand low-income households
access to the nancial sector. International examples are the Patrimonio Hoy program implemented
by Cemex in Mexico and SEWA in India. Lafarge and Holcim are building such programs in
Indonesia already.
Currently HMF lending is not very developed in Indonesia, though there is anecdotal evidence
that a substantial portion of microloans are used for home improvement purposes. Development
of the HMF industry may require nancial and technical assistance to be channeled to nancial
institutions to support them to develop HMF products. HMF is unique as it requires a combination
of nancial lending services and non-nancial services in order to address the specic risks of
home construction. This requires training of loan ofcers or partnerships with building materials
providers to assess home improvement projects, prepare cost estimates for materials, and monitor
quality of construction.
This Roadmap recommends the government consider supporting incubation of HMF product
development with several pilot nancial institutions in different regions of the country. This support
could be provided via an NGO contracted by government, regional banks, or via a state-owned
enterprise, such as SMF. Technical support should include systems for consumer education and
eligibility, training of loan ofcers, HMF product design, IT systems etc. Based on the results, the
capacity building program can be ne-tuned and scaled all over the country, provided for a fee, as
demanded by nancial institutions.
To make housing micronance more accessible, borrowers may need further assistance, for
example, in the form of a down-payment (to avoid the compounding of interest) or through
matching payments (as a behavioral incentive).
In the short-term, the government can use the existing programs (such as KUD, used to support
nancial institutions) to deliver support for HMF lending. In the medium-term, the government might
consider initiating a special state-enabled revolving fund that would provide liquidity to nancial
institutions for HMF at rates equal to the costs of funds to the government. This revolving fund
may be linked to the long-term liquidity provided through the reformed FLPP program, enabling a
certain level of integration across housing nance and housing micronance and a better level of
nancial integration for low-income households.
Implementation Plan
Immediate Actions (0-12 months)
Detailed design of the reformulated BSPS program.
Assess feasibility of integrating program to focus on spatial clusters of poor communities in
slums or other low-income urban areas.
Explore types of support toward a new program (or program pillar) for expansion of lowermiddle class homes.
| Annexes
115
53 Public housing is used to refer to both Rusunawa (vertically-configured public rental housing) and Rusunami
(vertically-configured ownership housing) even though Rusunami is not developed, owned or managed by the public
sector.
116
In combination with the substantial demand-side mortgage subsidy, known as FLPP, and the
mandate to produce affordable units54, it is the least powerful part of a bundle of incentives for
affordable rusun55 ownership.
However, construction and land price increases in recent years have stalled the Rusunami
programs usage. A price cap increase on houses eligible for FLPP mortgages is pending. This
may revive construction, but without other changes, it is likely that the households beneting from
the program will migrate up the income pyramid and cost the government more in foregone tax
revenues.
| Annexes
117
enacted without other measures, this will mean that units previously affordable to households with
monthly incomes just over IDR 4 million will now only be affordable to households with monthly
incomes at nearly IDR 8 million.
These tax and mortgage incentives are determined based on sales prices, not actual household
need. If house prices increase, the government is obligated to forego more revenue without the
ability to control the amount of the subsidy or to direct it towards certain beneciaries. These
incentives are also regressive, as higher price points will trigger more subsidy and will benet
higher-income families, who will be able to support larger mortgages and higher down payments.
Additionally, since these tax incentives are available on an open-pipeline and on a self-claim
system, they are difcult to direct, size and monitor. Only after the fact does the government
understand the amount of resources that it has utilized in foregone tax revenue. There is no realtime tracking of these subsidies nor any reporting to MPWH, which makes program evaluation
and scal controls difcult.
Table 13. Rusunami Program Quick Facts
CURRENT
PROPOSED
Rusuna (Apartments)
Target population
Tenure
Developers
Incentives offered by
government
VAT
Transfer Tax
TOTAL
Rp 18.4 million
Rp 5.6 million
Rp 24,0 million
Subsidy in 2013
reported by MoH
No data.
VAT
Transfer Tax
TOTAL
Rp 18.4 million
Rp 12.6 million
Rp 31.0 million
and Ministry of Public Works (DJCK). Generally speaking, DJCK is charged with construction
of units where trunk infrastructure is also required. Kemenpera generally constructed on sites
that were already serviced, although a local government could also be involved in infrastructure
provision.
Since 2011, Kemenpera received the majority of the government funds allocated to public rental
housing (60%), and was expected to produce roughly 76% of units. In 2014, Kemenpera allocated
IDR 1.3 trillion to the public rental program, which made up 33.2% of Ministry of Housings program
budget, while the Ministry of Public Works allocated IDR 1.1 trillion to public rental housing, which
was 1.5% of the total budget.
Comparisons between budget allocations and the number of units that were planned show that
the housing construction costs of the DJCK-produced units is signicantly higher, almost double
that of Ministry of Housing units. This apparent cost differential is only partially explained by the
provision of infrastructure by DJCK.
The budget allocations to the Ministries for the public rental programs do not come with nuanced
goals such as geographic distribution or project characteristics, instead there are only 7 minimal
threshold criteria.56 Even with few dictates for expenditure, it is challenging for Ministries to utilize
their full funding allocation. This is because the local units of government, who are the long-term
owners of the projects that result from the program, may not nd the proposition of a Rusunawa
project appealing and often struggle to identify suitable sites for the rental housing.
In construction, the Ministries act as developers for the Rusunawa projects by acquiring the sites
from local units of government, hiring a private rm to design, and construct the project on a feefor-service basis and hiring a private rm to monitor the construction of the project. In light of this
tendency to contract out the vast majority of the day-to-day responsibilities, the Ministries are not
readily exposed to the actual practice of real estate development.
Local governments supply the land for the public rental housing projects, approve land use, issue
permits and own and operate the project after construction completion. This includes taking on
the role of managing any operating decits and capital needs, which exceed the rent revenues
generated by the projects. Local governments are also charged with property management, which
is largely accomplished through site managers and vendors who are supervised by representatives
of local units of government.
The following characteristics of the program are problematic:
Total development cost of projects is not tracked. No single source of information exists
regarding the total development cost covered by both central and local governments, nor the
market value of the land contributed by local governments.
Operating costs are not reported or monitored. The absence of this information creates
challenges for meaningful long-term program planning and evaluation.
Tenant income eligibility is set by provincial minimum wage (UMP) not local minimum wage
(UMK), with a nation-wide limit of IDR 2.5 million per month, which equates roughly to Decile 6
households.
Rents are set at 30% of UMP, not set to actual household affordability, which may be problematic
for the lowest-income Indonesians (particularly those in Decile 1-4).
56 i.e. Compliance with local plans, serviced by water and sewer, not in risk zone, etc.
| Annexes
119
57 58 59 60
Rusuna (Flats)
None
Budget allocations
2011
2012
2013
2014
2015 budget
Total
Rp 1.075
trillion
Rp 1.156
trillion
Rp 1.370
trillon
Rp 1.328
trillion
Rp 1.492
trillion
Per Unit58
Rp.
25,058,275
Rp.
22,416,910
Rp.
26,868,471
Rp.
44,254,153
Production
Assumptions
42,900
51,600
51,000
30,000
36,300
Rusunawa as
% of ministry
budget
31%
19%
28%
33%
32%
Total
Rp .853
trillion
Rp .649
trillion
Rp .823
trillion
Rp 1.099
trillion
Rp .770
trillion
Per Unit60
Rp.
40,648,062
Rp.
54,158,494
Rp.
40,978,628
Rp.
130,854,688
Rp.
116,666,667
Production
Assumptions
21,000
12,000
20,100
8,400
6,60
Rusunawa as
% of ministry
budget
1%
1%
1%
1%
1%
Ministry of
Housing
(Kemenpera)
57
Ministry of
Public Works
(DJCK)59
Rp.
41,113,829
Target population
Income eligibility
Tenure supported
Developers
Incentives / subsidies offered Full (100%) subsidy for construction cost of the project and limited
by central government
administration and project management costs.
Subsidies offered by local
government
Rents
30% of the Provincial Minimum Wage (UMP), with rents not to exceed
prorated share of operating costs.
Affordability
57 Includes housing unit construction, administration and supervision, but not land or other costs borne by the local
government.
58 Per unit imputed from budget figures provided by MoH, assuming 300 units per twin block
59 Includes housing unit construction, trunk infrastructure provision, administration and supervision, but not land or other
costs borne by the local government.
60 Per unit imputed from budget figures provided by MoH, assuming 300 units per twin block
120
Sector Recommendations
1. Revitalize Perumnas Role as Master Developer in Public Housing
Production
A core recommendation of the Roadmap is to revitalize and renew the mandate of Perumnas to
act as the Government of Indonesias master developer for public housing production. GoI would
provide Perumnas with the mandate to lead bulk housing development on newly released land.
As outlined in Policy Action 6, GoI will develop a land inventory and utilization program to identify
and mobilize under-utilized or vacant public land assets. Land to be released or assembled under
this program is currently under the oversight of SOEs, LGs, BPN (abandoned land), waqaf, and
various line ministries. At a strategic level, Perumnas experience in land acquisition, aggregation,
development and management should be leveraged by the land assembly entity responsible for
executing the program.
In conjunction, Perumnas would be revitalized to act as a publicly-owned private institution
that serves as the lead developer, developer joint-venture partner, or lessee of land under the
strategically released land portfolio.
In this role, Perumnas will be able to support local governments with the delivery of housing
for sale, long-term leasehold options, as well as for rental (whereby local governments act as
landlord), with features similar to Turkeys TOKI or Moroccos Al Omrane initiatives. High performing
local governments could utilize Perumnas as co-developers, whereas Perumnas could take a
lead on development partnerships with lower capacity local governments, which will in turn gain
knowledge through project experience.
Specic activities of Perumnas may include taking a lead on site master-plans for projects,
incorporating principles of mixed-use and mixed-income zoning for sustainable settlement
planning, structuring development plans and nancing strategies, facilitating release of land to
private sector developers (structuring the RFQ and RFP processes and taking on non-commercial
risk), coordinating potential development guarantees, trunk infrastructure delivery, arranging sales
agreements or off-plan escrows and acting as landlords for lease-to-own housing.
For this strategy to be successful, a business plan will need to be developed for revitalizing the
role of Perumnas, clearly dening the needs for institutional strengthening, structuring of the
legal and nancial relationships with central and local government entities, and the framework for
engagement of private sector.
| Annexes
121
1. Moving vulnerable and poor households quickly out of unacceptable housing conditions and
into basic starter cores, thereby achieving public health and humanitarian objectives quickly.
2. Supporting a swadaya platform for improvement and expansion towards continued home
improvement.
This platform may have characteristics of self-help, but it should not be confused with selfconstruction per se. In urban areas, many households may prefer to hire labor, rather than selfconstruct. Here, self-help implies self-management and self-determined decision making while
the sourcing of construction services constitutes an opportunity for crowding-in of private sector
construction.
There are two main types of projects that could be prepared:
Short-term small-scale projects: Primarily on centrally-located and smaller sites, where core
units or row housing is used for densication, redevelopment and inll development
Large-scale settlements: Comprehensive human settlement development (likely on peripheral
land), which requires land assembly, trunk infrastructure, and housing delivery. These projects can
integrate planning for non-residential areas and different typologies of housing to promote mixeduse and mixed-income neighborhoods.
New settlements may be developed according to a comprehensive approach similar to Tridaya
(i.e. the balance of housing, social and economic development) that was implemented in the
1990s with support of BTNs Triguna Credit scheme.
Starter core units for the lowest income groups might include the following characteristics:
i.
Dwelling Unit. Minimum-size unit (e.g. 10 square meters only, using kampung units as a
benchmark for the start that can then be expanded and improved). The core unit is ready to
move in with basic nishings (possibly no plaster, paint, tiles). Various typologies are possible,
including landed row housing or landed maisonette shells on narrow and deep individual lots,
as well as stacked core units to allow for multi-family housing in denser areas.
ii. Site Selection. Units should be built at accessible locations, with good connections to
employment and social services such as schools and health facilities.
iii. Infrastructure. Shared water and sanitation (to improve affordability, reduce project
management costs, and reduce demand from higher-income households); individual electricity
connections to boost the productivity of home-based businesses; basic street surfacing and
storm water drainage (e.g. compacted subgrade that can later be upgraded with paving,
natural storm water run off due to inclination that can later be upgraded with covered drains.)
iv. Land use. Efcient land use with small alleys, maximizing the number of units with groundoor access for commercial opportunities, waiving of minimum plot sizes and all minimum
parking requirements.
v. Collective tenure. Support collective construction, management and nance with collective
tenure options. This can also help to control entries and exits to reduce gentrication and
improve subsidy control.
vi. Finance. A homeowners association collectively possessing land and housing would allow
using member certicates as collateral. Incremental home expansion or improvement can
be supported by community funds or through the development of the housing micronance
sector.
122
vii. Eligibility/Targeting. The program can target households living in slum areas that are relocated
or redeveloped, as well as the bottom 40% of families living in substandard conditions, as
identied by TNP2K. Self-targeting can also be employed, as most characteristics of the
program will be unattractive to middle-income households.
viii. Delivery. Local governments take a lead in identifying and preparing projects. In the short
term, Perumnas or another private developer can support the development of core housing
projects, particularly on large sites. However, local government can also enlist small-scale
contractors to stimulate the local construction sector or transfer subsidy to higher-capacity
communities so that they can self-manage construction. Technical assistance for project
development will need to be provided at the local government and community level.
ix. Complementary actors. Linkages with CSR, PSO, community organizations and similar
groups may help to speed up the incremental process through additional nancial resources
and/or technical assistance.
The following table illustrates some examples of targets that could be developed over the next 5
years.
Table 15. Example of Delivery Targets for a Core Starter Home Program
Phase
Cities
Year 1-2
Year 3
Year 4
Year 5
15
10,000 units
50,000 units
150,000 units
300,000 units
+25
10,000 units
50,000 units
150,000 units
+50
20,000 units
100,000 units
+100
50,000 units
Total
+190
10,000 units
60,000 units
220,000 units
600,000 units
| Annexes
123
Maximum allowable beneciary income should be set annually and each household should be
provided with a set-term multi-year lease (e.g. 3 years) with options to extend, to provide a certain
level of security. The program could use local minimum wages to correspond to the lesser of local
minimum wage or to households that rank in the lower 4 deciles nationally and adjust rent levels
based on income. In addition, renters could receive greater access to other government supports
(insurance, savings schemes, and services), which would build their household capacity to save
for an ultimate move to ownership housing.
Roles and Capacity Building under Rusunawa 2.0. Authorities, responsibilities and resources
will be pushed to the local level of government where there is existing capacity, allowing the central
government to focus on policy and strategy. Where local capacity is limited, nancial and training
resources will be made available to increase the ability of local governments to participate in the
provision of rental housing. Interim delivery methods will be established in the short and mediumterm, calling upon the capacity of Perumnas to ll in the gaps. Roles under Rusunawa 2.0 include:
1. Central Government can be charged with sizing production goals, budget allocation,
planning and implementation support, as well as monitoring and evaluation.
2. Provincial Government takes on the role of advisory and consultation on policy and program
development, support to local governments, as well as collecting the inputs for monitoring
and evaluation.
3. Local Government, depending on capacity, will propose projects, accept funding from
MPWH and act as developer and owner or may prepare joint venture partnerships with
Perumnas or a private developer of their choosing, which also meets MPWH approval. Local
governments who are deemed to have insufcient capacity can also nominate projects for
funding by MPWH for development and ownership led by Perumnas. These governments will
also be the recipients of capacity building funds from MPWH, and may be directly supported
by a real estate development specialist within the local government.
4. Perumnas. The State Owned Enterprise (SOE) Perumnas will act as lead developer for
Rusunawa projects for low capacity local governments and will also be a potential (but not
mandatory) partner to capable local governments. Perumnas will bring to these partnerships
considerable structuring, design, construction and management capacity.
Allocation and types of funding under Rusunawa 2.0. The new version of Rusunawa will
recognize the real challenges of building long-term quality housing for low-income segments.
By providing a more comprehensive suite of funding types, the program will seek to attract the
participation of local governments (and SOE and private developers) who are currently hesitant
to participate because of the considerable long-term nancial burden that they assume. Types of
funding may include:
1. Administration. Funds to support central and local government administration of the
program.
2. Capacity Building. Funds to build competencies of central and local government where they
are lacking and support local facilitators and program consultants.
3. Capital. Funds for the construction of the housing units and necessary infrastructure.
4. Operating. Funds to offset the difference between tenant rent payment capacity and the
costs of operating maintenance and replacement.
Allocations will be made according to MPWH-decided parameters and will favor growing markets
with demonstrated need.
124
To boost immediate production levels, qualifying local governments and their development
partners, including Perumnas, should be able to make applications to the MPWH on a rstcome, rst-served basis for funding of all types (Administrative, Capacity Building, Capital and
Operating). Later, a transparent and competitive system for funding allocation may be developed.
Low capacity local governments may nominate projects in their jurisdiction and receive funding
directly for capacity building, while Capital and Operating Funding would ow through Perumnas
for those projects.
Table 16. Summary of the Redesign of the Public Rental Housing Program
Rusunawa 1.0
(Current State)
Rusunawa 2.0
(Short Term)
Rusunawa 3.0
(Longer Term)
Developers
Central government
(MoH, MoPW)
Owners
Local governments
Administrative
funds
To MoH, MoPW
Capacity
building funds
To MoH
Capital
subsidies
Operating
subsidies
From local
governments to
project
Long-term
stewardship
Eligible
residents
General population,
those relocated for
slum upgrading. Up
to Rp. 2.5 m monthly
income, but not to
exceed UMP.
Rents
30% of UMP
Rent increases
| Annexes
125
Stafng plan
Role of private sector contractors
Operating budget and multi-year projections
Capital needs projections and reserve analysis
Market / targeting plan to include measures such as: population to be served, rent-setting and
ination, tenant selection.
Government should also explore setting requirements and SOPs that relate to construction
standards (materials, design and spatial planning), as well as operating standards (management
protocols, tenant selection, annual budgeting and multi-year projections, etc.) and capital needs
standards (multi-year projections and reserve sizing).
The property management standards and procedures that are developed will need to be socialized
with local governments during project initiation and then monitored and reported systematically
in order to allow local governments to qualify for additional project funding where performance is
high, or additional support, where the performance is lagging.
126
| Annexes
127
could be considered for Indonesia. These include partial guarantees of loans or tenant payment
streams, loan participations, interest rate buy-downs and liquidity mechanisms. A review of these
options will be the rst step; followed by detailed design of the chosen model and a limited roll-out.
Implementation Plan
Immediate Term (0-12 months)
Core Unit/Row Housing Program:
Select a sample of ten to fteen primary and secondary cities based on capacity, geography,
need, etc.
Convene key stakeholders from central, provincial and local government, as well as relevant
private sector, nancial sector and civic leaders, for participatory design of delivery systems
and program parameters, aligned with capacity building on incremental housing design, etc.
Identify suitable locations and conduct community need assessments and action plans through
a simplied approach (e.g. participatory rapid appraisals).
Reformulate the Rusunawa Program:
Establish systems to qualify high-capacity local governments.
Designate Perumnas as developer for low-capacity local governments.
Gather information and determine actual total development costs and operating expenditures
based on experience from existing projects in order to create realistic budget for future.
Develop training and resource manuals for capacity building of central and local governments
for program delivery.
Increase private sector affordable housing production:
Announce end of the Rusunami tax incentives and set the deadline for nal project certication.
Strengthen the implementation of inclusionary development requirements by establishing
regulatory frameworks that enable local governments to enforce Law No. 20/2011 and
promote tested methods and models.
Consider international experience with support to developer nance, against Indonesian
realities, to determine the appropriate structure/mechanisms.
Include property and asset management requirements in funding allocation threshold criteria.
Reset tenant eligibility and rent methodologies.
Track TDC, operating, replacement and production under the new program.
Increase private sector affordable housing production:
Establish tax benet phase out in sync with the launch of the mortgage-linked down-payment
assistance program.
Share inclusionary zoning systems with local governments and monitor and enforce
implementation.
Detailed design of a limited program to test support to construction nance and/or other
private sector incentives.
63 In-depth analyses were conducted in 2013 and 2014 by the World Bank .
| Annexes
129
Mortgages are estimated to only cater to the top two deciles of the income distribution, yet the
government aims to deepen it. Housing nance should become available for the missing middle
of underserved, yet bankable households, i.e. those with income placing them in Deciles 4-8.
A continuum will thus develop in the access to decent housing from lower-income groups for
whom alternative measures to mainstream housing nance must be offered, to the higher-income
households whom the market already serves.
Obstacles to the deepening of the mortgage market lie rst on the demand side. These are:
The low degree of nancial inclusion. Only 19.6% of the population aged 15 and over have
access to a bank account. Branchless banking, a very important access factor given the
geographical structure of the country, is in its infancy. Although, a legal and prudential
framework is underway to support its development.
The level of housing prices in urban areas, which varies depending on location, has been
experiencing a stark increase in the recent few years, especially for small housing units, thus
limiting effective demand.
The large share of the population active in the informal sector of the economy estimated at
60% of employment64. There is a lack of experience to assess actual incomes and credit-risk
of households that source their income from informal sources, meaning that banks typically
abstain from lending to this category.
Obstacles also exist in the supply of affordable housing nance. These include:
The incomplete geographic coverage of the land registration system, which limits the availability
of mortgageable titles.
A lack of long term funding. The Indonesian banking sector has traditionally a high Loan-toDeposit ratio (more than 90% in September 2014 overall, and 108% in the case of BTN).
However, the capital market remains a very marginal source of funding, BTN being the main
user of this channel65. Liquidity is therefore a systemic concern (and a major objective of macroprudential regulations) that, in many cases, constrains the development of long-term lending.
The structure and strategies of the banking system. Public sector banks tend to concentrate
where they historically have a competitive advantage, and are not necessarily keen to develop
their activity in the low and middle market segments that are BTNs area of specialization.
Regional Development Banks (RDBs) could be more active in these segments, but their lending
activity is limited. In the private sector, intermediation margins are high, and the extension of
smaller loans that involve customized risk assessment processes is handicapped by lower
protability. The same protability considerations are probably behind the limited mobilization
of long-term resources from the capital market. This is currently the case, with a very steep
yield curve of government bonds (SDN) from 0 to 5 years;66 this makes such resources
comparatively expensive (see Figure 12). Note that, conversely, banks hold one third of the
SDN outstanding.
64 70% if irregular workforce in the formal sector is included. Source: International Labor Office 2013 Women and Men
in the Informal Economy : a Statistical Picture
65 IDR 54 trillion in the consolidated liabilities of commercial banks at the end of 2013 , compared to 3,800 trillion deposits.
BTNs capital market debt is estimated to amount to about 13 trillion at the end of 2013 (without securitization).
66 A less unfavorable yield curve should result of the decline of inflation expectations that the deceleration of the price
increase should eventually trigger.
130
Yield (%)
8.50
8.00
Last Month
7.50
Last Week
7.00
6.50
Yesterday
Today
6.00
5.50
5.00
05
10
15
20
25
30
Maturity (Year)
Source: Indonesia Pricing Agency.
The government has developed a series of programs and institutions to overcome these
obstacles. These include:
1. To provide, or help raise, long-term funding for mortgage lending, a state-owned intermediary,
PT Sarana Multigryia Finansial (SMF), was created. Its mandate is (i) to issue bonds and pass
on the proceeds to lending institutions, and (ii) to help arrange securitization transactions. Its
interventions target loans of a maximum amount of IDR 500 million, i.e. the upper end of the
mid-market. SMF enjoys high, although not top, grades from rating agencies (AA from Fitch,
AA+ from PEFINDO). It has provided renance loans for an outstanding amount of IDR 6.2
trillion at the end of 2013, and arranged 6 securitization transactions for BTN totaling IDR 4
trillion, in which it also provided some credit enhancement.
2. Various subsidy schemes have been developed over time. In particular, interest rate subsidies
based on BI funding in the seventies and, from 2005 to 2010, a direct demand support
program in which two options were offered by the government: a down-payment subsidy, or a
buy-down subsidy, which assumed part of the interest payments. This program was replaced
at the end of 2010 by a new scheme, FLPP, managed by Ministry of Housing through a semiautonomous BLU structure. The FLPP scheme pursues two objectives: subsidizing interest
rates for individual borrowers and provision of long-term funding to lenders. The recycling
of capital repaid by the lenders is supposed to warrant the durability of the mechanism; this
revolving principle is a major part of the rationale to house the scheme in the BLU structure. In
addition, FLPP was designed to bring xed rate loans into the mortgage system, an important
feature in the case of low-income borrowers whose earnings are insufcient to cushion interest
rate hikes.
3. FLPP supports nancial institutions by lending them funds at deeply concessional terms (up
to 20 years, 0.5% interest rate). These loans contribute to 75% of the mortgage amount
| Annexes
131
extended by lenders, who are responsible for funding the remaining 25%. Mortgages must
have a xed interest rate of 7.25% p.a., and benet households who meet specic eligibility
criteria. These criteria are mostly about income and price limits. Currently, household income is
not suppose to exceed IDR 4 million per month or IDR 7 million per month, for landed houses
and apartments respectively. Home prices are capped at IDR 115-130 million for landed
houses and 250-300 million for apartments, depending on the geographic area67. These limits
have been raised several times since FLPPs inception. From the last quarter of 2010 until the
end of 2014, FLPP will have helped nance about 340,000 new units for a cumulative nancing
volume of IDR 15 trillion.
4. To mitigate the increased credit risk of low-income borrowers, FLPP-supported mortgages
are guaranteed by the state-owned insurance company, ASKRINDO. This credit enhancement
is provided at extremely favorable terms. The guarantee now covers 100% of loan balances,
claims are payable as soon as loans are in default68, and the insurance premium, which includes
life and property insurance beside credit default, has been reduced to a very low 0.24% p.a.
132
in these portfolios. In contrast to similar mortgage renancing facilities elsewhere, SMF bonds do
not receive any favorable treatment in investors portfolios, be it institutional investors or banks
that would be consistent with the degree of security its debt offers.
There is untapped potential for attracting funds from institutional investors. This component of
the nancial system is relatively small in Indonesia about 10% of GDP71, although interest is
growing, especially in the case of insurance companies, 44% of the latter being life insurers, which
are natural long-term investors. According to BI72, the aggregated volume of assets managed by
the insurance industry, pension funds (including 40% attributable to Jamsostek) and xed-income
mutual funds exceeds IDR 800 trillion. Banks that are not large housing lenders are also a potential
source of funds to target.
Analysis of FLPP. FLPP has been supporting 68,000 units on average per year since 2010, i.e.
the same volume as the previous subsidy scheme. It has fallen well short of the planned objective
of nancing 1,350,000 units in 5 years, or 270,000 annually on average.
The under-achievement of the FLPP scheme has several causes: (i) ination of housing prices, and
the unavoidable lag of the scheme to adjust to these. The same dynamic probably explains, at
least in part, the upward shift of the actual beneciaries towards more afuent targets than initially
planned; (ii) irregular and under-calibrated73 public allocations, which declined sharply in 2013
and 2014; and (iii) low leveraging of private resources, the volume of credit mobilized beside the
government allocation amounts to 25% of loans nanced by the lenders.
Overall, very few institutions are participating in the scheme, although 22 have entered into an
agreement to do so, half of which are RDBs with limited mortgage lending activity. BTN, and its
Sharia subsidiary, have extended 95% of the FLPP-supported loans. The participation of private
commercial banks is negligible. The limited participation of nancial institutions acts as a bottleneck
for extending the reach of the governments assistance. BTNs network only represents 1.5% of
the 19,000 commercial bank outlets in the country. Its partnership with the Post Ofce (over 3,000
outlets) will give a boost to its geographic coverage once the role of the local post ofces in the
origination of mortgages is well established. However there is further potential for widening the
distribution network for subsidized mortgages.
One achievement of the scheme has been on the credit risk front. The delinquency level is far
below the previous subsidy program, with NPL rates in BTNs portfolio of 1.45% and 10.34%
respectively (June 2014). As stressed by BTN, the xed rate feature of the subsidized mortgage
loans was instrumental in keeping NPLs low. However, a more in-depth analysis would be useful.
First, ASKRINDO reports a 25% rate of claims on its portfolio, which gives a very different picture
even if most of the claims are motivated by risks other than the credit risk. Second, it would be
necessary to factor in the age of the two types of portfolios, as well as the upwards shift of the
actual incomes of households beneting from FLPP, as currently only base incomes are reported.
This shift in the household targeting requires some further analysis in itself. It is likely to be linked
to the appreciation of prices and the dearth of affordable housing supply, but other factors have
probably also played a role, such as the fact that income ceilings are applied to individual borrowers
71 IMF / World Bank 2010 FSAP.
72 Financial Stability Report, March 2014.
73 The initial appropriations implied an allocation of IDR 13 to 16 million per unit, whereas the actual consumption of
finance has actually been above 40 million.
| Annexes
133
base rate, and not to household incomes, or inclusion of employment benets. The largest gap in
the coverage of the scheme remains however the exclusion of informal sector households. This
category is basically unserved despite its large share among lower income groups74.
Analysis of ASKRINDO. FLPP-supported loans must be guaranteed by Askrindo. The company
therefore accepts all loans, without adding any soundness criteria to their eligibility for coverage.
Furthermore, it seems that there is little check of the validity of claims, the vast majority of which
are accepted. This is a matter of concern, since the credit risk is now entirely transferred to the
government. As such, the existing design of the guarantee mechanism is conducive to moral
hazard and promotes lenders to relax risk management practices instead of strengthening them.
If these risks were to materialize, it would jeopardize for a long time the trend towards a more
inclusive mortgage market.
74 BTN does lend to independent workers, provided however that they their activity is recorded in formal accounts
75 SMF total equity is IDR 2.8 Trillion
76 Affordable Housing Finance Policies in Indonesia Bappenas, presentation at the World Bank global Housing Finance
Conference May 2014
134
Overall, the total cost of explicit support, implicit subsidies and contingent liabilities incurred by the
government for encouraging the provision of housing nance is fairly high but is not reected in its
budget for the most part. The relevance of the policy is not questionable. However, the fact that
the aggregated cost of the governments involvement is not transparent to policy-makers may
distort the rationality of resource allocation, and lead to overlooking inefciencies of the system
if interventions are perceived as cost free. Given the relatively low impact of government efforts,
which despite their magnitude have triggered little response from the banking sector, a deep
structural reform of the components of the government strategy appears necessary.
Sector Recommendations
The Roadmap recommends a strategy that uses four pillars: (i) developing a more efcient and
more inclusive subsidy policy (ii) stimulating the market-based provision of long term funding;
(iii) avoiding credit risk slippage and moral hazard phenomena, especially at the expense of the
State; and (iv) increasing the number of lending institutions active in the affordable housing nance
system.
Current FLPP
Down-payment subsidy
Buy-down subsidy paid up-front
(assuming a 5% p.a. income
increase)
Interest rate on
mortgage loans
Initial government
spending
Economic cost
(Net Present Value)
7%
75%
42%
11%
25%
12%
30%
11%
8.5% (6 years)
12%
13.5% (8 years)
77 i.e. An annual mortgage servicing payment of IDR 944 for each IDR 10,000 borrowed (20 year loan).
| Annexes
135
Simulations show that the same economic cost could support between 1.5 to 3 times more
mortgages than the existing instrument, for interest rates prevailing at the end of 2014 in the
mortgage market.
The structuring of a new scheme would require feasibility studies and cautious design, in particular
to draw the lessons from the previous program.
As an example, a possible scenario for structuring of the downpayment assistance could be as
following:
The core of the system could be a new interest buy-down subsidy, coupled with a buffer
against interest rate surges.
An upfront subsidy payment would be made to participating lenders, for instance, at the level
of a down-payment subsidy, with the same affordability impact.
This upfront payment would be divided in two parts: the provision to cover buy-down interest
charges for a certain number of years (8 years for instance), requiring an initial contribution of
13.5%, and an allocation to the interest uctuations buffer for the balance (16.5% of the loan).
The buffer would be drawn down when needed to maintain debt servicing to income ratios
as constant as possible. At the end of the coverage period, possibly longer than the subsidy
period itself, any balance left would be returned by the lender to the government.
Using such an approach, the BLU structure within MPWH would still be useful. If well-designed
and operationally set-up, this type of subsidy should reach a much larger number of beneciaries
than the current FLPP (1.5 to 3 times) for the same economic cost to the government.
Note that a lease-to-own product is not recommended as a solution78. This instrument, which is
often developed to encourage credit discipline when enforcing mortgage rights, is not efcient,
especially for borrowers who do not have, at the onset, any equity to invest in the home they want
to buy. The efciency of the mortgage rights is not a major issue in Indonesia. Moreover, leaseto-own options can be expensive, are particularly sensitive to lack of long term funding (similar to
rental investments), and raise relatively complex legal and tax questions.
78
136
Except in its Islamic Finance version (Ijara), which reflects other objectives.
Box 2. FLPP Economic Cost and Comparison with the Down-Payment / Buy-Down
Subsidy Scheme (2005 2010).
The cost of FLPP to the public results from two factors: (i) ination, which reduces the value of
the cash ows received over time and affects the actual recycling capacity of the revolving fund;
and (ii) the yield - in real terms after ination- of State Bonds (SBN) that is above the return of
their investment in FLPP. The difference between the loan amount allocated to primary lenders
and the Net Present Value (NPV) of the cash ows received by the BLU measures the subsidy
element in the renancing mechanism, which is 55% at currently prevailing conditions.
The rate of subsidization of the mortgage loan derives from the subsidy amount, by taking into
account the share of nancing assumed by the primary lender, i.e. 33% of the FLPP contribution.
The subsidization rate varies as follows in several scenarios:
Ination SBN real rate
3%
5%
7%
0%
19.0%
29.8%
37.9%
1%
24.9%
34.3%
41.4%
2%
30.0%
38.2%
44.5%
3%
34.5%
41.7%
47.1%
Cumulative
number of
units
Realization
per unit
(IDR million)
Subsidy amount
per unit
(IDR million)
FLPP 2010-2014
14,700
338,300
43.5
2479
Direct demand
subsidies 2008-201080
1,112
337,443
3.3
| Annexes
137
Only after these corrective actions are adopted to strengthen program efciency, sustainability and
targeting to low-income households, should the government consider increasing scal allocation.
138
The introduction of the Basel III regime in Indonesia provides an opportunity for changes, both
for short-term liquidity considerations, with the new Liquidity Coverage Ratio, and for long-term
funding requirements with eventually the new Net Stable Funding Ratio.
Promote market practices that mitigate the risk of oating interest rates for borrowers
Lenders should be encouraged to better mitigate the risks that oating rate mortgages create for
borrowers, which translate into credit risk for the lenders. This can involve, for instance, averaging
short term indexes over several months to smooth out rate uctuations, extending the periodicity
of the resetting of rates to longer time intervals, possibly in parallel to SMF renancing operations,
or lengthening the maturities of loans to a certain extent to avoid, or limit, the increase of monthly
installments. Variable rate loans with these type of features could be eligible to the subsidy program.
| Annexes
139
Technical assistance is needed to help potential lenders conduct the necessary adjustments.
SMF, which already has developed technical support programs for new-comers to the market,
could play a pivotal role in this respect by expanding its services to cover this support to lenders.
Scope of the assistance should include setting up operating conditions, dening organizational
adjustments, setting lending and servicing standards and designing procedure manuals. In
addition, setting up staff training programs in these new processes will be critical.
81 A legal and regulatory framework for branchless banking is under way, pilots to test mobile banking systems have
been developed with BIs support.
140
Implementation Plan
Immediate Action (0-12 months)
Design a new direct demand subsidy/ down-payment assistance program.
Prepare the reorientation of FLPP onto market-based long term liquidity scheme.
Align SMFs status vis--vis institutional investors and banks prudential regime with the high
quality of its bonds.
Conduct a consolidated assessment of all implicit subsidies supporting low-income housing
nance.
| Annexes
141
5. Overview of Recommended
Policy Actions
Action 1. Develop a Comprehensive Slum Upgrading Program to improve existing slum and squatter
settlements.
1.1
Immediate
1.2
Short Term
1.3
Medium Term
Action 2. Reformulate the Approach to Formal Subsidized Housing including different typologies
(core starter units, row houses, vertical housing) and tenure options, (rental, shared-equity,
owner-occupied) to respond to different stages in the housing career.
2.1
Immediate
2.2
Immediate
2.3
Short Term
2.4
Medium Term
Action 3. Redesign Support to Home Improvement to expand focus to low-income urban areas and
incorporate construction assistance, titling and crowding in of housing micronance.
3.1
Strengthen the Design and Delivery of the Existing Home Improvement Subsidy
Immediate
3.2
Short Term
3.3
Medium Term
3.4
Medium Term
3.5
Medium Term
Action 4. Enable the Affordable Formal Housing Market and Increase Private Sector Participation
to make low-cost formal housing and affordable mortgage nance more readily available to
low- and middle-income households.
Part A: Improve the Economic and Social Efciency of Government Support to Deepen the
Mortgage Market
4.1
Immediate
4.2
Immediate
4.3
Short Term
4.4
Short Term
4.5
Medium Term
4.6
Medium Term
142
4.7
Short Term
4.8
Medium Term
Action 5. Build Robust Delivery Systems where capacity building, funding and responsibilities are
transferred from central government to local governments over time. Perumnas and SMF are
assigned as specialized actors to spread the responsibility and cost of implementing housing
policy.
Part A: Strengthening and Empowering Local Governments
5.1
Immediate
5.2
Short Term
5.3
Short Term
Immediate
5.5
Immediate
5.6
Immediate
5.7
Elevate the role of the Pokja as Lead Housing Reform Coordinating Body
Short Term
5.8
Medium Term
Action 6. Mobilize Urban Land for Housing and Settlements by focusing initially on
under-utilized public land assets and regularizing informal settlements, then exploring
alternative instruments for making land available.
6.1
Immediate
6.2
Short Term
6.3
Short Term
6.4
Medium Term
| Annexes
143
144
80m2. By law, property developers who agree to build a minimum of 500 social housing units
over 5 years benet from VAT exemption and 50% of the corporate tax. The 2010 law revision
reduced the threshold for tax breaks from 1500 to 500 units (already down from 2500 when
the program rst began) to enable small developers to benet. Homebuyers must occupy the
unit for 4 years before resale.
A Very Low Income Housing Program ( or Logements a Faibles Valeur Immobiliere Totale
(FVIT)). FVIT units are dened as not exceeding a sale price of Dh 140,000 and are aimed at
households earning less than 1.5 times the minimum wage (about Dh 3000 per month).
Upgrading informal settlements. Some neighborhoods are being renovated in situ, often when
a home complies with regulations (size and quality of construction). In this case, housing has
been built without permission or adequate services, but are selected by local authorities for
formalization, particularly the appropriate land titles. Beneciaries contribute nancially to the
program.
B. CODI Thailand
International Case Study of Slums Alleviation
One of best instances of a community-government partnership is Thailands Baan Mankong
Upgrading Program. In 2003, the Thai Government announced an ambitious policy to address the
housing needs of the urban poor. The Baan Mankong Upgrading Program channels government
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funds, infrastructure subsidies and soft housing loans directly to the poor who then jointly design and
execute improvements to their homes, environment and basic services while managing the budget
themselves. As part of this program implemented by the Community Organizations Development
Institute (CODI), a program of the Ministry of Social Development and Human Security, the poor in
200 Thai cities work in close collaboration with their local governments, universities and NGOs to
survey all urban settlements and plan an upgrading process that attempts to uplift all settlements
in that city within ve years. Once these city-wide plans are nalized, CODI channels the budget,
infrastructure subsidies and housing loans directly to communities.
The HDA has established two main objectives to fulll its mission, namely:
To identify, acquire, hold, develop, and release well-located land and buildings;
To provide project management support and housing development services.
Each of these objectives is detailed in the following two programs:
1. Land Planning and Assembly
The primary aim of this program is to design and coordinate strategies and support programs that
facilitate the release of integrated land and landed property for sustainable human settlements
development. It is structured into four areas of operation:
1. Land assembly strategy and support
2. Land geo-spatial info services
3. Knowledge and best practice services
4. Monitoring and Evaluation
146
One of the key initiatives of this program is to develop a national land assembly strategy, in concert
with a variety of stakeholders, including provinces and municipalities.
2. Land and Housing Support Services
This program is housed in the regional ofces where the Land and Housing Support Services work
closely with their partners, including provincial and municipal governments, to implement support
programs and projects that promote sustainable human settlements. Program support areas may
include but are not limited to: informal settlement upgrading support, emergency housing support,
land geo-spatial services, and project technical implementation support.
D. TOKI, Turkey
International Case Study of Public Housing Developer
TOKI was established in 1984 to deliver well-planned affordable housing at scale. However, TOKIs
low-income provision in the 1980s and 1990s often became suburbs for the middle class. Even
when the agency began making long-term soft loans to building cooperatives, the beneciaries
were mainly middle class.
The 2003 Emergency Action Plan for Housing and Urban Development set a 250,000 low-cost
unit target for the 5 years until the end of 2007. Regulatory amendments in 2003 and 2004
transferred a number of responsibilities on to TOKI, allowing TOKI to become a powerful actor in
the development of mass affordable housing for sale or rent to low and middle income households,
reporting directly to the Prime Minister. The Land Ofce was closed with its land reserve and nearly
all of its authority given to TOKI, and the assets and shares of the publicly-owned real estate bank
were transferred to TOKI.
TOKIs main role now reaches across identication land areas for priority housing projects,
preparation of site master-plans, assembly of nancing for developments, partnerships with
municipal housing companies84 and private real estate developers and sale of units to end users.
TOKI engages private sector developers, as well as real estate investors, project managers, service
providers, contractors and trade companies through a public tender process and revenue-sharing
model and also has the power to expropriate and rezone land, providing a successful revenue
source for TOKI.
TOKIs revenue sharing model relies upon a public tender process to generate short-term prots in
order to subsidize low-income housing. The minimum value of land is determined and a tender is
announced. A contractor is selected using a formula determined by the highest possible revenue
rate and income-share ratio in TOKIs favor. The contractor takes on all responsibility for covering
the cost of nancing. The revenue collected from sales is allocated to TOKIs account and used to
84 Municipal companies are private entities under the executive of municipal administration that provide housing typically
through partnership with TOKI. For example, KIPTAS is a company owned by the Istanbul Metropolitan Municipality.
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subsidize affordable housing projects. As of 2011, over 90 percent of TOKIs operating revenues
were derived from the proceeds of its sales.
TOKI has been responsible for the construction of a total of 285,000 units built by the end of
2007, 500,000 by the end of 2010, and 559,840 by 2012. From 1984 to 2002, TOKI provided
credit support to 940,000 housing units through a cooperative credit structure and has provided
completion credit support to 92,215 homes and constructed 43,135 housing units on its own.
The total investment cost of this construction was TL 48 billion, involving 3,793 tenders and 2,486
construction sites. Social housing units are high-rise and generally vary in size between 80 120
m2 with costs kept around US$ 180 200 per m2. The timeline of social housing projects from
tender to opening is generally 12 to 18 months.
Although successful at increasing supply of apartments, the incentives that arise with the revenuesharing model results in TOKI building and selling many units to middle or high income families,
for which they can achieve higher sale prices. Secondly, as TOKI is a central agency with rezoning
ability, it has been criticized for not always coordinating adequately with city governments to
understand and integrate with local needs and spatial development plans.
148
The aim is to enable local governments to use their statutory powers and resources to improve
local housing needs through their role in planning, development, and construction.
The kit provides step-by-step guidelines for the development of an affordable housing strategy,
with the following three frameworks:
Analysis of local or regional housing needs and conditions;
Goals and detailed set of objectives;
Implementation Plan.
3. Land and Housing Corporation
The Land and Housing Corporation (LAHC) is a Public Trading Enterprise under the New South
Wales Ministry of Family and Community Services. It is responsible for owning and managing land,
buildings, and other assets within the social housing portfolio, with the goal of providing more
houses for people in need. LAHCs objectives are:
To advise the government on best use of its land and housing assets to achieve social housing
outcomes;
To manage and develop land and housing assets;
To procure effective tenancy management services;
To collaborate with other government agencies to inuence policy and implement initiatives
that relate to LAHCs purpose and goal.
In carrying out its objectives, LAHC collaborates with government agencies and community
organizations including local councils, community housing providers, building and maintenance
contractors, and local communities.
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1. Housing: The HCA has a statutory duty to improve the supply and quality of housing in England.
Activity: Get Britain Building: The HCA created a 500 million investment fund for developers to
address weaknesses in the housing market. The aim is to create homes and jobs on development
sites that have stalled, havent started, or are classied as being on hold. So far, this program has
helped jumpstart construction on nearly 12,000 homes.
2. Enabling: HCA enabling role includes a range of services - from advice on legal agreements
and planning applications, to investment models and brokering deals, to the provision of spatial
and market intelligence.
Viability & Planning Tools: The HCA uses their practical, experience-based tools to help their
partners with a variety of technical areas relating to housing, regeneration and economic growth:
Area Wide Viability Model Testing the viability of planning at a strategic level
DevelopmentAppraisal Tool Appraisingin detail the viability of an individual site
ATLAS Guide T10 Financial Appraisal & Project Viability. Dealingwith nancial viability
Planning Obligations Good Practice Recommending best practices in housing delivery.
Expertise & Skills: HCA also depends on the skills and know-how of their partners in their success.
The HCA has developed a number ofviability and planning tools85and other resources to help
local authorities. In addition to the enabling work of their local delivery teams, their Advisory Team
for Large Applications (ATLAS) usesplanning expertise86to provide direct specialist support to
HCAs partners to help them deliver strategic projects through the planning system.
Research & Best Practice: The HCA places a premium on insight and intelligence to ensure
that their activity meets the needs of the places and communities where they work, and that
their decisions about where and how to intervene are underpinned by sound analysis.They are
also committed to sharing their ndings with their partners, and developing best practice and
guidance87 documents based on these ndings. They also publish regular information and analysis
such as theirmonthly housing market bulletin88.
HCAs research function delivers:
Strategy and program development based on analytical evidence and support
New thinking to support innovation to respond to new challenges
Monitoring and evaluating the impact of HCA programs
Best Practice and Guidance: The HCA has published or worked with their partners on a number
of documents to help local authorities and other partners to maximize delivery in their areas.
They also have a library of external guidance and research that may be of use, available through
downloads and synopses.
150
3. Land and regeneration: The HCA plays a key role in land, regeneration and local economic
development. During 2011, the HCAs land holding were increased by the transfer in of
approximately 1,000 ha of coalelds sitesand over 2,000 ha of othereconomic assets from the
Regional Development Agencies.
The HCA is also supporting large land, property and commercial projects with potential for
growth through theLocal Infrastructure Fund89. This could includeland remediation or reclaiming
contaminated land, upgrading or installing utilities, linking to local road networks or reconguring
site layouts. The HCA also works with otherpublic sector land owners to promote the release of
public sector land for development.
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151
City governments will set up a National Housing Program ofce that will implement the new
processes received through accreditation. Provincial governments will be intermediaries between
the local and national governments, and their (new) roles will include: (i) capacity development
and support for municipalities; (ii) monitoring and oversight; and (iii) setting up accreditation units.
Moreover, provincial governments will retain the authority to distribute funding to municipalities.
The end goal of the accreditation and devolution is to improve the abilities of municipalities
in integrated urban management and planning; response to housing demand in cities; and
acceleration of housing development and household quality improvement.
152
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153
At completion of the pilot phase of the project in 2012, 753 loans, worth a total of Tshs. 786,164,000
(US$485,000) had been disbursed for home improvement and WAT is now extending its program
to continue to support the development of the HMF sector.
Rooftops Canada, and Habitat for Humanity have also been running a pilot program for housing
micronance in Tanzania, called Makazi Bora (Improved Housing), in which they work directly
with interested MFIs and support them in HMF product development and training of loan ofcers.
Once the HMF product has been successfully piloted, these MFIs are eligible to access low-cost
nance via a housing micronance fund, MicroBuild, to assist the scaling of HMF loans to a larger
number of customers.
In 2010, the Bank of Tanzanias housing nance initiative (supported by USD 40 million provided
by the World Bank) included an explicit HMF component, in line with a similar project with Bank of
Nigeria. The HMF component was allocated USD 5 million or 12.5% of the total program costs.
The project intended to undertake advisory on regulatory reform and capacity building required
to foster a safe lending environment for housing micronance in its rst phase, working towards
the establishment of a USD 3 million Housing Micronance Fund to provide MFIs with access to
long-term funding for micro-housing loans in Phase 2 of the program.
Yet, progress has been slow. The number of HMF loans increased to 1091 in December 2014 with
7 participating credit institutions, from a baseline of 462 and 4 institutions in March 2010, and the
establishment of the Fund has been delayed, pending nalization of the terms and conditions for
eligible nancial institutions.
154
with a small contribution from family savings. Bankable households operate under the General
Housing Subsidy System. The standard nancial package under this program includes three
ingredients: a voucher applicable to a down payment, a contribution from family savings, and a
long-term mortgage with a maximum payment-to-income ratio of 25 percent to cover the bulk of
the cost of the dwelling.
The program has effective targeting mechanisms. The use of the down payment subsidy is in itself
a mechanism to decrease capture by higher income households since it prevents the regressive
qualities inherent in below-market interest rates. The Chilean government initially used Social
Assistance Committees to assess and qualify beneciaries. In 2008 they introduced the Social
Protection Form, which took over this role and functions similarly. The form ascertains vulnerability
and is administered by social workers working for municipal governments. Information for the
whole country is kept in a database in the Ministry of Planning.
In addition to these targeting mechanisms, the amount of subsidy is based on the home price,
which is capped at USD 23,000 and varies by geography. There are also signicant tax benets
for homeownership. Homes with an area of less than 140 m2 are exempt from payment of half
the land tax for a period of 10 to 20 years. In addition, income earned from renting a house is not
classied as taxable income under the revenue tax law. Finally, since 1998 buyers of new homes
have been able to deduct the payment of interest on mortgage loans from their annual taxable
income. On the supply side, the voucher is paired with tax breaks that encourage the construction
and purchase of new housing.
The subsidy is administered and delivered through the Ministry of Housing and Urban Development
and, for bankable households, it is recommended that the subsidy be combined with mortgage
nancing from a private institution. However, in recent years most commercial banks have not
provided credit through this scheme. Only Chiles national bank, Banco Estado, has taken a key
role in this market. This has occurred even though Banco Estado is already highly exposed to
low-income mortgage loans, owning around 75 percent of credit originated in private vouchers.
Though the reluctance of most nancial organization to lend to bankable households as part of the
scheme is a concern, the program has run quite smoothly and helped reduce Chiles quantitative
and qualitative housing decit
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155
the aim to socialize private development and spread the benets of construction through the city.
Bostons linkage program requires that developers of large-scale commercial, retail, hotel, or
institutional structures seeking zoning relief make payments into a fund (called the Neighborhood
Housing Trust) administered by the City of Boston. The City uses the trust proceeds for the
construction and rehabilitation of low- and moderate-income housing. The regulation was
expanded in 1986 to allow for increased payments by developers, which were to be used for job
training programs for city residents.
The impetus for the linkage program was the ever-decreasing availability of affordable housing
caused by economic and job growth in Boston. At the same time, a combination of decreasing
federal aid and limited revenue from property taxes in the city meant that linkage payments was
one of the ways Boston could provide adequate housing and job training for low income residents.
Moreover, the statute provides that the linkage fees can be raised based on a combined consumer
price index but not more frequently than at 3-year intervals.
Developments in downtown Boston are required to pay the linkage fees on a 7-year schedule,
while developments in other neighborhoods pay on a 12-year schedule, usually at the time of
issuance of a building permit. The extended payment period adds an element of exibility that
has facilitated the progress of development in difcult circumstances. Deferred payments from the
7- to 12-year schedule allows developers to pay linkage fees out of operating revenues from the
project rather than from up front equity investment, reducing the nancing necessary to begin
construction. It is important to note that this deferral does diminish the Net Present Value (NPV)
of the fee.
Scheduled payments have also helped assure a steady inow of funds to the Neighborhood
Housing Trust (NHT), even over periods of low development activity, such as the recession in the
late 2000s. As of 2006, the Neighborhood Housing Trust (NHT) had awarded $87 million to 120
different projects throughout the city, which had contributed to the creation of ~8000 housing
units of which ~6000 were affordable.
156
Asian Development Bank. Housing and Housing FinanceA Review of the Links to Economic
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12. Monkonnen, P. Urban Land-use Regulations and Housing Markets in Developing Countries:
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23. World Bank. Indonesia Housing Policy: Key Strategic Issues. Technical Note. July 2013.
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8. Glossary of Terms
ALM
Asset-liability management
APERSI
APR
ARM
Adjustable-rate mortgage
Askrindo/Jamkrindo
BLU
BOI
Bank of Indonesia
BPN
BTN
BUDP
CG
Central Government
DAK
DAU
DTI
Debt-to-income ratio
FLPP
FRM
Fixed-rate mortgage
FSAP
GOI
Government of Indonesia
HF
Housing nance
HGB
HM
HOA
Homeowners Association
HP
HPA
HPL
HREIC
IDR
Indonesia Rupiah
IT
Information technology
IUIDP
KIP
Landed House
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160
LG
Local Government
LTV
Loan-to-value ratio
MFA
MI
MIIP
MOF
Ministry of Finance
MOH
Ministry of Housing
MPW
MPWH
MSOE
NBFI
NPL
Nonperforming loans
OKJ
PT Perumnas
POKJA PKP
PPPSRS
PSO
REI
REIT
RMBS
RP3KP
Rusun
Multi-family housing.
SKBG
SMF
SOP
TA
Technical Assistance
TNP2K
USD
Waqaf
WBG
Yoy
Year-on-year