Discussion Paper:

Reinventing Government on LowIncome Housing Provision

DIRECTOR OF SETTLEMENT AND HOUSING NATIONAL DEVELOPMENT PLANNING AGENCY (BAPPENAS)

Characteristics of Housing
Big volume (bulky) and needs space and land

Different from public infrastructure, housing

involves personal preferences related to models, structures as well as materials. Housing is the biggest asset owned by most households and paid over several periods of payment. Need operational and maintenance costs, otherwise to be slum area in the long run

Rule of Thumb
Middle and high-income housing can be fully

delivered by market mechanism But low-income housing are in difficulty without government supports newly formed households cannot afford the lowest-price housing in the formal housing market What kind of supports?

1st Issue : Low Affordability

18 percent of low-income households live not in their

own-houses (rental, as extended family in parents or relatives, others) 62 per cent of total workforce work in informal sectors and most of them are associated with poverty.

Paid daily, no regular salary, no registered asset (dead capital) difficult to access credit or housing mortgage from formal financial institution Barriers for accessing housing mortgage: only 18 percent of the buyers used housing mortgage, Why?

Housing is the largest expenditure item in the budget of

most families and individuals. Average: 25 %, Poor and Near Poor 50 %)

Issue 1: Low Affordability

Barriers for accessing housing mortgage: only 18

percent of the housing buyers in Indonesia used housing mortgage, Why?

Short tenor housing mortgage high installment. Lack availability of long-term financing in market. Does Secondary Market Facility work well?

2nd Issue : Low Quality Housing

A 95 percent of low-income households living in

houses that have low quality of wall, roof, and floor vulnerable to disaster Only 25 percent of low-income households have access to protected drinking water sources. About 73.5 percent low-income households are serviced by communal sanitation facility and no facility. spreading diseases economic loss: IDR 56,000 billion (USD 6.3 billion) per year

2nd Issue : Low Quality Housing

28.6 % of low-income households living in housing

with occupancy area per capita less than 7.2 m2 (overcrowded housing) (five million low-income households) About 1.37 % slum area growth per year, from 54.000 ha (2004) to 57.800 ha (2009). (still debatable) Overcrowded housing leads to several impacts on health and child education, affordability leads to overcrowded housing

Comparison Between Poor, Near Poor, And Very Poor

Physical Housing Condition
100

Access to Sanitation and Water Supply

100 80 60 40 20 0
Communal Facility Unprotected Source

Percentage

60 Near Poor 40 20 0
Low Quality Low Quality Low Quality Floor Type (B3P02) Wall Type (B3P03) Roof Type (B3P15)

Peercentage

80

Near Poor Poor Very Poor

Poor Very Poor

Access to Access to Adequate Adequate Drinking Sanitation (B3P04) Water Sources (B3P05)

Home Ownership
100 80 60 Near Poor 40 20 Poor Very Poor 60 40 20
Own Housing Rental Housing Other

Occupancy Area per Capita

100 80

Near Poor Poor Very Poor

Occupancy Area (Houseden) 7.2 m2

Home Ownership (B3P14)

Market Failure or Government Failure or both?

Market failure: housing price overshooting, slow

delivery of new housing, under supply of affordable housing, capital market imperfection, and low quality housing (slum area). Government failure: a source of problem related to housing provision, occurs when a policy intervention leads to a deepening of a market failure and even worse, a new failure may arise.

Common Problem and Solution (Mayo)

Common Problem 1. Shortage of housing Common Solutions Government provides housing Criticism Suggestion

Wrong solution Housing shortage is the impact of fast growth in demand and impediments to the supply of housing Governments cannot respond to demand faster or more efficient than private markets.

Mitigate or remove market imperfections.

Common Problem 2. Poor quality of housing

Common Solutions Raise standards through stricter building codes and better enforcement.

Criticism Often wrong solution. Standards enforced by the governments usually have little to do with basic structural safety and hygiene. The standards related to safety and public health can work only in integrated and comprehensive action in entire population.

Suggestion Standards and codes should focus on basic requirements for safety and health. Since housing quality improvements will come as development proceeds and incomes rise, providing regulations cannot actually work.

Common Problem

Common Solutions

Criticism For many reasons this can be the wrong solution. Many poor people live on public or private land, contravening land use controls and similar laws. When people are moved off land, they go to somewhere else.

Suggestion Slum housing represents a large part of the poor's capital stock Destroying capital is not a good prescription for development. Informal housing is sometimes of surprisingly high quality. Policies adopted to improve conditions are cheaper than clearance of squatter programs

3. Too Clear the squatter many areas. squatters

Common Common Problem Solutions 4. High price Control rents of housing and the price of land and building materials.

Criticism Wrong solution. When housing prices rise faster than prices in general, it is a signal to the market to produce more housing relative to other goods and services. Such price increases are transitory unless the market is prevented from adjusting because of shortages of inputs, excessive government regulation, and similar restrictions

Suggestion Dealing directly with the causes of rising costs, rather than try to shift the burden of adjustment to landlords. Any restriction on landlords will reduce the quantity of housing and land for rent.

Jenis Kumuh dan Penanganannya (1)

Jenis 1. Kumuh ilegal (Squatters) : 1. Kumuh Nikmat (Kumat) dan kumuh miskin (Kumis) Karakteristik Solusi

2.

3.

4. 5. 6.

Menempati lahan secara 1. Direlokasi off-site: ilegal (bedeng di lahan penyediaan social housing kosong, bantaran rel (rusunawa, rumah kereta, dll. singgah, dll.) Beberapa di antaranya 2. Direlokasi on-site ????? memiliki rumah di kampung, efisiensi pengeluaran Beberapa di antaranya hidup menggelandang (stateless??) Infrastruktur tidak layak, Permasalahan sosial yang tinggi Seringkali membahayakan dirinya dan publik

Jenis Kumuh dan Penanganannya (2)

Jenis Karakteristik Solusi

2. Kumuh legal (Kumuh 1. Menempati lahan milik 1. Upgrading salah urus /Kurus) sendiri 2. Urban renewal, land 2. Rendahnye kemampuan consolidation (perlu social pemeliharaan engineering dan trust 3. Tidak didukung dengan yang kuat) infrastruktur yang layak 3. Perlu mekanisme kegiatan 4. Site plan tidak beraturan dan pendanaan khusus 5. Kepadatan tinggi 6. Beberapa tidak memiliki bukti kepemilikan tanah 7. Seringkali memiliki permasalahan sosial yang tinggi (kriminal dll.) 8. Seringkali membahayakan diri dan publik

Lesson Learned
Berdasarkan pengalaman bahwa KITA BISA (MHT,

REKOMPAK, dll.) Pemerintah memiliki kapasitas untuk bekerja sama langsung dengan masyarakat (from top-down and community driven approach to partnership approach) Perlunya pembagian peran dan tanggung jawab yang jelas di semua tahapan proses Masyarakat punya kemampuan untuk bergotong royong memecahkan masalah huniannya secara komunal Merumahkan orang tidak hanya sebatas fisik rumah namun juga terkait sosial ekonominya

Conclusion and Recommendation

Good policy is better than excessive regulation in

order to deliver more affordable housing. The government should formulize good policy as a first step of solution rather than providing more budget to produce housing that can be delivered by the private sectors. The government role as a provider should be changed to be enabler. Low-income housing market should be analyzed carefully before intervening the market. Since informal workers is a majority households in Indonesia, the government should design housing financial system that can be easily accessed by the informal workers.

Conclusion and Recommendation

Emphasizing adequate drinking water and sanitation

provision as one of the mainstreams to reduce households expenditures, to reduce negative externalities that may cause larger damage to the entire population. Providing improved water supply can reduces diarrhea morbidity by 21% and providing improved sanitation can reduce diarrhea morbidity by 37.5%. Spending more public budget in water and sanitation infrastructure may not attract policy makers. The policy makers and politician may be more interested to spend budget in the sectors that will generate quick yielding impacts to the economy such as road transportation.

Conclusion and Recommendation

Building code enforcement and public campaign

about housing safety are necessary to protect the households from disaster and to reduce negative impacts of overcrowded housing. Unlike water supply and sanitation funded by the public budget, improving the construction quality and living space would be costly for the households. Consequently, the government should invest public budget for research and development to find out cheaper and durable housing materials as well as construction technology.

Next Step
Strengthening national and local government

capacity Housing Task Force Slum Alleviation Policy and Action Plan (SAPOLA) Neighborhood Upgrading and Shelter Sector Project (NUSSP) Forming National Housing Authority?