Reinventing Government on Low Income Housing Provision
Discussion Paper:Reinventing Government on Low- Income 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 Access to Sanitation and Water Supply 100 100 80 80 Peercentage 60 Percentage 60 40 Near Poor Near Poor 40 20 Poor Poor 0 20 Very Poor Communal Facility Unprotected Very Poor Source 0 Access to Access to Low Quality Low Quality Low Quality Adequate Adequate Drinking Floor Type Wall Type Roof Type Sanitation (B3P04) Water Sources (B3P02) (B3P03) (B3P15) (B3P05) Home Ownership Occupancy Area per Capita100 100 80 80 60 Near Poor 60 Near Poor 40 Poor Poor 40 20 Very Poor Very Poor 20 - Own Housing Rental Other Housing - Home Ownership (B3P14) Occupancy Area (Houseden) ≤ 7.2 m2
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 Common Criticism Suggestion Problem Solutions1. Shortage Government Wrong solution Mitigate orof housing provides Housing shortage is remove market housing the impact of fast imperfections. growth in demand and impediments to the supply of housing Governments cannot respond to demand faster or more efficient than private markets.
Common Common Criticism Suggestion Problem Solutions2. Poor Raise standards Often wrong solution. Standards andquality of through stricter Standards enforced codes shouldhousing building codes by the governments focus on basic and better usually have little to requirements enforcement. do with basic for safety and structural safety and health. hygiene. Since housing The standards related quality to safety and public improvements health can work only will come as in integrated and development comprehensive action proceeds and in entire population. incomes rise, providing regulations cannot actually work.
Common Common Criticism SuggestionProblem Solutions3. Too Clear the squatter For many reasons Slum housingmany areas. this can be the wrong represents a largesquatters solution. part of the poors Many poor people capital stock live on public or Destroying capital private land, is not a good contravening land prescription for use controls and development. similar laws. Informal housing is When people are sometimes of moved off land, surprisingly high they go to quality. somewhere else. Policies adopted to improve conditions are cheaper than clearance of squatter programs
Common Common Criticism Suggestion Problem Solutions4. High price Control rents Wrong solution. Dealing directlyof housing and the price of When housing prices with the causes of land and rise faster than prices rising costs, rather building in general, it is a than try to shift materials. signal to the market to the burden of produce more housing adjustment to relative to other goods landlords. and services. Any restriction on Such price increases landlords will are transitory unless reduce the the market is quantity of prevented from housing and land adjusting because of for rent. shortages of inputs, excessive government regulation, and similar restrictions
Jenis Kumuh dan Penanganannya (1) Jenis Karakteristik Solusi1. Kumuh ilegal (Squatters) : 1. Menempati lahan secara 1. Direlokasi off-site:Kumuh Nikmat (Kumat) dan ilegal (bedeng di lahan penyediaan social housingkumuh miskin (Kumis) kosong, bantaran rel (rusunawa, rumah kereta, dll. singgah, dll.) 2. Beberapa di antaranya 2. Direlokasi on-site ????? memiliki rumah di kampung, efisiensi pengeluaran 3. Beberapa di antaranya hidup menggelandang (stateless??) 4. Infrastruktur tidak layak, 5. Permasalahan sosial yang tinggi 6. Seringkali membahayakan dirinya dan publik
Jenis Kumuh dan Penanganannya (2) Jenis Karakteristik Solusi2. Kumuh legal (Kumuh 1. Menempati lahan milik 1. Upgradingsalah 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?