The urban housing crises of Indonesia and Malaysia: Same-same but different

The rise in the urban poor population across Asia has led to many cities seeing massive shortages in affordable housing and public services, as well as an increase in the inequalities between classes, and the privatization of public space at the expense of disadvantaged communities.

The large cities of Indonesia and Malaysia are no exception to this trend. Friedrich-Ebert-Stiftung (FES) spoke with Elisa Sutanudjaja, Executive Director of Rujak Center for Urban Studies in Indonesia, and Malaysia’s Rajiv Rishyakaran, State Assemblyman for Bukit Gasing, Selangor for the Democratic Action Party, a long-standing opposition centre-left party currently in coalition government.

Each expert shared how their respective country is tackling affordable housing, on the sidelines of the recent conference titled Socio-Economic Justice in the City, held in November in Seoul.

As more people move to the big cities, what are the developments in your countries regarding the shortage of low- and middle-cost housing?

Elisa Sutanudjaja: Many people who come to the big cities in Indonesia live in the informal settlements, known as urban kampung. These have poor infrastructure, and are not considered official settlements by the authorities. This means they are not included in spatial planning or the masterplan for the city. Instead, the urban kampung are seen as an obstacle to urban planning, and the government will eventually “clean them up” through forced evictions.

The government’s support for housing is focused on lower-income people. However, this only receives 0.7 per cent of the national budget. Furthermore, by leaving the provision of housing for the middle class to private developers, this allows those developers to target the strategic locations often occupied by the kampung, which they demolish to build middle-income apartments. This is a vicious cycle in housing provision.

Rajiv Rishyakran: In Malaysia, we don’t really have a problem with urban slums, so the issue of evictions or displacements does not arise today. What we have is a shortage of low- and middle-cost housing. In the last 10 years the private sector has stopped building houses in these categories. This has to change.

What instruments can be used to tackle this challenge?

Elisa: In Indonesia, housing law already requires at least 20 per cent of newly built apartments to be affordable units. But another issue is transparency. In Indonesia much of the land is still owned by government and on long-term lease to private investors. However, members of the public are not able to access the information about who rents it and when the lease period ends. If we knew the details, we would be able to push the government to make those lands available for uses more in line with the public interest.

I’d like to highlight that so far, the people themselves have been the biggest provider of housing. Self-built homes are embedded in the culture of Indonesia. It is mostly a community-based initiative and has received little attention or incentive from the government. All the incentives go to government, or state-owned companies, or the developers. If the government wants to address the housing issues, let’s view it as our common problem and share the burden. We can start by including smaller developers, or by incentivizing property owners to make higher-density houses. With the right incentives, I think we can see more diverse players and better results.

“[…]local government units need to take on the agenda of affordable housing head on and zone sufficient land for the purpose of affordable housing.” – Rajiv Rishyakaran

Rajiv: In Malaysia the first instrument that needs to be looked at is land-use planning under local government. In most cases the land is zoned for something with a higher return than affordable housing. Right now in Malaysia, very little government-owned land remains, especially in the cities, where most of the land is already in private hands—a situation inherited from the previous administration. In a scenario where virtually all land is privately owned, zoning laws are extremely important. If you look at the track record of applications from land owners to local government units in the last 5 year the demands are quite consistent, they all want to move towards commercial zone because in Malaysia that fetches the highest price. That’s why the local government units need to take on the agenda of affordable housing head on and zone sufficient land for the purpose of affordable housing. If it left to the land owners’ interests, we will not see enough affordable housing. Not bowing down to this interest of the private sector. That’s the first instrument.

The second instrument is the financing for housing at the federal level. I think the way we govern the system has to change to cope for the nature of income of a lot of the low income families. Based on the current system they have a tough time getting housing loans, as they do not have the criteria that the private banks look for in a client. In Malaysia we have the Employees’ Provident Fund (EPF), a compulsory saving for all employees. If the EPF is amended to include a contribution towards a house purchase, this can help families get access to home.

Will Jakarta’s new zero-down-payment scheme help housing affordability in the city?

Elisa: As this programme - mainly building the vertical housing - is still driven by the government and focusing on people who work in the formal sector. I think it will be enough only for the middle class; primarily people with incomes of 4 to 7 million Indonesian Rupiah (275 to 480 US dollars) per month. But for low-income people still living in the urban kampung, it is difficult to find the financing for it and also, it is more difficult for them to adjust to the vertical living.

“[…]the right to adequate housing covers all sectors: Transportation, basic sanitation, the need to ensure a cultural adequacy in providing housing, respect for local tradition, freedom from discrimination, and other civil and political rights […] that’s holistic.” – Elisa Sutanudjaja

What can Malaysia do to go beyond bare affordability, and provide housing that allows a decent quality of life?

Rajiv: Quality of life is a much bigger issue than housing. People want jobs that are fulfilling, meaningful and that pay decently well, but they also want to avoid spending too much time or money on their commute. So we need to make the transport system affordable and efficient, which requires land-use planning to be combined with transport planning. Also, good education and good health care should be accessible to all, not just those living in the upscale housing areas. Finally, we must not discount the importance of recreation, and give plenty of options other than the shopping malls. Fulfilling all these requirements comes back to proper land-use planning.

What are the main structural challenges in your countries to the right to adequate housing?

Elisa: The right to adequate housing is in fact a very holistic issue, but the basic problem in Indonesia is that the government sees it as being only an issue of the public-works sector, to be solved through an industrial approach. But the seven components of the right to adequate housing (link) cover all sectors: Transportation, basic sanitation, the need to ensure a cultural adequacy in providing housing, respect for local tradition, freedom from discrimination, and other civil and political rights. So that’s holistic. Unfortunately, as the Indonesian government continues to not see housing as a human-rights concept, this remains the big underlying challenge.

Rajiv: I think challenge number one is adequate land-use planning; creating enough zones to house enough people. Second, we need financing models that go hand-in-hand with the land-use planning. Third, a change in law is needed, to better control the purchase of houses in the affordable category. It should be limited to one home per family, and not the situation where a rich landlord can acquire so many and skew supply and demand. This is the structural issue that the government should have the political will to deal with.

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The interview was conducted by Paula Boks, Junior Expert and Artanti Wardhani, Programme Officer at FES Indonesia. For more information on the work by FES on Social Cities and strategies towards a sustainable economy of tomorrow, visit the dedicated page and contact the FES Office in Indonesia.