T

he government is turning to the poor with its latest economic policy package, but its effectiveness remains doubtful.

Announced on Wednesday, the 13th economic stimulus package scraps seven permits and combines several others in an effort to simplify procedures for the development of housing for low-income people.

The number of permits will only amount to 11 from the previous 33, according to the package.

The downsized number of permits is expected to reduce the duration of administrative processing to 44 days from a whopping average of 769 to 981 days.

Coordinating Economic Minister Darmin Nasution claimed the fewer number of permits will also reduce fees throughout the process by 70 percent.

He said the housing sector had largely ignored developing housing for the poor on account of piling permit requirements and long processing, despite the fact that developers were obligated to build houses for the poor and middle-income people in the same regency or city that they built upscale homes.

At the same time, the poor have not been able to own houses owing to high costs.

President Joko “Jokowi” has vowed to keep housing projects a priority during his term.

His administration aims to realize its goal of providing 1 million houses for the poor by issuing the stimulus package, in hopes that the housing backlog can be reduced to 6.8 million houses in 2019, from 13.5 million houses in 2014.

“We also want to increase accessibility in house ownership, make housing permits easier to obtain and manage housing permits for a maximum 5 hectares of land,” Darmin said at a press conference.

“By preparing the regulations, we will be able to improve the business climate, so that [developers] can provide homes for the poor.”

According to government data, privately owned homes account for 78.7 percent of the total, while rented ones make up the remaining 21.3 percent.

Furthermore, 3.1 million households own more than one house, while 11.8 million households do not own homes at all.

Darmin said the 70 percent decrease in housing administration fees would slash the average home price, resulting in homes becoming more affordable for the poor.

“Of course, the portion of the administration fee within total costs varies, depending on the location of the house,” he said.

Despite the government’s efforts, it remains to be seen whether the stimulus will trigger higher interest from developers or demand from the poor.

Bank Central Asia (BCA) chief economist David Sumual said the latest package lacked punch and merely contained administrative simplification.

“There should be an interest subsidy as provided in other countries for public housing,” he said.

Meanwhile, Indonesian Institute of Sciences (LIPI) economist Latif Adam argued that a more holistic approach was needed to tackle the issue of high prices.

“The housing problem is not just related to permits, but there are several other factors that need to be considered. Scrapping these permits will not automatically increase public demand because they are using a partial approach,”
he said.

Instead, Latif noted, the government should subsidize the high interest rates that the property sector is notorious for and stipulate that low-cost housing be developed on land that is close to public transportation to minimize daily
living costs.