For a group of people who have been dubbed the driving force of Indonesia’s economy, it is deeply ironic that the middle class in Indonesia have not been able to fulfil their own basic need for proper housing. Too poor to own commercial housing yet too wealthy to apply for government subsidies, the middle class are left in limbo.

President Joko “Jokowi” Widodo suggested during the 2019 national meeting of the Indonesian Young Entrepreneurs Association (Hipmi) last September that the nation’s middle class would double in number by 2020, reaching approximately 140 million people.

Although businesses seemed to welcome this news with excitement along with plans to capitalize on the growing potential, such demands to be met do not only revolve around perishables or lifestyle-related consumption.

A good few million people will prosper enough to graduate from poor to middle class and will no longer be eligible for government subsidies in many categories of basic needs, including and especially in housing.

Although graduating from the low income group shows a significant increase in prosperity, the loss of eligibility to apply for government-subsidized housing could mean that millions of households will be put straight on the already abysmally long housing backlog list.

The housing crisis for the middle class is not an issue unique to Indonesia, or even to developing nations. Countries like the United States and the United Kingdom are slowly realizing that the middle class and aspiring middle class are priced out of big cities and forced to either live in the suburbs — therefore creating even more urban sprawl and having to endure long commutes to their daily jobs — or spend more than half of their income on rent.

The mathematics of this is quite straightforward. The smallest type of landed housing in major Indonesian cities is priced at Rp 500 million (US$36,615) to Rp 600 million. A Rp 550 million house with a 10 percent down payment and 9 percent interest (with 13.5 percent floating interest) requires aspiring homebuyers to prepare nearly Rp 100 million for a first payment and shell out more than Rp 4.5 million a month for the next 20 years.

This means that to maintain the healthy financial situation of earning at least triple what they spend on a mortgage, the average household must have a combined monthly income of at least Rp 13.5 million, nearly twice the maximum income allowed for government-subsidized housing, which is currently capped at Rp 7 million a month.

Households earning less than that are effectively relegated to the fringes of big cities, wasting their time and energy on an incredibly stressful commute and a large portion of their income on the cost of transportation.

Now, what should the government do? First and foremost, the government must acknowledge that housing for the middle class is a serious issue and then use this acknowledgement as fuel to change political will.

Amid ever-increasing house prices and inflation, the average salary of Indonesia’s middle class population simply cannot keep up.

The latest policy on the housing quota does require developers to build medium-priced housing at a scale of 2:3 to subsidized housing, but even this policy is problematic. For example, in Tangerang municipality in Banten province, the cap for the subsidized house price is Rp 168 million.

This is an issue because developers can legally claim that houses priced anywhere from Rp 168 million to a little over Rp 1 billion are medium-priced, according to Public Works and Housing Ministerial Regulation No. 7/2013 on housing and settlements with balanced residencies including subsidized housing. The government must make deliberate policy changes so that the ostensibly middle-priced houses can actually be purchased by middle class families.

For example, the government could provide loans for families with a combined income ranging from Rp 8 million to Rp 14 million to be put on a subsidized program of first homes or more varied categories based on types (apartments or landed housing) and the total size of building areas for specific programs.

The government should also start taking control of land and housing prices in areas deemed suitable for middle class homeowners to prevent skyrocketing prices due to market mechanisms like what we see happening in Greater Jakarta.

Second, the government must accurately map the population of middle class aspiring homeowners. Are they single or married? Do they have children, or are they looking to have children? Basic census information about middle class aspiring homeowners, if collected accurately and used appropriately, should help the government create further development and marketing strategies to curtail the national housing backlog.

Research in several cities in the US published in The Journal of Urban Affairs by DP Varady, et al., in 2005 suggested that one of the biggest groups of aspiring homeowners were those with young children who were looking to move into neighborhoods close to decent schools. This kind of information can guide the government’s future developments to more precisely match the socioeconomic needs of millions of our middle class families.

The middle class in Indonesia have been uncharacteristically quiet about their struggles in purchasing houses. It could be because they have normalized the housing crisis into inevitability or they have simply lost hope.

Seeing that the government has been grooming the middle class to be the backbone of our consumption market, it is high time it delivered its part of the deal: meeting their most basic need of a roof to live under.

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Lecturer in architecture, Pembangunan Jaya University, graduate of the University of Manchester in urban regeneration and development.

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