Demographic Transition, Economic Crisis and the Housing Deficit in Indonesia

Abstract

The idea of a housing deficit is a common, seemingly objective frame for housing policies. A deficit of between 3 and 8 million units in Indonesia has become a concern for the government in recent years. The wide range of estimates demonstrates not only that the methods used to estimate housing need are inconsistent, but also that the meaning of the term housing deficit is little understood. Insufficient housing supply is generally blamed for the supposed deficit, and policies to stimulate housing production have been considered in response. This paper analyzes household formation trends in urban Indonesia from 1990 to 2007 and estimates the quantitative housing deficit based on trends. The analysis finds that an abrupt change in the rate of household formation and household size occurred in Indonesia around the year 2000, suggesting that beyond macro trends in the country’s demographic transition and urbanization, the economic and political upheavals in the last years of the 20th century affected household formation significantly. Yet, analysis of household formation over different socioeconomic groups and urban areas shows that housing markets do also matter.