Jakarta is already home to more than 10 million people.

In Jakarta, a city of more than 10 million people, housing affordability has become a major issue—one that likely cannot be solved by the public sector alone, said Harun Hajadi, chairman of the Jakarta Property Institute (JPI) and managing director of Ciputra Group.

Hajadi spoke as part of a webinar organized by JPI and the Urban Land Institute, along with featured experts Dr. Richard K. Green, director of the University of Southern California’s Lusk Center for Real Estate; Lily Chan-Wong, director (policy and property), Housing and Development Board (HDB); and Blake Olafson, founder and managing partner at Asia Capital Real Estate Management (ACRE).

The webinar is available on-demand at ULI Knowledge Finder.

Hajadi explained that the Jakarta government typically prioritizes housing for people with the lowest incomes, while middle-income citizens are expected to adjust to the market. Currently, the only option for middle-class citizens is the suburbs—not an ideal solution due to extra-long commutes and sprawl.

Green shared factors that lead to housing inequality in cities: more people are becoming better educated, especially women. Green said that while there is a decline in global marriage rates, in contrast, Indonesia is seeing an increase in marriage rates. People who got married tended to be better educated, commanding higher pay and have two incomes, whereas people who were less educated and remained single had a lower income. These factors lead to a wider income difference.

Green also highlighted a fundamental problem with successful cities: while they attract a talented workforce, this drives up everyone’s wages but not by the same amount. Property prices, in turn, increase but in a much more homogeneous fashion. The result is that people with a higher income are able to keep up with housing costs but low- to middle-income earners are not.

Clockwise from top left: Lily Chan-Wong, director (policy and property), Housing and Development Board (HDB); Blake Olafson, founder and managing partner at Asia Capital Real Estate Management (ACRE); Wendy Haryanto, executive director, Jakarta Property Institute; Professor Khoo Teng Chye, ULI Asia Pacific chair; Harun Hajadi, chairman of the Jakarta Property Institute (JPI) and managing director of Ciputra Group; and Dr. Richard K. Green, director of the University of Southern California’s Lusk Center for Real Estate.

A case study is Singapore, where holistic government commitment and support are keys to success. Chan-Wong described the country’s public housing program. Seventy-nine percent of the city-state’s resident population is living in HDB flats, and 94 percent of them were homeowners. She said that homeownership was beneficial for citizens since it gave them a stake in the country, fostered a sense of belonging among them, and built strong work ethics, among other reasons.

“To ensure affordability, we [HDB] have adopted a three-pronged approach,” said Chan-Wong. The approach includes ensuring a sufficient supply of flats of different sizes and in different locations to meet different budgets and needs. HDB also regularly reviews housing subsidies to ensure that flats remain affordable for its primary target groups of first-time homeowners and low-income citizens. Chan-Wong said that HDB also promotes financial prudence by encouraging Singaporeans to plan and buy within their means.

On the other hand, Olafson raised the idea of rental housing/multifamily projects. While most millennials want to own a house, rising property costs and other financial burdens make it hard for them to afford one. In addition, the definition of “home” had shifted from a place of long-term permanence to one where they are each day. Olafson said that he wished to adapt the instant gratification that millennials seek into housing and founded HOMA, a multifamily project concept that balances co-living with safe social distancing and targets young professionals and families.

He said that the potential for multifamily housing projects is strong across the world, especially in Southeast Asia, due to the supportive demographics (where there is a large percentage of 20- to 39-year-olds in Asia), increasing urbanization, unaffordable housing, the rise of the shared economy, and increases in remote work. Olafson added that multifamily investment volumes are low in the Asia Pacific region as compared with the rest of the world, which marks the region for future potential growth. Rental could be a viable option in Indonesia if the country’s borrowing rates were below 10 percent.

While sharing different perspectives on middle-class housing, the speakers agreed that a wider variety of housing options would help make Jakarta more affordable to middle-income citizens.