Chapter 8

The Voice of ‘Managing’ Households 

177 
 
 Chapter 8: The Voice of ‘Managing’ Households

8.1 ‘Managing’ Household Strategies ……………………………………………… 179

Characteristic of ‘Managing’ Household ………………………………………... 179

8.2 Findings (Blue-Collar Households) ……………………………………………. 181

8.2.1 Moving from Renting to Owning ………………………………………………... 181
8.2.2 Housing Aspirations: Stories and Narratives ……………………………………. 184
8.2.3 The Cost of Owning Relative to Renting ………………………………………... 185

8.3 Findings (Young White-Collar Households) ………………………………….. 190

8.3.1 Housing Aspirations: Stories and Narratives …………………………………….. 190
8.3.2 Work/home balance ……………………………………………………………… 193
8.3.3 Affordability ……………………………………………………………………... 193
8.3.4 Lifestyle Choice ………………………………………………………………….. 196
8.3.5 Coping Strategies ………………………………………………………………… 197

8.4 Housing Stress? Housing Market Led to Despair …………………………….. 198

8.5 Conclusion ……………………………………………………………………….. 200

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 Chapter 8

The Voice of ‘Managing’ Households

8.1 ‘Managing’ Household Strategies

It is a widely held view that homeownership has become a ‘normalised’ tenure choice in many
countries including Indonesia. However, after the 1997 economic crisis and followed by the
2008 global credit crunch, accessing homeownership has been increasingly challenging.
Mortgage lending criteria have become more complex, bigger down payments are now required
and a sharp increase in housing price has made it an almost unreachable goal for low to middle-
income households. In June 2012, Bank Indonesia raised the minimum down payment
requirement for housing loans for first homeowners to 30 percent (thus a loan-to-value ratio of
70 percent) and increased the minimum down payment requirement for the purchase of a second
house or apartment (bigger than 70m²) to 40 percent (BI circular letter No.15/40/DKMP). That
policy was basically designed to maintain the stability of the financial system and to strengthen
the bank’s resilience by reducing credit risk in the property sector. The rule was not applicable
to credit or financing within the housing program sponsored by the government. Nevertheless,
given the limited subsidised mortgages available, the majority of Indonesian people only have
a commercial mortgage with a high-interest rate as an option. The ability to enter into
homeownership not only depends on a family’s or individual’s ability to fund a mortgage but
also being able to meet home purchase cash requirements made up for a deposit and transaction
costs.

To fully understand these challenges, the chapter will look beyond the immediate housing
market issues and explore household experiences of taking out a mortgage with or without a
government subsidy. A rich data set of interviews with people talking about their mortgages,
housing histories, circumstances and future plans will be discussed in this chapter. The
fieldwork was conducted in three subsidised housing areas in Bekasi from October to
November 2014 (for blue-collar respondents) and by telephone calls between December 2014
and January 2015 in Greater Jakarta (for white-collar respondents).

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Characteristics of ‘Managing’ households

Whilst much research supports the assertion that homeownership has positive psychosocial
benefits, these results often reflect the views of owners who are not exposed to the risks
associated with the repayment of mortgages. That said research focused on homeowners at the
higher end of the economic spectrum reflects that, by definition, the market for homeownership
has been largely the domain of higher-income families (Rohe & Stegman, 1994b). In reality,
recent home buyers, from low to middle-income households, have to face high housing prices,
high up-front transaction costs, high-interest rates and limited housing options within their
budget. The author uses the term ‘managing’ to describe people who struggle to keep up with
their mortgage payments or who manage to pay their instalments but struggle to plan ahead
given their current circumstances.

These households face a hard budget constraint every month; nevertheless, they have stepped
onto the housing ladder despite those constraints. Maintaining equilibrium between needs and
resources is the main goal for this household strategy. Thus, adaptability is crucial to achieving
equilibrium. Whilst people who live on lower-middle incomes are not different in their attitudes
and values to the rest of society, their aspiration for a decent home has made them more
vulnerable to economic changes. As first-time buyers, their profiles in terms of employment,
expectations and attitudes to job security arguably have influenced the timing, location,
borrowing arrangements, or nature of their home purchase, their future mortgage commitments
and how well-off they believe themselves to be.

To assert that ‘all’ first-time buyers think or act alike is almost falsified by the empirical data.
Arguably, under current economic transformations, there are good reasons to expect each
household to differ in response according to their individual and household situation.
Macroeconomic changes involving inflation, interest rate changes, changes in housing prices
and uncertainties about continuing paid employment make every household need to carefully
enter into a long credit commitment such as taking out a house mortgage. It is low to middle-
income home purchasers (with a mortgage) who can expect to face the greatest financial risks.
In addition, the benefits and risks of homeownership for low-middle income households also
need to be reviewed. Do low-middle income households gain the same benefits as households
with higher incomes? Are these benefits offset by additional financial risks, including high
mortgage burdens and additional expenses for house maintenance?

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8.2 Findings (Blue-Collar Households)
8.2.1 Moving from Renting to Owning: Income Stability and Employment Permanency

Moving from a rental dwelling to owner occupation is an important event in the housing career
of a household. Arguably, considerations of housing consumption are closely related to
household circumstances which play a dominant role in the decision to rent or to buy a dwelling.
Various studies have examined the relationship between housing tenure decisions and the
family life cycle (Henderson and Ioannides, 1989; Davies and Pickles, 1991). From the
fieldwork, the author found that the majority of respondents from the three subsidised housing
areas in Bekasi were young families between 23 and 31 years old. This resonates with the idea
that buying a house is closely linked to marriage and the birth of children. Clark et al. (1994)
suggest that for many households the transition to ownership occurs just before or after the birth
of a first child.

Moreover, one of the most significant reasons why Indonesian people are bound to
homeownership is a social belief that a family ideally needs a house to raise their children. This
social value is deeply entrenched in Indonesian culture and strongly associated with autonomy.
It is almost accepted wisdom that buying is better than renting; after all, becoming a homeowner
is not only a signal of personal success but also one of the most important methods of wealth
accumulation. In addition, for many households, the home is the largest asset in their portfolio
and labour income is the most important source of wealth. Shiller (1993) and Caplin et al.
(1997) argue that without financial markets for insurance against volatility in housing prices
and labour income, it is natural to expect risk-averse households to use housing purchase to
hedge income risk.

Despite some people assuming that becoming a homeowner makes them exposed to
fluctuations in house values, the alternative to home owning – namely, renting – is also risky
since a tenant is also subject to periodic rent adjustment. Thus, the only practice to hedge against
uncertain annual housing costs is to own a house so they can lock in the cost of future housing
services. As (Sinai et al., 2009) argue, even though the house price risk increases with rent risk,
the latter empirically dominates for most households – so housing market risk actually increases
homeownership rates and house prices. In addition, the regional variations in the composition
of housing supply also have a large effect on decisions for owning or renting, as might be
expected (Myres, 1990; Deurloo et al., 1990).

From the fieldwork, the author found similar working backgrounds between respondents in
renting dwellings and homeowners in this subsidised housing. Almost all of the respondents
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worked in manufacturing industries around the Jababeka industrial estate. Most respondents
lived in rental units in the kampungs near Jababeka before buying a house in their current
dwelling, in the same kampung where most of the ‘defensive’ respondents were interviewed. A
respondent, 28 years old, explained:

“[…] renting first […] in Pasir Gombong (A thousand door rental unit) then I moved
again to ‘Sukaraya’ settlement when I worked in my current company […] it was 2011,
I got married at that time […]”.

Nevertheless, when he became a permanent employee in his current company, he decided to

take out a subsidised mortgage (KPR-FLPP) to buy his current house. The other respondents
also told the same stories; almost all of them took a subsidised mortgage when their
employment status became permanent. Many of the respondents stressed how important the
permanency of income was before they committed to buying a house. A common theme was
the notion of income stability and permanency of employment that embodied the main factor
which influenced respondents’ decision whether or not to buy. Arguably, the household’s short-
term and long-term expectations about the development of their household and employment
career are an associated aspect of the motivation to buy a home (Pas et al., 1983). In addition,
income level, income stability and income prospects are internal factors that influence the
decision for renting or owning. When they choose to rent instead of buy, it is not the barriers to
accessing credit by financial institutions (although these certainly exist) that make them stop
trying, but rather through the individuals’ self-assessment of their own situation. A respondent,
who had just become a permanent employee, 28 years old, spelt this out:

“It is us who are afraid to take it (house mortgage) if we are not a permanent employee
[…] if we get laid off how can we pay (the instalment) […] it is a bad way to lose your
money”.

The step to house ownership is generally only undertaken when the person (usually the
household head) has reached certain stability. Thus, some of them were renting and then bought
their current house while others waited to have a house before deciding to marry. Nevertheless,
one or two respondents admitted that they were in fixed-term contracts and outsourcing
employment, but nevertheless able to take out a housing mortgage. This was likely because
they had a connection with the developer or company, who was willing to help with
administration issues, for one of the requirements of purchasing a home is to show a letter of
appointment as a permanent employee to the housing developer. A respondent, 24 years old,
explained:
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 “Not yet, still working as contract employee […] I’m asking for help from Human
Resources but it is an unofficial letter (laughs)”.

It seems that employment status has a big effect on decisions regarding tenure choice and the
household strategy more broadly. Interestingly, it seems, some people were willing to risk
buying a house using false supporting documents. Arguably, that was one of the important
factors that distinguished the fieldwork respondents who were still renting from homeowners.
It can be argued that the transition to homeownership mainly takes place when stability in both
income and household situation has been reached (Davies and Withers, 1998; Dieleman and
Everaers, 1994; Henretta, 1987). Besides the necessity of having a place to raise their family,
buying a house is also affected by current housing market circumstances. A high increase in
housing prices in the last few years, combined with the uncertainty of inflation and economic
conditions, makes it logical for them to enter the housing market as soon as they can. A
respondent, 28 years, agreed:

“The thing is, you must hurry up (buying a house) […] house prices are increasing
beyond reason like in the central park region […]”.

The increase in housing prices over the last couple of years has already made many households
decide to channel all their resources into buying a property. These ‘panic buyers’ are found not
only in the more affluent economic households but in all levels of households including those
in the lower-middle-income group. For these households, the urgency to buy a property as soon
as possible is real, as they will be ‘left out’ if a purchase is not made immediately. Rudel (1987)
argues that house price inflation has two contradictory effects: it raises the entry costs to owner-
occupied housing, but at the same time increases the incentive to own a house as a hedge against
the inflation of assets. The increase of housing prices in the last few years also has produced a
side-effect, that many people are putting their money into property in the hope that they gain
instant profit from house price appreciation. This highlights the tension between the need for
property values to increase for low-income earners so that they have an asset that accumulates
wealth, and the need for home prices to be affordable at the same time. However, this
unsustainable housing market will produce more problems eventually, for Berkovec (1989)
show that higher house price inflation makes higher-income households purchase a house while
low-income households are excluded from this tenure. Many people are buying properties as
an investment rather than to occupy (see Chapter 9).

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8.2.2 Housing Aspirations: Stories and Narratives

To fully understand household housing aspirations it is important to understand how they make
sense of their household economic condition and the available housing opportunities in the
market. The following two respondents were found by the author to typify the subsidised
housing mortgage (KPR-FLPP) receiver, which is one of the main topics of the study. Thus,
these oral testimonies had a big impact on the research, contributing to how the bigger picture
was eventually painted:

Case Study 1

RB (26) and his wife (26) just married several months ago. RB was renting before he got married and
has been working for five years in his company. Both of them are not originally from Jakarta, RB from
Malang, East Java, and his wife from Cilacap, Central Java. RB felt lucky to be permanently employed
by the manufacturer, which made him able to buy his current house and subsequently get married.
“Alhamdulillah (Praise be to God) I’m now a permanent employee”. He took out a 15 years subsidised
mortgage for his 36/60 type house (two-bedroom house) and pays Rp.790,000 (£45) for each monthly
instalment and around Rp.160,000 (£9) for bills. He admits that he felt more secure after buying his own
house: “It is just like paying the rent…well, it is more than what we pay if we are renting a house, but
at the end of the day, it will be ours”. Regarding the down payment, he managed to get a relatively small
down payment, of around Rp.10,000,000 (£571), as he purchased the house in the early days of estate
construction which allowed him to pay 6 instalments (thus negating the need for family help).

Since then, he admits that they have not experienced any significant problems in paying those
instalments: “Well, for paying the instalment, it’s already our first priority…maybe if we have financial
difficulty, the post of secondary expense like my expense of smoking cigarettes will be reduced”. Besides,
his wife also works and can give them additional income for the family. Even though he now lives
farther from his workplace, he does like the neighbourhood and there is a shuttle bus near the housing
estate that goes to his workplace. Regarding his plans in the future, whether he will live permanently in
Bekasi or will return to his hometown, he said: “Well for the future, I don’t know what will happen…if
I buy a house in kampung (hometown) but I’m renting here it’s not really ideal, I think it is better like
this…buy a house here and if I will be back to my hometown, it has already become my investment...I
can rent it out or anything else”.
 

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Case Study 2

ST (27) and her husband (29) had been living in the housing estate for a year and a half before the
interview. They were renting in Cikarang Baru between 2009 and 2012 before being able to take out a
15 year subsidised mortgage on a new home, with monthly instalments of Rp.790,000 (£45). She was
working in a restaurant for 3 years and a factory for 4 years before she got laid-off because the factory
relocated to another region. Since then, she has not worked again. Her husband is working in a lathe
workshop in Bekasi. Both of them are originally from Garut and Bandung, West Java. “Regarding
expense…I used to be working so there is an additional income, but now, since I stop (working) is just
enough (laughs)”. After the birth of her son, she feels she cannot go back to work: “Actually my husband
does not forbid me to work…but I have a son and since my sister already has her child, there is no one
can help me to look after my son while I’m working. So, I just decided to stop working completely. Many
other women are also not working (in the area), some of them put their children to their grandparents
or send their children back to kampung (hometown)…I feel it is a pity to do that”.

After they took the house (type 36/60), they made a small renovation and spent Rp.17 million (£971) to
add a small space to the back of the house. They borrowed some money from her sister as she encouraged
them to buy a house rather than renting forever. “It is much more comfortable to live in your own house
even though you are in debt (laughs)”. Regarding their future plans, concerning whether they will be
able to buy another house for investment: “Have no idea, not yet thinking over there…to be honest,
there is a nervous feeling if we aren’t able to pay (the mortgage) but as long as my husband is
working…little by little, just have a house first”. She felt comfortable in the neighbourhood as many
neighbours are also young families with one or two children: “Many women in the neighbourhood are
just like me, having small children so it is convenient”.

8.2.3 The Cost of Owning Relative to Renting

Although there was diversity in the individual experiences and perspectives across research
respondents, there were many commonalities. The majority of respondents felt that they paid
more or less the same amount of money as when they paid for rent. A respondent, 23 years old,
explained:

“I’m more peaceful […] I pay the same when I was renting […] but when I pay for rent,
I just give the money to other people, but if I pay for a mortgage, at the end it will be
mine […]”.

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Even if they pay more on mortgages, it is considered as saving. Many respondents view buying
a house as a type of forced saving which makes a monthly mortgage payment similar to putting
money in a bank, unlike paying housing rent. This exposes a well-known view of many
Indonesians that renting is ‘dead money’ and households are always better off buying if they
can do so, irrespective of income and where they buy. The KPR-FLPP also helps lower-middle
purchasers keep housing costs more predictable. A statement from one respondent, 26-years-
old, reflected this view:

“My expense is bigger when buying, but it can be seen as saving, it is also more
manageable compared to renting”

Nevertheless, it is clear that paying their mortgage has taken a substantial part of income, which
the households will have to cope with in the long term; the majority have taken out a mortgage
of 15 to 20 years. Whilst it is clear there is an issue of ‘access affordability’ for lower-middle
households, simultaneously, there has been some concern with ‘ongoing affordability’ which
is the capacity of households to continue to pay their mortgages in the face of external changes
such as increasing interest rates, unemployment and illness or disability. The majority of
respondents admit that they budget carefully and are determined to live within their means and
avoid going into debt, by making the payment of their mortgage instalments their first priority
before other daily needs. The individuals interviewed were very conscious of the limitations of
their budget, so self-discipline and restraint were required for them. However, this could
accentuate financial hardship in the family by leaving too little in the household budget for
necessities other than housing.

The majority of respondents often showed great resilience in trying to make ends meet by
sacrificing secondary needs such as ‘leisure time’ and parts of the food budget. A respondent,
23 years old, made this clear:

“For me, at the early month, I pay for a house and motorcycle instalment, then the rest
for food, you eat from what budget is left”.

Another respondent, in her late 20s, added:

“When we still rent, we just go out every weekend, but now just stay at home […]
sometimes when we want to buy some food, we just cook it at home, especially like now
as we just have a baby just stay at home (laughs)”.

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The constant need for prioritising and juggling was not seen as an inescapable oppression.
Instead they often viewed it as an ‘ordinary’ fact of life and identified continuous possibilities
to improve the efficiency of their household management. For people to say that they are coping
with the situation does not mean that they are living comfortably; economising, in the sense of
doing without, is often necessary. Nevertheless, the respondents seemed satisfied with their
current economic background despite their limited budget after paying the mortgage. This was
likely because of the personal satisfaction of their current lifestyle was closely related to their
previous financial circumstances, their parent’s economic condition and also the relative
position of their neighbours – who, more or less, had the same working background.

Some studies identified that personal perspectives and reflections on individuals’ current
financial and social circumstances are influenced by an individual’s ‘frame of reference’
(Frank, 1997), which is in-turn affected by their expectations, aspirations, previous life history
and social reference groups (Burchardt, 2004). The author also argues that it is also part of
Indonesia culture, in particular, Javanese (the ethnic group of the majority of respondents),
where the culture of ‘nerimo’ (acceptance) is very strong. This can be translated as having the
courage to change the things we can and the serenity to accept the things that we cannot.
Nevertheless, lifestyle adaptations of the respondents are also important to help them to cope
with additional expenses. This was reflected in the statement of a 26 year old respondent:

“At the first time, it really feels a bit hard, but a while, we just get used to, we just
manage to meet all the basic needs”.

Nonetheless, some respondents, in particular women, said they also felt anxious about the
possibility of not being able to pay the instalments. A respondent, 25 years old, said:

“Feel more anxious […] for example, if you rent the landlord will chase you but if this
(taking a mortgage) the bank (debt collector) will chase you”.

Despite most of the respondents saying they had not spent anything on their house maintenance,
some respondents said that they had to spend more to be able to make their house function. The
poor finish of their houses had influenced them to renovate upon entering. One respondent, 26
years old, made it very clear:

“Buying house like this, just like, ready for renovation but not ready for living […] for
the first time I got the key, some floor tiles are already cracked, so house like this just
ready for renovation not for living”.

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Another respondent, in her end 20s, added:

“Many were cracked, the floor tiles were installed really badly, and many are cracked
already”.

Certain house deficiencies required extra money to fix, for example installing an artesian well
or fixing the septic tank. Some of them had also added rooms or extended the kitchen (the
kitchen is only a kitchen sink when they handed over) using spare land around the house (type
36/60 houses are usually a 36m² building with 60 m² land overall). They spent from
Rp.6,000,000 to Rp.30,000,000 (£342-£1714) to do that renovation. The author found that most
of the houses did not meet the quality standard that the respondents expected. Poor quality
building work also resulted in some of the households not directly moving in when they got the
keys but living elsewhere until the house was ready to be lived in. Nevertheless, over time,
rooms have been added, higher standard material used and utilities installed. In order to pay for
this ‘extra’ expense, some of them had taken out a personal loan from their bank; whereas others
just waited until they had the cash or borrowed from friends. Many households were reluctant
to utilise credit except to finance a major expenditure such as house renovation or buying a
motorcycle. Two respondents, aged 28 years and 26 years respectively, explained why:

“No, my parent advises me not to take it; they said it (credit card) is a devil card
(laughs)”. His wife added, “We prefer paying by cash, we are just afraid cannot control
it, some (banks) offer it to us but we don’t take it, just borrow from my neighbour
(laughs)”.

Arguably, KPR-FLPP helps lower-middle purchasers keep housing costs more predictable. The
question is, do lower-middle income purchasers struggle for years and only achieve financial
relief after many years of hardship, or is their decision to purchase vindicated relatively
quickly?

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 1  2

6  3

5  4

Figure 8.1 (Clockwise from the top)

(1) Main entrance to the housing estate
(2) Typical subsidised housing unit
(3) The atmosphere of the housing estate
(4) Some facilities in the area (convenience store, clinic and barbershop)
(5) Some desolate and derelict houses
(6) Major renovation to maximise ‘spare’ land

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8.3 Findings (Young White-Collar Households)
8.3.1 Housing Aspirations: Stories and Narratives

Young white-collar workers, particularly those who live in Greater Jakarta, face increasing
difficulty in finding suitable housing, as the problems of affordability and accessibility restrict
the options available to them. Since 2008, house prices have been rising consistently across
Greater Jakarta, with some areas experiencing dramatic increases. This has made
homeownership unattainable for most young families, even for those with relatively high
income. Allocations for subsidised social housing (Rusunami and Rusunawa) and subsidised
mortgages (KPR-FLPP) exclude this group as their income exceeds the applicable limit.
Meanwhile, rents are becoming higher and there is a lack of housing security. This group has
to face the housing market with no help from the government, and has become more vulnerable.
As Andrew (2006) note, young people are particularly disadvantaged by the housing price
increase trend because they have had limited opportunity to accumulate the liquid wealth
required for the deposit and are on relatively low wages at the start of their careers. The situation
is most acute for those aged 35 or younger, as they are still developing their career, which is
usually concentrated in the capital city. Arguably, in current housing market conditions, young
white-collar workers do not have time to plan and just have to react to their housing situation.
These young white-collar households usually are seeking a house between Rp.400 million
(£22,857) and Rp.1 billion (£57,142).

The majority of young white-collar workers also stressed how important homeownership is for
them, much like their blue-collar worker counterparts. Arguably, with their more secure
employment background and bigger income, these young white-collar households should have
more options for their first home. Unfortunately, these housing price increases across Greater
Jakarta have made housing become more polarised. In order to get a house within their budget,
young families must be willing to live on the edges of Jakarta City or in a multi-storey apartment
with limited space for children. It is likely that they have to adjust their dream to their budget
rather than vice versa. The following two case studies exemplify this situation:

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 Case Study 1

MH (30) is a young professional working for an oil and gas company in Cilandak (South Jakarta). With
an above-average income at around Rp.20 million (£1,142) per month and permanent employment, he
had bought a 98/63m2 house in Cinere for Rp.900 million (£ 51,428) with a 15-year mortgage from the
bank. He was waiting for bank approval before making a final decision on the best mortgage to finance
his house purchase. He needed to wait a year for the house to be built after his mortgage application
was approved. Given the 30 percent downpayment required to buy a first house, he was considering
taking a higher rate mortgage to help him with that downpayment. He had no financial help from
parents or friends, while the allowance from his company was also limited to those workers who had
worked a minimum of five years and were in a managerial position. So the only option for him was to
take out a mortgage from the bank.

He said that he needed to buy a house for his preparations for marriage that year and hoped that
additional income from his wife would help them to cope with the mortgage instalments. He prefers to
allocate his salary to pay the mortgage and his wife’s for daily expenses. He was also considering taking
out a car loan when able to do so. During the interview, he was living in a boarding house near his
working place, at Rp.1,200,000 (£68) a month including bills. On average his monthly fixed
expenditure was around Rp.5,000,000 (£280). He admitted there were not many housing options in his
budget range, which ideally would be less than Rp.800 million. He said that “… now the developer just
become a single determinant (to dictate the house prices around Greater Jakarta) which make the
uncontrolled increase on house price and beyond reach of most of Jakarta people…”. He was not
considering an apartment because he thought a house was a better residential unit. Regarding the
process, he said: “I think it much easier now in term of administration as many bank compete to provide
KTA (no collateral credit) but again the interest makes many people afraid to buy a house…but for the
administrative issues, it is them who approach us (customer) rather than as it was several years ago
we needed to apply by ourselves”. He considered buying a house as an end user rather than for
investment: “I don’t ever think about it (buying another house)…for investment, I put part of my income
to financial service like investment insurance and mutual funds”.

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 Case Study 2

DA (29) and her husband (29) have lived in Jakarta for several years. Both of them work as architects.
They have been married for four years and have a child which made her decide to resign and do
freelance projects while her husband works as an architect in Kuningan (Central Jakarta). After they
were newly married, they decided to rent a house before moving to her parent’s tenement. They decided
to spend Rp.20,000,000 (£1,142) to renovate the tenement rather than renting a house, and lived there
for two years. They then sold their car to buy a piece of land in the Greater Jakarta fringe area (140 m²)
in 2013. “At first, we planned to save some money for the down payment but after my son’s birth, we
had only very limited money so must delay our plan to have a house”. During that time, they also kept
looking for a house mortgage but because of the legalities of the land (which was AJB / Deed of sale
and purchase, and not SHM / freehold title), no bank wanted to finance their plan. She explained: “We
then went to a Multi finance company and we mortgaged the car to get some loan and used the money
to build the house gradually”. She added “The process was quick but the rates was high, almost double
the money that we borrowed (in three years loan period)”.

Given their expertise in construction, they were able to manage the build themselves by hiring only
builders. “As for us, the house also become my (architecture) studio advert, so if the client want to see
our design they just need to come to see (laughs)”. They spent Rp.120 million (£6857) to build the
house (55/140). She added: “As we build by ourselves, we can adjust the budget to build the house,
some part we just down grade the materials or the other just waiting until we have enough money
before we installed it”. She admitted that they put all the resources they have into the house: “All the
money come from my parents, me and my husband salary, the freelance jobs money…that’s all”. They
also needed to make some adjustments in their lifestyle to pay their loan instalment: “As I don’t work
anymore, we have to make some adjustment from dual income to only one income…I think it’s more to
our lifestyle, before we have a house we usually eating out in restaurant but now is just occasionally,
sometimes the expense of entertainment is the same as the expense of eating at home for a month”.
They were still paying for the loan instalment while hoping to buy a house in the future, using the
current house for their architecture studio office.

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8.3.2 Work/home Balance

Young white-collar workers arguably were also more committed to their area and usually did
not want to move outside their current place. Thus, it is not surprising that many young
households experienced a real lack of housing options in their local area and difficulties
throughout their housing journey. Compared to their blue-collar colleagues, these young white-
collar workers stressed the importance of house location because they wanted to live near the
workplace, be near their family and support networks, and be close to better schools.

A respondent explained:

“[…] we have to look at the cost and benefit (in buying a house) […] location and price,
for location, it must be near my workplace, the main consideration is the effectiveness
and efficiency, then the price […]”.

The location was more important to them when they already had a family. Nevertheless,
because of price considerations some respond by choosing to compromise their ‘ideal’ location,
which sometimes means long commutes and traffic jams. A respondent declared:

“[…] it is all different, some people must buy a house that fits their dream, maybe must
near their working place, but if you consider the budget, like myself, you must looking
for the house on the edge of Jakarta, if you are not willing to move out same distance
you won’t be able to buy (a house) nowadays, a far as there is a public transport, I’m
fine […] the distance is around 35 km from my house to my workplace”.

8.3.3 Affordability

In the last decade, house prices have risen much faster than wages, which means that houses
have become less and less affordable. It is clear that achieving outright ownership at an early
age has become more difficult. Arguably, like other markets, such as the labour market,
homeownership is becoming a mechanism for reinforcing inequality. Many lower-middle and
moderate-income families are being locked out of the opportunities for wealth building and
secure occupancy that have historically been offered by homeownership. Households who did
not already own a house before the bubble started growing, ended up giving up more and more
of their salary simply to pay for a place to live. This increase in prices led to a massive increase
in the amount of money that first-time buyers spent on mortgage repayments. Ideally, young
couples should buy or rent a small house to start a life and after 2-3 years, manage to save for
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a house down payment to step onto the housing ladder. However, current housing prices in
Jakarta are soaring to an astronomical level, and the gap between income and house price is too
great. The requirements of bigger down payments makes many young white-collar workers put
off their plan to buy a house or even if they eventually are able to buy their ‘dream’ house, they
must be willing to use all their savings or consider re-mortgaging to be able to fund the down
payment. Financial constraints are still the biggest problem for these young families. A
respondent stated:

“Difficulties? […] more about approval and cash flow […] between my dream and
budget […]”.

Another respondent explained:

“Down payment not yet enough […] some banks already give some offers to help to pay
the down payment but with higher interest rate, it also becomes my concern […]”.

Another respondent also added:

“[…] all of my saving were taken for the down payment”.

Unsurprisingly, many young white-collar workers have delayed their personal plans, like
marriage and having a child. Ermisch (1999) and Andrew & Meen (2003) report that higher
housing costs discourage household formation while higher real incomes encourage it.
Arguably, the typical housing career model envisages a smooth progression from leaving the
parental home into rental housing where the household saves the deposit necessary for a
transition to homeownership. Once that transition is complete, the typical family household
trades up as child-rearing responsibilities prompt a higher demand for housing space. However,
the limited availability of suitable and affordable housing showed that making the transition to
suitable long-term housing is not a linear process and could involve many different types of
housing. For example, a respondent must first rent a Rusunawa (affordable rental flat) before
being able to save for a down payment and taking out a loan from their employee.

Whilst many of these young white-collar workers have a relatively good job and security on
their employment background, housing affordability become the main issue which makes them
also vulnerable to current housing market conditions. Given that home purchases are low
liquidity assets and entail undertaking a long-term, high level of debt, housing price becomes
as important as the level of income and employment status when deciding their tenure choice.
The generally positive correlations between income and home prices suggested that households
enter financial markets with a greater exposure to risk now than before. Arguably, all house
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purchases after 2008 (since which the price increased significantly every year) have an
affordability problem compared to the households that purchased their dwelling many years
earlier. A respondent illuminated this:

“For my colleagues, many of them are older than me and already settled […] the thing
is, all of the house prices are changing really significantly in the last five years and now
the house prices are much higher […] the majority of them were lucky to buy their house
a few years ago”.

Here, the timing of buying is really important to determine whether they are a ‘managing’ or
‘improving’ household. Lack of adequate housing units at affordable prices has made the price
appreciate dramatically over the last few years. For people who bought before 2008, when the
house price started to picked up, they can enjoy their house appreciation, but for the unfortunate
young families who planned to buy this year or last year, they face the ‘peak’ of housing price.
A respondent explained:

“I’m buying this house for Rp.350 million (£20,000) in 2011, now the price in this area
around Rp.650 million (£37,142)”.

It is clear that price appreciation sometimes can be almost 100 percent of the original house
price. Therefore, this made people think twice before entering the housing ladder. Arguably,
they need to wait until the price slows down or ‘bursts’ but on the other hand, delaying buying
a house may make them never able to do so in the future. Even if we can agree that
homeownership is a lifelong aspiration, it is important to be able to enter the housing ladder as
soon as possible. Arguably, as we get older our lives may become more complex (and
expensive), for instance with more children, which adds economic pressure.

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8.3.4 Lifestyle Choice

Interestingly, from the fieldwork, the author found that some respondents are not really
interested in living in an apartment, although it has become more common for young Indonesian
people to live in high-rise apartments around Jakarta. Reasons include future plans to raise a
family, which is still associated with a detached house with a garden and community spirit.
They prefer a small to medium-detached house in a housing estate or a cluster for security and
comfort. In addition, the housing estate or cluster helps to prevent the house price from possible
degradation. A respondent made this clear:

“Apartment, not interested […] I’m looking for a family house that socialises (with the
neighbour) so the focus is more on a housing estate or housing cluster”.

Another respondent added:

“[…] as long as my child is still small, I’m not interested (to live in an apartment) I
prefer here, we have a park, if in the apartment, even they also have the facilities, we
have to share with others, people smoking, not comfortable […] in a cluster, the park is
only for our children and they can play with their friends. So as long as my child is still
growing up, I don’t have any plan to move to apartment”.

Historically, Indonesians have preferred to purchase houses rather than apartments, which were
typically bought by investors for rental. Apartments tend to be a cheaper form of
accommodation, so another way to become an owner is to acquire such accommodation. It
seems that households should be more flexible in their options, as what is important is stepping
onto the property ladder, especially in the face of affordability pressures. Nevertheless, there
are some common perceptions that buying a house is always better than an apartment, as
generally, house price appreciation is higher than for an apartment. Besides, the idea that a
house provides better accommodation to raise children than an apartment is still strong in
Indonesia.

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 1  2

3 

Figure 8.2 (Clockwise from the top)

(1) Typical units in the market for ‘middle’ class Indonesians
(2) ‘One Gate’ Clusters have become more popular in Indonesia
(3) Spacious living room with unfinished kitchen
(usually only a kitchen sink)

8.3.5 Coping Strategies

Given that the value of homeownership is so strong in Indonesia, it appears that each household
is responding in various adaptive ways to achieve purchase in the face of quite difficult barriers.
As with their blue-collar counterparts, although their salary is three to five times higher, some
respondents also said that they have reduced their ‘luxury’ expenses in order to save for the
deposit. A respondent, 30 years old, noted:

“Leisure cost, like travelling, goes to the cinema […] that the expense will be reduced”.

Dual income earners are also crucial for these young families. When both husband and wife
can work they both do so. In addition, financial support from families is likely to be a crucial
factor in the ability of young people to access homeownership in the future. Previous studies
have shown that parents play an important part in the transition to homeownership. The
homeownership by parents contributes to their offspring’s chances of also becoming a
homeowner as a result of their financial contributions and similarities in housing market

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conditions (Helderman & Mulder, 2007). In addition, homeownership is the most important
form of family wealth (Kurz & Blossfeld, 2004) and is often transmitted from one generation
to the next. Even though the exact mechanisms for the intergenerational transmission of
homeownership have not yet unravelled, arguably there are some explanations. First, parents
who are homeowners themselves are more likely to help their children financially on their way
to homeownership than parents who rent their home (Helderman & Mulder, 2007). The higher
the socioeconomic status of parents, the greater the resources available to them to invest in their
children, whose socioeconomic status will consequently increase (Blau & Duncan, 1967).
Second, children tend to strive for a socioeconomic status that is at least equal to that of their
parents. Those who lived in owner-occupied homes during their socialisation period might
have a strong wish to become homeowners themselves (Easterlin, 1980; Henretta, 1984).

8.4 Housing Stress? Housing Markets and Despair

People who benefited from the house financing liquidity facility (FLPP) or a subsidised KPR
by the government are still limited, as only 3.71 percent of total home mortgages are distributed
by banks (BI, 2014). This means that the majority still need to apply for a commercial mortgage
with a high-interest rate. Meanwhile, it is still debatable as to how much the government should
intervene in the market. It is clear that the market has failed to produce affordable housing for
low to middle-income households. Arguably, government intervention is also needed to
redistribute income within society. A respondent noted his frustration about current housing
market conditions:

“[…] because it (housing) is not a luxury need, the government should become a
regulator to control the house price increase and what house type can be built […], now
every developer can build what type they want […] so there is an uneven spread of
housing stock and limited supply of affordable housing […]”.

The aspiration to own one’s home remains high, but there are signs that expectations may have
been moderated, especially among the young. A respondent who eventually was able to buy his
house explained his concern about current housing prices:

“No, it doesn’t make sense at all […] there is no regulation from government to control
the increasing of house price, it looks like the developer becomes a single determinant
of the house price, when it goes up, how much it increasing, it makes the property price
becomes uncontrolled and for the Jakarta people it is already out of the […] and the
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 behaviour of some developers damages the system […] but also it happens because
there is no government presence in this problem”.

The absence of the government in regulating housing prices arguably has made house prices
increase significantly. The housing stock has decreased relative to the formation of many new
households who need a house. The developers also use this condition to maximise their profit
and compete to sell their projects with the promise that their house price would increase in a
short time. The same respondent added:

“ […] also, in many places in Jakarta there is potential for major fraud, mainly through
developers selling houses which are not built, so they raised the funds but the property
is not there and it happens many times in Batar Gebang, Bekasi […]”.

It is common practice in Indonesia for many consumers to buy their house by giving some
amount of money as a down payment, even though the house does not yet exist, which makes
them vulnerable to fraud. As a result, the name and reputation of the developer become the
main consideration for people before deciding to buy, and it gives more power to developers to
control the housing price. This author argues that rising house prices are eventually only
rewarding the people who have the most, creating more economic inequality and more
polarisation between those who have and those who have not. The next chapter will discuss the
people who enjoy the benefit of their house appreciation and have become ‘investors’ in the
current property bubble.

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8.5 Conclusion

In this chapter, the expectations and experiences of home purchase among blue-collar and
white-collar households in Greater Jakarta were explored. It is clear that job security is the most
important determinant in deciding whether to buy or keep renting. The stability of income and
household becomes the main consideration. Nevertheless, this does not mean that these
households are free from problems. Housing affordability is another constraint that makes these
home purchasers becomes vulnerable and insecure against inflation and the possibility of
increasing interest rates or even falling house prices.

Most respondents were families with small children or young people who planned to be married
or were just married. Feijten and Mulder (2002) found that couples were likely to become
homeowners some time before they had their first child. It can be argued that couples who plan
to get married and/or expect to become parents might anticipate their future household status
by seeking appropriate housing that will be suitable for a long time period. It is important to the
young family to be able to access homeownership when they are just married, as delaying
homeownership can be a problem for raising a family, which is costly. It can be argued that
once a couple has already made the transition to parenthood, the transition to homeownership
might be postponed or not be made at all for practical or financial reasons. An ascending
housing career is typically described as stepping up the rungs on the ladder – from parental
home to rental, from rental to home purchase, from home purchase to outright ownership
(Abramsson, Borgegård and Fransson, 2000).

On the other hand, it is also clear that house prices have reached levels where up-front cash
requirements far exceed the savings a typical young household has managed to accumulate. For
them, the problem is not only in accessing the mortgage, but also the amount of down payment,
which sometimes delays or even prevents the decision to take out a mortgage. Thus, from the
fieldwork, the author argues that KPR-FLPP is a good program to help first-time buyers step
onto the housing ladder. Despite some difficulties, it appears that compared to continuing to
rent, blue-collar purchasers buying in outer urban areas will experience financial advantages
within four or five years of purchase. Nevertheless, it is also clear that much homework still
needs to be done by the government, including assessing the quality of subsidised housing and
the availability of housing in many areas in Greater Jakarta, which is still limited.

Whilst blue-collar purchasers are more willing to buy in outer suburban and growth zones where
the price is still cheaper, their counterparts, young white-collar purchasers, face bigger
problems in finding suitable housing, as they must live in the city centre to be able to access the
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transport, employment and educational opportunities they aspire to. Having to spend more on
housing makes them become ‘managing’ households, same as the blue-collar workers, even
though their incomes are much higher than blue-collar households. Blue-collar workers also
seem to be able to enter the housing ladder earlier than their white-collar counterparts, as from
the fieldwork, the majority of blue collar worker first time buyers were in their early 20s while
the white-collar workers spent more time on their education, so the majority were not able to
buy their housing until their late 20s and 30s. It is however, impossible to directly compare
them as the diverse housing options and prices combine with different preferences and
lifestyles. Although blue-collar households were able to enter homeownership early in family
life, they are more likely to be unable to progress well in their housing career because of their
insecure employment, which presumably affects their ability to earn higher salaries or other
benefits.

Blue-collar and young white-collar workers have some similarities. First, the main driver for
purchase among these households is to have a home (rather than an investment) in which the
psychosocial benefits of owning can be achieved, in particular, security, control and stability of
living. Second, most of them feel that they are incapable of moving to better housing given their
current economic circumstances, and housing market and housing options available to them.
Arguably, these households will not be able to reap the most benefits from their house in the
near future, as they are still paying for their housing debt. It is also because of the difficulties
these young households must face, including affording both buying a home and raising children,
since such families value security, control and stability for their children highly. There is also
a mismatch between the profile of these purchasers who increasingly comprise singles, couples
with no children and those with one or two children and the type of housing which is affordable
in Greater Jakarta. This raises questions about the degree to which the government can use the
planning system and other policy levers to enable more appropriate and diverse housing
outcomes.

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