The high demand for housing is not being met in Indonesia due to a lack of supply. For Indonesian people, a house can only be a house if it is on the ground — not in a flat or apartment. This increases market demand for land and property, which drives prices to increase. But rising prices are not being matched by proportionate income increases.
In response to this difficulty, the Indonesian government established the Public Housing Savings Management Agency — Tapera — in 2016. Due to socioeconomic developments, the government updated this regulation to now compel all Indonesian workers to participate in the Tapera program, with a monthly contribution of three per cent deducted from their salaries.
Salary deductions to fund Tapera enraged the public. Employers were also unhappy, as they will bear 0.5 per cent of the contributions charged to each employee. The community is still haunted by similar fund management cases, including Jiwasraya and ASABRI, which resulted in state losses of approximately Rp 40 trillion (US$2.4 billion).
Tapera did eventually address this issue, but this does not rule out the chance that something similar could happen again, despite their insistence that they will better manage funds. Under the previous system retired civil servants would only have received principal but under Tapera, members will benefit from interest payments too. Tapera members can also utilise the funds earlier to finance their housing needs. But the program has not gained the full confidence of the public.
The government must conduct a more thorough examination of Tapera’s outcomes to avoid fraud and assist people in building homes. This scheme is similar to the Housing Trust Funds established in several other countries.
Singapore has successfully implemented it through its Central Provident Fund. The community can use the funds from this Central Provident Fund to buy government-provided housing or build homes of their own. Even a superpower like the United States cannot provide direct physical housing to Housing Trust Fund participants. The US government instead utilises its budget to develop houses that Housing Trust Fund participants can buy when they redeem their investment funds.
The cases of Singapore and the United States suggest that paying Housing Trust Fund or Tapera contributions do not guarantee a physical house once people retire. They only receive their collected deposits, which have compounded interest, as well as specific benefits that make it easier to purchase a house.
Managing Tapera funds requires additional attention because these assets will be invested in an annuity over time. Government bonds offer minimum risk and are the most likely instrument to accommodate these funds. The 2022 Tapera Program Management Report shows that 44.75 per cent of the money was invested in state bonds and the remaining in corporate bonds.
The public also needs to be more informed. Investments in state bonds can be used to fund government projects with a lack of money, which is increasingly common due to global economic uncertainties. From the start of 2024 to April, foreign outflows in the Debt Securities Market were Rp 38.86 trillion (US$2.3 billion) and the government will require additional funding to plug the deficit created by the departure of foreign capital. If Tapera funds are used and the project collapses, it could jeopardise the program and disrupt the process of disbursing funds to the community.
Tapera will not be able to address the root causes of Indonesia’s housing crisis. The significant risk of failure and fraud only exacerbates this problem. Even if these assets can be disbursed in retirement, they will not be sufficient to meet people’s financial demands to purchase housing in the future as the prices continue to rise.
If the Indonesian government really wants to solve the housing crisis, it should think again. The government is overly focused on intervening in housing market demand rather than supply. It should instead focus on improving the Land Bank’s effectiveness, which is already outlined in the Omnibus Law. This bank can be a powerful tool for improving Indonesia’s agriculture. Under this program, the government is expected to manage a larger share of land than the private sector. The government will then be able to curb price speculation created by the private sector more readily.
Tapera has come at the wrong time. After agriculture has been reformed, the housing program could be effective. But until then, the government risks angering the public by mismanaging their money without solving Indonesia’s housing crisis.
Shalhhakka Dimar Farrakhy is a Civil Servant at the Audit Board of Indonesia.