Mixed-income Housing Development:

Mixed-income developments enable the cross-subsidization of affordable housing without the need for direct subsidies, therefore it could encourage housing developers to be involved in public-private partnerships. This study elucidated the partnership challenges associated with mixed-income housing development schemes and proposed strategies that could assist in promoting mixed-income low-cost apartment developments in Indonesia. Six Indonesian government representatives and six semi-private housing developers were interviewed, from which it was found that one of the greatest challenges was selecting the land for suitable mixed-income housing schemes.

This study adds to the field by identifying the critical points for mixed-income housing developments. Some changes in financial and asset regulations are needed if mixed-income housing were the project design choice. To lower housing prices, land prices could be minimized by leasing state-owned company land assets, implementing mixed-income and mixed-use, and reforming the current land use policy to support mixed-income housing developments. In addition, to increase project viability, the proportion of subsidized and nonsubsidized units should be calculated thoroughly.

Urbanization and population growth, especially in developing countries have generated the need for housing. Urbanization is triggered by various facilities in urban, such as infrastructure, education, and economic activity. One of the prominent impacts of urbanization is the growth of squatter settlements (Jones, 2017). In general, squatter settlement is defined as informal residential in an urban area, which is occupied by poor communities who do not have access to tenured land of their own (Srinivas, 2015).

Squatter settlements are illegal and do not comply with urban spatial planning, which triggers various problems in the context of urban economic development and public infrastructure provision (Zubair et al., 2015). Squatter settlement was also triggered by the inability of low-income communities to own or rent affordable housing. These circumstances have motivated the government to provide public
housing. The high land prices in city centers worsen these conditions but living far from their employment centers means that these low-income workers would face high transportation costs. Therefore, the government built low-cost high-rise apartments, which are commonly provided in major cities for rental or for ownership.

Since these low-cost apartments are for people on low incomes, the rents or sales prices are generally lower than market prices, which has been a barrier to housing quality (Onatu 2010) as these rents are often unable to cover operating and maintenance costs. However, if some apartments are offered at a lower rent or a lower sales price in a building that also has regular tenants, the consequent rent or sales price often becomes adjusted toward the lower prices, which has made it difficult for landlords to charge the proper rental prices when two tenant types live in one building.

Further, if the price is only slightly below market price, the affordability problem is not resolved (Branco & Alves, 2020). Therefore, mixed-income developments, which involve cross-subsidizing affordable housing without providing a direct subsidy (Austin, Gurran, and Whitehead 2014), have been suggested as a viable method to revitalize urban areas and transform public housing (Vale and Shamsuddin 2017).

Mixed-income housing policies can also encourage real estate developers to participate in public-private partnerships (PPPs) (Read and Sanderford, 2017). Theoretically, policymakers and public officials put in place the needed zoning and approval processes, after which political incentives that leverage market forces are offered to attract capital to the mixed-income housing development projects and encourage real estate developers to risk their social, political, and financial capital to earn risk-appropriate returns.

Previous research on mixed-income housing has either focused on the benefits (Joseph and Chaskin 2010) or discussed the problems, such as the social gaps in socially mixed housing developments (Chaskin and Joseph 2011; Joseph et al. 2019; McCormick, Joseph, and Chaskin 2012). However, these studies did not specifically discuss low-cost or low-rent apartments, each of which has particular conditions, such as tenure and tenant segmentation.

Also, no previous studies have clearly distinguished the characteristics of the different mixed housing types. Therefore, this paper seeks to fill a gap in the existing mixed housing literature by examining the critical points associated with mixed-income housing partnership development schemes and suggesting strategies that could be employed to promote mixed-income low-cost apartment developments in Indonesia.