A First House: Indonesia's Endless Marathon

When the Rigged Race Fires its Gun

We always dreamed of standing on our own two feet. Having a nice salary, a loving family, and to complete the picture, a home we could call our own. For most people, owning a first house is the milestone every adult strives toward, the finish line that greets you with: "You made it." But for many young, aspiring Indonesians, that moment may never come. The housing crisis in major cities, especially Jakarta, has turned against the country's most productive and educated generation. Gen Z, despite those qualities, remains the most challenged generation when it comes to owning a first home, likening the pursuit to a race with time closing in from behind. That raises the question: Is the problem in the individuals, or has this race been rigged before the gun even fired?

The Bank of Indonesia (2025) reported that the residential property prices or Indeks Harga Properti Residensial (IHPR) has risen considerably over the last several years. Major cities, including Jakarta and Surabaya, are seeing property prices increase by 0.84% year-over-year. This may sound insignificant, but the country's real wages grew by only 0.6% per year (LPEM, 2025), meaning house prices are outpacing income. The implications are every bit as bad as you would expect: for many Indonesians, the dream of a first home grows heavier and more distant with each passing year.

While past generations often scrutinize younger generations — "When it was my time, getting a house was very easy!" — the data tells a different story. Today's price-to-income ratio (PIR) for Indonesia stands at 13.81 (JPI, 2025), an astronomically high figure. To put it in context: Malaysia's PIR is 8.41 and Japan's is 11.84 (Numbeo, 2026). Indonesia dwarfs them both. In practice, this means the average Indonesian entering the workforce at 22 will be waiting nearly 14 years before owning a home, and that assumes they save every rupiah without spending a single penny.

The Deputy Minister of Housing has stated a 15 million unit backlog across the nation, meaning 15 million families waiting for housing, including apartments, that have yet to be built. But what makes Jakarta's crisis particularly striking is that this is not a story of a city that has run out of room. Jakarta has land, the problem is that nobody wants to live in the solution. When Ahok, the former Governor of Jakarta, attempted to relocate illegal riverbank settlements into vertical housing, the backlash was immediate, exposing something deeper than a policy disagreement: an almost sacred attachment to the idea that a family deserves its own plot of ground, its own fence, and always a horizontal one. The frustration deepens knowing that a city packed so tightly that breathing feels like a negotiation had the solution right in front of it, and still could not take it.

The Muddy Track

The deep-rooted housing problem is inseparable from the nature of Indonesia's workforce. The informal sector accounts for 57.8% of Indonesia's workers, more than 84 million people (BPS, 2025). Informal workers, with no social security or legal paycheck, are locked out of the mortgage system almost entirely. Even if they can afford it, the system was not designed with them in mind, despite their being one of Indonesia's largest economic groups. Even for those who do qualify, the down payment alone becomes a crushing obstacle. The average Indonesian earns 3.09 million rupiah per month, while those aged 15 to 29 earn only 2.4 million (BPS, 2025). With the median home price in Indonesia at Rp2.19 billion, a 10% down payment means willing buyers are expected to have Rp220 million cash in hand before the purchase even begins.

Contrary to what many assume, major cities like Jakarta do in fact have enough land for a higher quality of life. Yet a regressive property tax system that benefits the wealthy, combined with the city's ineffective approach to vertical living, explains why so many Indonesians choose to live just outside the capital while working within it.

Floor Area Ratio (KLB) is a regulation that controls building height and density. A higher KLB allows a single plot of land to accommodate more housing units. Areas near public transport are assigned higher KLBs given their economic benefits. This matters given that 89.37% of Jakarta's properties have a KLB capped below 2, while properties near major transit corridors are assigned KLBs between 7 and 11 (RCUS, 2022). While this seems logical, those higher KLBs apply only to vertical housing zones, a separate classification from the residential plots that dominate the city. Combined with the deep cultural preference for horizontal living, structural change in Jakarta's density has been painfully slow. This is not a new problem, and Jakartans have watched for nearly two decades as governors promised solutions that never materialized. Anies Baswedan, for example, pledged to construct over 200,000 housing units, of which only 9,000 were built.

Another reason so many runners fail to reach the finish line is the pay-to-win nature of the race itself. Around 70% of new apartment units in Jakarta are segmented for upper-middle-class buyers, and the market for apartments and idle land is increasingly treated as investment rather than shelter (Global Property Guide, 2026). More troubling still is that the government actively supports it.

The property tax system in Jakarta disproportionately benefits those who hold land. With appreciation offsetting the tax burden, large tracts of Jakarta land that could be converted into housing sit idle. Much of this land is taxed at a flat rate of 0.5%, with the effective rate often falling even lower (Lloyds, 2026). If property taxes were made more aggressive, comparable to how vehicle taxes create a disincentive for holding unused assets, there would be more land available for housing. At the very least, idle landowners would face greater pressure to develop or sell.

The Fate for the Runners Who Fall

Those who fall behind tend to live just outside the administrative city limits, in Jakarta’s Greater Metropolitan Area. Many formal workers have to endure the suffocating early-morning rush of the Cikarang–Jakarta commuter line and sprinting through Manggarai station that became a daily necessity for breadwinners. And for many young married couples, the situation is bleaker: Many still share homes with parents or in-laws, financially squeezed between the generation above and below them.

And that is for workers who are seen formally in the eyes of the law. For many informal workers, life seems even harder than it already is. Combined with the inconveniences formal workers face every day, their lack of social protection and a legal contract slowly snowballs into a far greater problem. Many informal workers who can’t even afford to live outside economic centers settle on government-owned land. These illegal settlements make owning a legitimate home even harder for them and the next generation — a vicious cycle. Many of them are one economic shock away from collapsing, like we’ve seen previously with COVID-19.

Redesigning the Race

It is an open secret that the housing market needs structural change. But resistance comes not only from bad policies, but also from the people. As discussed earlier, Ahok’s attempt to relocate illegal settlements into vertical housing met with massive backlash, effectively damaging his reputation among those affected. But when we look at this event through the eyes of those affected, we gain sympathy for them. Many people live in these settlements, often called kampung, because they are close to their work. When they were relocated, many were moved into housing units far from their main jobs, effectively restarting their progress all over again.

Combined with Jakarta’s overpopulation problem, congested streets and coming home late at night have become a nuisance that every Jakartan must adapt to. It is hard not to feel that these relocations only add to the burdens for the city’s most vulnerable people. That being said, fixing Jakarta’s density is not only a matter of revising vertical zoning and spacing regulations. It also requires confronting the city’s deep-rooted cultural, social, and economic problems. For vertical housing to work, the government should also provide job security for those affected, or even subsidize residents through the first months of transition, as Ahok attempted.

With the country’s workforce dominated by the middle class and those aspiring middle class, the government should feel obliged to fix the structural problems in these sectors. A real wage reflected by productivity should be one solution considered. In recent years, worker productivity has risen considerably, yet real wages keep stagnating. With long-term productivity growth averaging around 2% - 2.6%, workers wage growth of around 1.94% (y-o-y) seems far from reflecting many Indonesians' contribution to the economy (BPS, 2025). A policy that links wage growth to productivity gains would give millions of Indonesians a better shot at homeownership. Another solution is to give first-time buyers easier access to longer mortgages (KPR) and a subsidized down payment. Extending credit inclusivity to informal workers would also help break the vicious cycle and reduce the number of people trapped in informal settlements.

But those solutions are more often than not easier said than done, because they require structural reform just to succeed. The most feasible short-term solution toward a more affordable Jakarta is to revise its property tax code. Jakarta Governor Pramono recently pledged to cover tuition costs at 103 private schools. The same political commitment towards the housing market would transform the landscape for millions of Jakartans. Revising the KLB code and introducing a more progressive property tax would unlock land that Jakarta can actually build on, and perhaps finally give its runners a race worth finishing.

REFERENCES

Badan Pusat Statistik. (2025). Rata-rata upah/gaji bersih sebulan buruh/karyawan/pegawai menurut kelompok umur. https://www.bps.go.id

Bank Indonesia. (2025, November 6). Survei harga properti residensial triwulan III 2025: Harga properti residensial tumbuh terbatas [Siaran Pers No. 27/266/DKom]. https://www.bi.go.id/id/publikasi/ruang-media/news-release/Pages/sp_2726625.aspx

Delmendo, Lalaine C.. (2026). Indonesia’s Residential Property Market Analysis 2026. Global Property Guide: https://www.globalpropertyguide.com/asia/indonesia/price-history 

Hannarny, Zetta., Rafsanjani, Kholid. (2025). Indonesia’s Economy Grows 5.04% but Wages are Eroded by Inflation. IDN Financials: https://www.idnfinancials.com/news/58498/indonesias-economy-grows-5-04-but-wages-eroded-by-inflation 

Jakarta Property Institute. (n.d.). Jakarta yang terjangkau. https://jpi.or.id/project/jakarta-yang-terjangkau/

Lloyds. (2026). Tax rates in Indonesia. https://www.lloydsbanktrade.com/en/market-potential/indonesia/taxes 

Numbeo. (2025). Property prices comparison between Indonesia and other countries. https://www.numbeo.com/property-investment/rankings_by_country.jsp

Mediana, C.  (2025, August 6). Upah Riil Stagnan, Tabungan Menipis: Ancaman Ketahanan Rumah Tangga Pekerja. KOMPAS. https://www.kompas.id/artikel/upah-riil-stagnan-tabungan-menipis-ancaman-ketahanan-rumah-tangga-pekerja  

Rayhan Kalevi. (2026, April 30). Who can afford a house in Jakarta? The Reformist by Think Policy. https://www.thereformist.id/p/who-can-afford-a-house-in-jakarta

Simanjuntak, A. K. M. (2025, November 9). BPS ungkap porsi pekerja formal dan informal pada Agustus 2025. DDTCNews. https://news.ddtc.co.id/berita/nasional/1815079/bps-ungkap-porsi-pekerja-formal-dan-informal-pada-agustus-2025

Tanny, Vidya. (2022, July 29). Hunian Berbasis Kolektif: Alternatif Bagi Generasi Tua di Jalan. RCUS: https://rujak.org/hunian-berbasis-kolektif-alternatif-bagi-generasi-tua-di-jalan/