Housing deficits as a frame for housing policy: demographic change, economic crisis and household formation in Indonesia

The idea of housing deficit is a common, seemingly objective frame for housing policies that promote increased supply. This paper critically examines the concept through a case study of Indonesia, where different sources report a deficit of between 3 and 14 million dwelling units estimated without a transparent methodology. The wide range of estimates demonstrates the multiple interpretations of the term's meaning. In the paper, changes in household formation trends in urban Indonesia from 1990 to 2007 are used to estimate a quantitative housing deficit. I find the decreasing rate of household formation that is being interpreted as a housing deficit. However, this interpretation is complicated by the country's demographic transition and the high urbanization rate. Further, the abrupt change in household formation occurred around the year 2000, suggesting that the economic and political upheavals following the Asian financial crisis played an important role. Comparison of household formation rates across socioeconomic groups and urban areas shows housing markets also matter, illustrating the complexity of the issue.