An affordability review for low-cost apartment rent

The low-cost apartment development program is one of the solutions to provide housing for low-income people. During 2010-2014, the Indonesian Ministry of Public Works and Public Housing developed 250 twin blocks of rental low-cost apartment (five-storeys) on the local government's asset land for public and relocation communities. The aim of this paper is to review the existing rent regulation and tenant's affordability to pay rental fee. The evaluation is also included tenants' willingness to pay and the implication on the low cost apartment management issues. This research based on the documents related to ministry and local government regulations concerning minimum wages and rent price adjustment. This study found that there is a gap between what the tenants' ability and willingness to pay. The tenants only pay half of the price that they supposed to pay based on the existing regulation of rental price. As consequences, the rent income is very low and cannot cover the operation and maintenance cost of the building. Therefore, local government has to provide subsidy to top up the rent income and to cover the operation and maintenance costs. The study recommends the evaluation of local government regulation is necessary to reduce government subsidy and to retain more appropriate level of rent that still consider affordable for the tenants.