Developer exactions and affordable housing provision

Urbanisation has contributed to housing affordability crises around the world, causing the housing supply in many of these countries has been unable to keep up with demand and resulting in housing shortages, particularly for low-income people. As a result, policymakers have sought new tools to fund affordable housing production, including through land-use policies such as Inclusionary Housing. The concept of Inclusionary Housing was introduced in Indonesia by the national government through the Balanced Housing policy in 1992 and has been in place for thirty years with several changes. However, despite its long-standing existence, there have been limited studies concerning how local governments implement the policy to provide affordable housing, including in Surabaya Even though the balanced housing policy may not be the panacea to the housing affordability crisis, it would lessen the burden on local governments. Therefore, a disconnect between national policy and its implementation at the local level may prevent municipalities from capitalising on rising real estate values to provide affordable housing. Thus, this research aims to investigate and explain to what extent the Balanced Housing Policy is implemented in Surabaya and how it contributes to the supply of affordable housing. The research uses a mixed-method approach and case study strategy, with the data for the research collected through interviews with stakeholders, reports and literature. The findings showed that no local regulation governs how the balanced housing policy should be implemented in Surabaya, and several aspects of the policy remain contentious, resulting in developers' views on this policy as shifting responsibility from the government. Furthermore, the municipality has not fully met some of the preconditions of establishing LVC instruments, resulting in weak monitoring and enforcement. At the same time, negative public perceptions of mixed-income neighbourhoods still affect the stakeholders' decision in realising balanced housing. To conclude, the research showed that the balanced housing policy and its implementation in Surabaya are still underperformed. Despite being a long-standing policy, the obstacles and challenges encountered by stakeholders remain similar to its previous policy, eventually contributing to the ineffectiveness of the policy in supporting low-income housing development in Surabaya. Ultimately, the local government has failed the chance to capture the value increment created by private developers to be recouped for the public benefit through the provision of affordable housing.