The diversity of Asia provides unique opportunities for examining the effectiveness of different policies and instruments. The Asian financial crisis reveals our ignorance of market operations and makes us to rethink the Asian economic miracles and to re-examine the Asian political and economic environment in which the markets operate and the performance of particular sectoral markets. Housing markets are very important areas. Better policy design relies on better understanding of housing markets. The impact of sub-prime housing mortgage lending in USA on the global capital market and global economy further illustrates the importance of housing issues. This report examines the operation and performance of housing markets and particularly the impact of government intervention on the performance of housing markets in Asia. It presents different approaches and instruments used by different countries to deal with similar housing issues. The Asian experiences and practices can provide inspiration for other parts of the world to design effective and equitable housing instruments and policies. HS/1013/08E THE ROLE OF ISBN: 978-92-1-132025-1(series) ISBN: 978-92-1-131997-2 GOVERNMENT IN THE HOUSING MARKET The Experiences from Asia UNITED NATIONS HUMAN SETTLEMENTS PROGRMME P.O. Box 30030, GPO Nairobi 00100, KENYA Telephone: 254-20-7623120; Fax: 254-20-7624266/7 (Central Office) E-mail: [email protected]; Website:http//www.unhabitat.org UNITED NATIONS HUMAN SETTLEMENTS PROGRAMME The Human Settlements Finance and Policies Series The Role of Government in the Housing Market: The Experiences from Asia First published in Nairobi in 2008 by UN-HABITAT Copyright © United Nations Human Settlements Programme (UN-HABITAT) Nairobi, 2008 Disclamer The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the secretariat of the United Nations concerning the legal status of any county, territory, city or area or its authorities, or concerning the delimitation of its frontiers or boundaries regarding its economic system or degree of development. Excerpts may be reproduced without authorization, on condition that the source is indicated. Views expressed in this publication do not necessarily reflect those of the United Nations Human Settlements Programme, the United Nations and its member states. HS/1013/08E ISBN: 978-92-1-132025-1(series) ISBN: 978-92-1-131997-2 This publication was prepared and edited by Xing Quan Zhang. Guidance and/or comments by Anna Tibaijuka, Inga Bjork-Klevby, Oyebanji Oyeyinka and Fred Neto. Yosuke Hirayama, Kyung-Hwan Kim, Hoang Huu Phe, Ho Chin Siong, Haryo Winarso and B. Kombaitan contributed chapters. Editing by Roman Rollnick and Tom Osanjo. Design and Layout by Anne Musotsi The Role of Government in the Housing Market The Experiences from Asia United Nations Human Settlement Programme 2008 FOREWORD s we move into the new millennium, one trend overwhelms our concerns: the rapid urbanization with deepening poverty, Aenvironmental degradation and increasing slums, which poses tremendous challenges for achieving adequate shelter for all. The chal- lenges we face in human settlements cannot be met by governments, private sector or civil society alone. It requires the actions of all aspects of the society. Human settlements are places of organised human activities. The way in which human settlements are organised is influenced by the pace and breadth of socio-economic development. Such development cannot take place without linkages and continuous interactions between physi- cal, institutional, economic and social structures. Human settlements are the product of deliberate planning or of spontaneous and uncontrolled economic and social activities. The problems and issues of human settlements cut across the conventional socio-economic sectors and are of multi-sectoral and multi-disciplinary nature. The national resource allocation and finance strategies are evolving towards the identification of na- tional development priorities and challenges. Therefore, a full understanding of human settlements needs to be looked upon in the national policy context, and links finance to policy debate. This ap- proach is increasingly appreciated by policy-makers and planners when addressing human settlements problems and policy options. The Human Settlements Finance and Policies series aims to explore the intricacy of finance and policy interrelations and to promote better human settlements finance policy and strategies. This series addresses the most important issues in improving human settlements. It draws the intellec- tual leaders and practitioners from the governments, local authorities, private sectors and civil society to confront human settlements and finance problems and to exchange views and experiences in tack- ling human settlements problems and issues, and to explore and promote innovations in policies and strategies and methods to address challenges in human settlements. Publications in this series provide opportunities to move towards a deeper understanding of the broad range of human settlements and finance issues. Our habitat is shaped by human actions and policies. Policies have profoundly shaped our cities, towns and villages in the past and they will continue to define the 21st century. Decision-makers face i challenges of designing policies that allow their countries and cities to meet the increasing human settlements challenges. I hope that this series will contribute to the policy debate and will enhance the capacity of member states to design new policies and strategies to address human settlements challenges. In human settlements policy debate, choices made today will impact our common future of habitat tomorrow. Dr. Anna Tibaijuka Under-Secretary-General and Executive Director UN-HABITAT, Nairobi, 2008 ii TABLE OF CONTENTS FOREWORD i INTRODUCTION 1 CHAPTER 1 The Role of Government in the Housing Market: Restructuring of the Home Ownership System in Japan 9 1. The Home Ownership System in the Post-War Period 10 2. The Bubble Economy and Home Ownership Policy 13 3. Deteriorating Economic Conditions for Home Owership 16 4. Decline in the Housing Ladder System 21 5. Marketisation of Home Owership 24 CHAPTER 2 The Role of Government in the Housing Market in South Korea 29 1.Evolution of Housing Policy in South Korea 30 2. Housing Policy Instruments 33 3. Evaluation of Government Intervention 35 4. Lessions and Policy Implications 38 CHAPTER 3 The Impact of the Intangible Factors on the Housing Market in Vietnam 43 1. Housing as a Special Good in the Market 43 2. Role of the Intangible Factors 44 3. A new theoratical Model of Urban Residential Location and City Structure 46 4. Social Trade-off 49 5. Implications of Residential Location Model 52 CHAPTER 4 The Role of Government in the Housing Market in Malaysia 61 1. Housing Market in Malaysia 62 2. Definition of Low Cost Housing 66 3. Housing Performance 67 4. Issues related to the Government Intervention in the Housing Sector 72 iii CHAPTER 5 The Role of Government in the Housing Market in Indonesia: Who Gets the Benefit? 83 1. Housing Policy and Development in Indonesia 84 2. Government Intervention 87 3. Effectiveness of Government Intervention 93 INTRODUCTION THE ROLE OF GOVERNMENT IN THE HOUSING MARKET EXPERIENCES FROM ASIA ousing touches everyone’s heart. A number of factors can be pinpointed. It has been the long-term focus in First, after World War II, there was a wave Hurban development, social and eco- of national independence movement. The nomic policy. In the past several decades, newly independent developing countries some countries have made tremendous had strong desire to change their own progress in meeting the housing needs of fates and to improve their economic and their nations, while others still face great living conditions. Second, there has been challenges of severe housing shortage, increasing recognition by both develop- substandard housing and slums. Today ing and developed nations about the about one third of the total urban popu- interdependence and globalisation of the lation live in slums. In some developing world economy. Third, agencies of United countries, the majority of urban popula- Nations and NGOs actively advocate for tion live in poor conditions. For a long social and economic justice and equity period, the housing issues in developing among nations and between the rich and countries have only received marginal the poor. Fourth, the progress and mate- interest in the academic community and rial well-being of people and nations have political arena. The political and public been at the centre of government policy concern with the housing conditions of and academic interests, which have long the developing world is a relatively recent been searching for the effective mecha- phenomenon. nism for growth and development. There is an increasing interest in integrating The world leaders now recognise that housing into social and economic policies, the social and economic problems of the which advocate inclusiveness and progres- developing world are among the great siveness. Fifth, the developing countries challenges facing human beings. These have trained a large pool of experts and problems are high on the international developed a good awareness of the hous- and national agenda. Fighting poverty ing issues and their marginalised status in and slums is now incorporated in one world development. of the Millennium Development Goals declared