From Policy to Practice: How Public Land Policies Shape Private-Sector Housing Development—An Indonesian Case

The interplay between land availability and the housing market highlights the importance of government intervention through land policies. Effective land policies ensure in-time land availability and facilitate private sector involvement in housing development. This study examines how public land policies influence formal housing development by the private sector, with a particular focus on land banking strategies—mechanisms involving the acquisition and holding of land for future use to ensure availability and capture value increases. While land banking policy aims to serve public benefits, private-sector land banking often prioritizes profit, creating governance challenges that shape housing development outcomes. This paper analyzes this phenomenon in the context of Indonesia by developing analytical framework of legitimacy, effectiveness, efficiency, and fairness. As a rapidly growing country with significant housing backlogs and a private-sector-dominated market, Indonesia’s land regulations present a critical case for examining these dynamics. Our analysis shows that while regulatory framework regulations emphasize land consolidation, acquisition, and development as instruments to facilitate private sector involvement in housing development, weak enforcement and regulatory ambiguities often undermine their effectiveness. The findings indicate that private-sector land banking is largely speculative, driven by profit-maximization strategies rather than housing provision, and is reinforced by inconsistent policy enforcement at the municipal level. A municipal case study further illustrates how governance challenges and discretionary compliance allow private developers to prioritize profitability over the affordable housing needs outlined in public policies. While land policies in Indonesia are framed as comprehensive planning tools, their implementation often favors specific beneficiaries, limiting their broader social impact.