Housing policy and regional development in Indonesia

Purpose This study aims to evaluate the regional economic impacts of Indonesia’s housing policy, with particular emphasis on its implications for regional development and sectoral linkages. Design/methodology/approach The study employs the Indonesia The Enormous Regional Model (IndoTERM), an interregional computable general equilibrium (CGE) model, calibrated using Indonesia’s interregional input-output database. Policy simulations are conducted by introducing investment shocks to the housing sector under alternative financing scenarios. Findings The results indicate that increased housing investment stimulates national economic growth, with the largest benefits concentrated in Java. Housing investment also generates positive multiplier effects across manufacturing, transportation and utility sectors. However, large-scale housing development may increase land rents and import dependence while generating uneven effects across regions because of differences in regional economic structures and industrial capacities. Originality/value This study extends the housing policy literature by examining the regional and intersectoral impacts of large-scale housing investment using an interregional CGE framework. The findings provide evidence that housing policy can serve as a catalyst for regional development, although complementary policies are required to strengthen domestic industrial capacity and promote more balanced regional growth.