Indonesia, an archipelago nation grappling with rapid urbanization and the escalating impacts of climate change, faces a significant housing crisis. As more people migrate to urban centers, the demand for affordable and resilient housing soars, while existing infrastructure struggles to keep pace. That’s why new creative options are required to fix our country’s housing crisis and resolve the impending climate disaster. That’s where modular, solar-powered smart homes come in as an exciting solution to that challenge. Together, they are poised to revolutionize the Indonesian housing market and position the nation to meet its emissions targets.
The Prevalence of Climate Risks
Overview of Climate Risks
Indonesia's vulnerability to climate risks is well-documented. Rising sea levels, increased frequency of extreme weather events, and land degradation pose significant threats to communities across the country. By 2035, experts predict 67% of Indonesia’s population will be urban dwellers. This change will place even more pressure on the already burdened housing and infrastructure. Nearly one in five city dwellers live in informal settlements. These communities frequently endure overburdened living environments, where they can’t even access vital resources and amenities. Yet these communities face growing risks of climate change, including flooding and landslides.
Impact on Communities
In many Indonesian cities, self-built structures account for 70% of the housing stock. This rampant practice just makes the housing crisis even worse. Being situated in resource-rich, often coastal areas, these homes are highly desirable, making residents prime targets for displacement and economic turmoil. The combination of rapid urbanization, informal settlements, and climate vulnerability creates a complex challenge that demands urgent and innovative solutions. Climate change has become a threat multiplier, exacerbating preexisting inequalities and driving more marginalized communities deeper into unstable circumstances. The need for climate-resilient, affordable housing extends beyond aesthetics and coziness. For most Indonesians, it’s essential to their very survival.
Increasing Foreclosures
Statistics on Rising Foreclosures
Statistics on increasing foreclosures due to climate risk in Indonesia are not readily available. The root causes suggest there may be a link. Natural disasters are occurring with increasing frequency and severity. This leads to lost property, families in limbo, and economic insecurity—all things that make it difficult for homeowners to continue paying their mortgage. That’s particularly the case for low-income households already residing in at-risk neighborhoods.
Causes Linked to Climate Risk
The deficiency of accessible and climate-resilient housing alternatives worsens the issue by increasing vulnerability to its impacts. Inadequate housing puts families at great risk. Given their susceptibility to flooding or landslides, these homes not only put residents’ lives at risk, they raise the threat of widespread property damage and financial loss. Climate change has long-term impacts, such as rising sea levels and desertification. Even small changes—increasing the distance to a transit stop, for example—can quickly erode property values and affect homeowners’ ability to sell or refinance their homes. As climate risks continue to escalate, the threat of rising foreclosures grows ever higher. We need to act now to protect our most vulnerable homeowners and invest in housing solutions that can better weather ongoing climate challenges.
The Buyer Market Contraction
Effects of Climate Risk on Buyer Interest
Climate risk might be starting to affect buyer preferences in the Indonesian housing sector. As these threats heighten, would-be homebuyers are increasingly cognizant of the risks associated with property ownership. They’re deeply concerned about places that may be vulnerable to flooding, landslides, or other disasters. While this increased awareness is beneficial, it results in a contraction in the buyer market, especially in at-risk communities. When homes are placed in these dangerous areas, they frequently experience a decrease in demand. This drastic decline reduces the availability and pool of qualified buyers, increasing the difficulty for sellers and negatively impacting property values.
Demographic Shifts in Homebuyers
In addition, climate risk can affect what kinds of properties buyers are searching for. As climate change creates more and more extreme weather events, Americans are increasingly looking to move into homes that will protect them from these disasters. These houses use elevated foundations, reinforced structures, and water-resistant materials. Third, buyer preferences are more fluid than ever before. That’s why today, developers are taking serious measures to include climate-resilient features in their construction designs. Climate change is already making life harder for Indonesians. In turn, the buyer market is growing more sensitive to climate risk, underscoring the immediate need for sustainable and resilient housing solutions.
Declining Home Values Due to Climate Threats
Analysis of Home Value Trends
The growing frequency and intensity of climate disasters are starting to shape the value of homes located in the most vulnerable provinces of Indonesia. Homes in flood vulnerable areas, coastal communities impacted by sea-level rise, and locations susceptible to landslides may experience a decline in value. Potential buyers are more wary than ever of these risks. The continued drop in home values threatens to further erase the wealth that many homeowners have accumulated. It shrinks their appreciation and gives them far less flexibility and incentive to sell their homes.
Long-term Implications for Homeowners
These short- and long-term implications of climate change on the value of homes in Indonesia are significant. Climate risks are increasing year by year. As a result, properties on the frontlines of climate change are at a greater risk of continued value loss and the potential for a “climate bubble” in the housing market. It would have a ripple effect on the rest of the economy, including increased costs of lending, insurance, and general financial risk. If we want to address the threat of diminishing home values due to climate change, we must have a holistic approach. This means funding climate-resilient infrastructure, improving land-use planning, and offering financial incentives for homeowners to adopt climate-adaptive strategies.
The Need for Affordable Mitigation Strategies
Importance of Cost-effective Solutions
Today, the need for subsidized housing continues to be a pressing issue in Indonesia. Combined with growing economic and climate pressures, this creates an unprecedented demand for cost-effective mitigation strategies. Without government subsidies, traditional construction methods are often prohibitively expensive for low-income households. This only deepens the housing crisis and exposes marginalized communities even more to the dangers of climate change. Whether it’s incorporating locally sourced materials or using energy-efficient designs, the effort often goes a long way. By factoring in passive cooling methods, you can maximize the savings spent on creating climate-resilient homes.
Examples of Successful Mitigation
This has been perhaps most clearly seen in their $175 million clean energy investment proposal with the Asian Development Bank. This program seeks to offer incentives and technical assistance to encourage green, affordable housing development across Indonesia. This initiative seeks to promote sustainable construction practices, reduce carbon emissions, and improve the affordability of housing for low-income families. By prioritizing cost-effective solutions and leveraging innovative technologies, Indonesia can make significant strides in addressing its housing crisis while mitigating the impacts of climate change.
Designing Homes to Withstand Climate Risks
Innovative Architectural Solutions
Architects need to embrace a new architectural mindset to designing homes that can sustainably withstand climate risks. Traditional building designs do a poor job of addressing the unique challenges posed by climate change. These range from worsening flooding to extreme heat and strong wind. Innovative architectural solutions, such as elevated foundations, reinforced structures, and water-resistant materials, can significantly enhance the resilience of homes in vulnerable areas.
Community Planning for Resilience
Through the Gap Fund, the local homeowners and government have been in close communication and collaboration. Together, they are designing plans to retrofit, extend, densify and construct 100 climate-smart homes in Indonesia. These plans include green building practices, energy microgrid designs, and community-focused climate adaptation approaches. Community involvement is the guiding principle behind these initiatives. Drawing on local knowledge, they are able to make sure housing solutions get to the heart of each community’s particular needs and challenges.
Financial Systems Facing Challenges
Impact of Climate Risk on Lending Practices
Climate risk combined with social risk is starting to change ESG-centric lending in Indonesia. Banks and other financial institutions are becoming more aware of the potential for climate-related disasters to impact property values and borrower's ability to repay their loans. As a result, they will often be reluctant to extend credit for homes located in at-risk neighborhoods. They may even require larger down payments and more insurance coverage.
Insurance Market Adjustments
Beyond persistent inflation, the insurance market is recalibrating to the growing risks of climate change. Insurance companies can be expected to increase premiums for higher risk properties, or cease coverage entirely. At the same time, homeowners in increasingly climate-vulnerable areas are facing increasing difficulty finding affordable insurance. This added burden compounds their risk of financial instability. To address these issues, public and private actors—including all levels of government, financial institutions, and insurance providers—need to cooperate. They should develop innovative risk sharing mechanisms and support climate resilient investments.
Urgent Call for Solutions to Climate Risks
Collaborative Efforts Needed
Overcoming Indonesia’s affordable housing crisis and climate fragility will take a concerted, agile partnership among all levels of government, the private sector, civil society, and global institutions. This is where the governments can make a big difference by establishing supportive policy frameworks, offering financial incentives, and steering development toward smart land-use planning. Businesses can contribute by developing innovative technologies, adopting green construction practices, and investing in climate-resilient infrastructure.
Policy Recommendations and Future Directions
Local communities are therefore indispensable actors for truly understanding local needs, informing decision-making, and executing on community-based adaptation efforts. Through technical assistance, financial support, and knowledge sharing, international organizations like the World Bank can play an essential role. Through collaboration, these stakeholders are well-poised to develop a more sustainable and resilient housing sector that benefits all Indonesians. Meanwhile, Indonesia has committed to modernizing its entire electricity grid. With a stated goal of deploying 42.6 GW of new renewable power capacity and 10.3 GW of storage. Further, the country’s 2025–2034 Electricity Supply Business Plan showcases this strategic pivot towards a cleaner and more investment-driven energy future. Community – and/or household-led housing densification investment is mind blowing affordable. It provides strong, affordable, and safe housing for Indonesia. The introduction of a Housing Location Suitability Tool and a Housing Calculator helps identify suitable locations and compare different housing scenarios. Though solar power is becoming more and more commonplace, projects geared toward community improvement are supplying localized off-grid solar panel systems to rural villages. The rate of electrification in Indonesia has changed tremendously, going from 48.9% in 1991 to 99.2% in 2021. These provide remarkable incremental advances for Indonesia.
Modular, solar-powered smart homes are an exciting answer to Indonesia’s housing crisis. These homes have the potential to be manufactured in a speedy, cost-effective manner, utilizing green materials and including climate-resilient features. As back up, solar is clean, reliable and affordable energy. It lessens the pressure on our fossil fuel dependency and decreases the production of carbon. By adopting these multifaceted approaches, Indonesia can lead the way toward a more sustainable and inclusive future for its diverse population.
