IPB University Professor Clarifies Misconceptions Regarding the Rp8,5 Million Income Threshold for Low Income Community

The widespread perception on social media that people with an income of Rp8,5 million are now classified as “low income” needs to be fully understood. 

This was stated by Dr Deniey Adi Purwanto, a professor of Economics at IPB University. According to him, this figure represents the maximum income threshold under the eligibility criteria for the Low Income Community (MBR) program regarding housing policy not a change in the national definition of community welfare.

He explained that MBR is an administrative category used by the government to determine the target beneficiaries of the subsidized housing program, namely the 3 Million Homes Program. The adjustment to the income threshold was made so that more people who struggle to own a home can still access housing financing amid rising property prices and the cost of living.

“Income categories in economics always depend on their intended purpose. In this context, the income threshold is set to support housing policy, not to classify who is poor or has a low income. Therefore, the MBR policy is more closely related to housing affordability than to a measure of poverty,” he said.

According to Dr Deniey, when compared to the average income of workers in Indonesia, the figure of Rp8,5 million is still above the national average. However, the level of income does not necessarily reflect a person’s ability to purchase a home, especially in regions with high property prices. 

For this reason, he believes that setting the income threshold for beneficiaries of the 3 Million Homes Program should not be based solely on the nominal income amount. The government also needs to consider housing prices and the cost of living in each region, the number of family dependents, the ability to make mortgage payments after basic needs are met, the stability of income sources, as well as inflation trends and rising property prices.

“In addition to income, other indicators such as first time homeownership, asset value, employment status, and the amount of routine expenses also need to be taken into account to ensure that beneficiaries are selected more accurately. This approach can reduce the risk of both inclusion and exclusion errors in aid distribution,” he said.

Moving forward, Dr Deniey urged that the selection of beneficiaries for the 3 Million Homes Program be integrated into the national welfare targeting system, including the use of the National Socioeconomic Single Database (DTSEN). In this way, various government programs can complement one another and reach target groups more consistently.

“What matters most is not the specific income threshold, but whether the program’s targeting truly reflects people’s ability to own a home and is integrated with the national welfare system,” he concluded. (Lp) (IAAS/LAN)