Analysis Illegal Settlements in Occupied Flood prone areas in Central Kalimantan Province, Indonesia-An Urban Economics Approach

Indrawan Permana

Abstract

The paper aims to investigate bid rent in illegal settlements on occupied flood prone areas within city of Palangka Raya, a medium growing city in central Kalimantan province, Indonesia. There are several dense settlements have been built in flood prone areas, the environmentally-function areas at a river bank where all of building constructions is not allowed due to a Local Ordinance (PERDA of Palangka Raya Municipality No.16/1982), Spatial Planning Law number 26/1992, Environment Management Law number 23/1997, Building Development Law number 28/2002 Government Ordinance on river, number 35/1991.

The settlements are populated mostly by low income households. This paper shows that bid rent offered by low income households in the flood prone area is higher than offered by high income households. Asset owned by both households is a key determinant that influence bid rent offers. The assets could possibly be damaged, bring a loss during flood events where run-of water severely inundates the settlements.

The high income households own more assets than the low income households. The loss of high income households in flood events is possibly more than the low income households. Since asset is an exponential function of income and bid rent is a function of income, hence, loss of the assets will influence the bid rent offered. The more the loss, the less the bid rent is. Therefore, bid rent of the high income households in the flood prone area is fallen down below the bid rent of the low income households.

(Keyword: low income households, high income households, bid rent, asset, flood prone area)