Housing policy in the Republic of Korea
Introduction:
The housing policy of the Republic of Korea shows how the government has responded to housing problems as they have emerged. In the early phase, the most pressing housing problem was a shortage caused by the increased demand for housing thanks to the country’s rapid economic growth and urbanization. Beginning in the 1980s, the Republic of Korea addressed this challenge through a pragmatic approach of engaging the private sector within a regulatory framework. The government provided developable land on a large scale through public sector developers, extended financing through the National Housing Fund, implemented regulations on the production and allocation of new housing, and provided tax incentives and subsidies to suppliers and consumers where appropriate.
Housing Quantity and Quality:
Over the past 40 years or so, housing conditions in the Republic of Korea have improved enormously in terms of both quantity and quality. The housing supply ratio is the most popular measure of the housing policy of the Republic of Korea and is defined as the ratio of the number of dwellings to the number of households. This ratio has increased significantly since 1990, as the pace of the increase in housing stock exceeded that of households by a wide margin. By the early 2000s, there were as many dwelling units as households in the country, and the housing supply ratio increased past 100%.
Housing Prices and Affordability:
Housing prices have been and continue to be one of the most important variables for housing policy in the Republic of Korea. Systematic housing price data are available only from 1986. The housing price index was first compiled by the Korea Housing Bank and was taken over by Kookmin Bank in 2001, when the two entities merged.
Housing Tenure:
It was an accepted presumption, until recently, that the population in the Republic of Korea has strong aspirations for homeownership. In that context, the rental-housing sector was considered a residual of the owner-occupied sector, which accommodates those who cannot afford to buy homes. In recent years, however, an increasing number of households have chosen to rent homes—although they are capable of purchasing homes.
Current State of the Housing Market and Government Response:
The number of building permits issued, housing construction starts and completions, and subscriptions of new houses offered for presale are all increasing, while the number of unsold units has decreased to the lowest level since 2006. The number of transactions of existing dwellings in 2015 was the highest since the government started publishing transactions data in 2006.
Evolution of Housing Policy and Major Achievements:
In the 1960s, the housing policy was carried out as a component of the 5-year economic development plan, which was initiated in 1962. The institutional structure of the housing policy and its implementation began to emerge. The Ministry of Construction (now the Ministry of Land, Infrastructure and Transport [MOLIT]) was in charge of housing policy, and the Korean National Housing Corporation and Korea Housing Bank began operations in 1968 and 1969, respectively. Some important laws and regulations, such as the Housing Bank Law and Emergency Measures to Deter Real Estate Speculation, were established in 1967. In this regard, the 1960s was a period of institution building for housing policy.
Housing Policy Programs and Their Beneficiaries:
Housing policy programs in the Republic of Korea can be classified into four distinct categories: supply side, demand side, finance, and macroprudential regulations. The most important example of the supply-side policy is the TMHD to overcome the severe housing shortage and to provide public rental housing for the most vulnerable households. Major instruments to implement the TMHD were the provision of developable land by public sector developers and expansion of funding through the National Housing Fund. The TMHD also helped stabilize housing prices by increasing new housing supply on a large scale and improving the quality of the housing stock. However, the massive supply scheme resulted in a lack of diversity and overstretched the capacity of the construction industry.
Political Economy of Housing Policy:
Housing policy is a sensitive matter, and the process of its formulation and implementation is influenced by the interplay among various stakeholders. The dynamics of the political economy of housing policy in the Republic of Korea is changing in significant ways. The legislature is becoming a dominant power over the administrative branch of government. Thus, the housing policy has become more politicized, and some policies announced by the government may not be realized as planned, due to delays in passage of relevant laws.
Conclusion:
Originally, the fundamental housing problem in the Republic of Korea was that of absolute housing shortages. The government did not allocate many resources to housing, however, because housing was regarded as a low-priority sector compared with manufacturing or infrastructure in facilitating economic development; underinvestment in new housing was a major reason for the chronic housing shortage in the 1960s through the mid-1980s. It was not until the late 1980s that the government initiated a program involving massive supply to meet the increasing demand for quality housing by the middle class and allocated a significant amount of the budget to address the housing needs of low-income households.
Also Read: Islamic Republic of Iran Ministry of Housing and Urban Development