The Ministry of Land, Infrastructure and Transport has emphasized that for the universal public rental housing, set to be introduced next year, to serve as a safety net for the homeless, it must not only be located in preferred areas with high living standards but also offer affordable deposits and rents.
According to the ministry on September 6, the universal public rental housing program aims to provide public rentals at levels comparable to private housing in desirable locations, such as transit-oriented developments in the third phase of new towns and central areas of Seoul, while relaxing income and asset criteria to accommodate a wider range of homeless individuals.
Potential supply sites include the S10 block in Wangsuk, Namyangju, the AC2-1 block in Gyeyang, Incheon, and the public complex site in Gyosan, Hanam. The basic residency period is set at six years, but it can be extended based on childbirth and the number of children, allowing families with three or more children to stay for up to 20 years. More than 50% of the total units will be allocated to young people without homes.
While existing public rentals primarily target low-income individuals, the universal public rental housing differs by expanding eligibility and improving housing quality to accommodate a broader range of homeless individuals.
However, the specific methods for calculating deposits and rents have not yet been disclosed. Even with relaxed entry criteria and improved locations and sizes, if actual housing costs remain high, accessibility for young people and the homeless may decrease.
Public rental housing costs can be designed based on surrounding market prices, housing supply costs, and the income of tenants. If linked to market prices, areas with high home and rental prices will see increases in deposits and rents. Even if based on supply costs, rising land and construction costs could lead to higher rents. Differentiating rents based on income could reduce tenant burdens, but would require financial support from the government and public institutions.
The long-term lease housing program by the Seoul Housing and Communities Corporation (SH) has a different pricing structure than the universal public rental housing, but it illustrates the potential burdens that can arise when public rentals in desirable locations are linked to market prices. Long-term leases calculate deposits based on the average contract amounts of nearby complexes, meaning that as surrounding rental prices rise, so do the deposits.
In the recent eighth recruitment announcement for long-term lease housing (Miril House), the deposit for a 59 square meter unit in Cheongdam, Gangnam, was set at 1.17 billion won, while a 84 square meter unit in Banpo-dong, Seocho-gu, was priced at 1.3884 billion won.
In last month's 51st long-term lease housing recruitment announcement, out of a total of 1,381 units, 421 units (30.5%) had deposits exceeding the basic total asset limit of 662 million won applicable to childless households. Additionally, 82 units (5.9%) had deposits of over 1 billion won. Even if the asset criteria are met, significant funds are still required for entry.
However, there are concerns about the limits of lowering housing costs while improving location and quality. Lee Eun-hyung, a researcher at the Korea Construction Policy Institute, stated, “In a situation where resources and supply capacity are not infinite, there are limits to providing spacious and high-quality housing at low prices. To recover input costs, a certain level of rent is necessary, making it difficult to simply lower supply prices.”
Consequently, there are calls for the public sector to devise ways to reduce supply costs, including land and construction expenses.
Kwon Dae-jung, a professor of real estate economics at Hansung University, noted, “Since universal public rental housing is rental housing rather than for sale, we need to consider ways to lower housing costs. Securing affordable land for supply could help reduce rents.” He added, “As costs for rental housing increase, the burden of monthly rents will inevitably rise. It is also crucial for the public sector to find ways to lower costs such as land and construction expenses.”
* This article has been translated by AI.
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