Government Increases Funding for Public Rental Housing Amid Rising Unused Contributions

The South Korean government is accelerating efforts to expand public rental housing supply, but the amount of unused contributions from the Korea Land and Housing Corporation (LH) for its rental purchase program has increased 2.5 times over the past year. Critics emphasize the need for enhanced project management to ensure that budget allocations translate into actual housing purchases and occupancy. There are also concerns about long-term vacancies in purchased homes, indicating a need for supply that considers actual demand.

According to an analysis by the National Assembly Budget Office on the 2027 budget linked to the settlement of accounts, the amount of contributions returned from the LH multi-family rental purchase program rose from 960.9 billion won in 2024 to 2.4 trillion won in 2025, marking an increase of 1.446 trillion won (150.5%) in just one year.

The multi-family rental purchase program involves LH acquiring and renovating homes in urban areas to rent them at affordable rates to low-income households. The return of contributions is calculated by deducting unused contributions from the following year's new allocations due to project cancellations.

During preliminary reviews of the 2025 fiscal year settlement, the National Assembly's Land, Infrastructure and Transport Committee pointed out that this method could circumvent the intent of the national finance law regarding budget rollovers and undermine transparency in budget execution. They urged the Ministry of Land, Infrastructure and Transport and LH to minimize the scale of returns through rigorous project management.

The Ministry did not reflect the offsetting of existing unused contributions against new project budgets in the 2027 multi-family rental purchase budget proposal. However, in a similar program, the integrated public rental contributions, 200 billion won in cancellation claims from permanent rental, national rental, and happy housing projects were offset. The Budget Office suggested that similar measures should minimize the use of claims and returned contributions in these projects.

Addressing the issue of long-term vacancies in purchased homes is also a challenge. According to the Budget Office's analysis of the 2025 fiscal year settlement, among the 193,940 LH rental homes at the end of last year, 6,186 units (3.2%) had not been rented for more than six months. Of these, 2,830 units had been vacant for over a year.

Regionally, there were 501 unleased homes in Seoul for over six months, accounting for 1.6% of the inventory, while Chungnam had 713 units, representing 21.6%. The Ministry attributed the vacancies to the acquisition of homes in less desirable outer areas or smaller units that do not attract tenants, as well as aging properties. The Budget Office emphasized the need to carefully consider rental demand at the acquisition stage and improve the utilization of existing vacant homes.

Seojin Hyung, a professor at Kwangwoon University’s Department of Real Estate Law, stated, “LH’s rental housing should be supplied where there is actual demand, but setting targets based on quantity has led to limitations.” He warned that if this situation continues, the gap between the government’s supply plans and actual supply outcomes could widen. He added, “Rental housing is not a profit-generating venture; it incurs ongoing costs. The focus should be on acquiring and supplying homes in areas desired by vulnerable populations rather than merely increasing supply volume.”