As the government recently announced a plan to supply high-quality public rental housing targeting even the middle class, attention is focused on whether it will overcome the limitations of the public rental policy introduced by the previous government.
As apartment prices in Seoul continue to rise and the monthly rent market is unstable, the key question is whether there will be a sufficient supply of high-quality public rentals in preferred locations where people can live for a long time at an ‘affordable price.’
According to the relevant ministries on the 27th, the Ministry of Land, Infrastructure and Transport announced in its recently announced 'Housing Stability Plan' that it will supply 190,000 households by 2030 by introducing a new 'universal public rental' that allows stable housing for a variety of actual demand classes.
Universal public rental is a type introduced to overcome the limitations of existing public rentals, which are usually supplied to vulnerable groups at low rents, making them less desirable due to their relatively low quality and small area.
In order to allow families with children to live there, public housing sites focus on exclusive use areas of 55 to 84 m2, which are highly preferred, while those in urban areas focus on 40 to 60 m2, and 30 m2 or more are also provided to single-person young households.
The plan was to raise the quality to the level of private housing with the 3/4 bay structure and high-end finishing materials applied to newly built apartments, and to supply them mainly in excellent locations within the city center, such as near subway stations with convenient transportation.
The income standard will be higher than the current public rental standard of less than 150% of the median income (KRW 6.29 million for a two-person household, KRW 8.03 million for a three-person household), and the assets will be raised to above the average assets of the third quintile (KRW 345 million) to attract middle class demand.
At the same time, it was decided to set the rent at a low level compared to the surrounding market price and to review rent adjustments by comprehensively taking into account the age of the youth and whether they are married or having children. The period of residence is 6 years, but the maximum is 20 years.
This also overlaps with the ‘quality lifelong housing’ announced in November 2020 during the Moon Jae-in administration.
At the time, the government announced that it would expand the public rental income standard to 150% of the median and the exclusive area limit to 85㎡ in line with the plan to merge construction-type public rentals, which were complexly divided into national, permanent, and happy housing, into integrated public rentals.
Integrated public rental allows residents to live for up to 30 years at a lower rent compared to the surrounding market price if they meet the income and asset requirements, and will also seek to improve quality by applying finishing materials and smart home technology at the level of pre-sale housing.
The target for supplying 60-85㎡ medium-sized public rentals announced by the government at the time was around 63,000 households, including 10,000 purchase-lease households, by 2025.
Although it was similar to the recently announced universal public lease in terms of medium-sized equilibrium supply and luxury, there were many practical limitations in the actual operation of the system.
In order to achieve the initially planned supply target on a limited site, it was difficult to significantly increase the number of medium-sized units that reduced the number of households that could be built, and gentrification served as a burden on the project cost finances.
In addition, if the proportion of middle-class targets was increased within the system of integrated public rental, there was a problem of insufficient support for the vulnerable class, which is one of the main goals pursued by public rental.
The government's intention to create a separate type of universal public lease was to make practical supply possible by complementing the various limitations experienced during the operation of integrated public lease.
Considering that expanding medium-sized units and improving quality will increase the financial burden on Korea Land and Housing Corporation (LH), the project implementer, we plan to significantly expand housing and urban fund investments and loans through consultation with the financial authorities.
The government plans to apply universal public rental first, focusing on the 3rd new city, but to achieve an early supply effect, it also plans to simultaneously promote a purchase type that purchases high-quality houses in excellent locations and supplies them as rental housing separately from new construction.
An official from the Ministry of Land, Infrastructure and Transport said, "When introducing integrated public rental in the past, the needs of the middle class were also taken into consideration, but the actual operation was not carried out that way. If the integrated public rental system is implemented without creating a new type for the middle class, etc., there are concerns that vulnerable groups will be harmed." He added, "Universal public rental will improve these problems."
