The housing rental market in Korea is undergoing rapid structural change. This report evaluated policy for housing stabilization and proposed solutions, considering the structural change in the housing rental market.
First, even though the supply of guarantees on the loans for jeonse -- a deposit-based housing rental system in Korea -- achieved the expected results from the perspective of helping people afford their jeonse deposits, it may cause the jeonse price surge as an incidental effect. As this unintended consequence militates against the original intent of housing stabilization policy, the government needs to devise more thorough and rational policy to prevent the jeonse deposits from rising inordinately and to improve the housing affordability index (HAI) for low-income earners.
Second, regression analysis using the HAI shows that the housing support involving jeonse loan guarantees has some factors that may undermine housing stabilization, while the increase in the supply of rental housing serves to maintain overall rents at affordable levels.
Third, according to analysis of the HAI for each income quintile, the disparity between the first and third income quintile has been increasingly widening since 2010. The analysis of the HAI for the last six years shows that the HAI of the median income rose 29.2 percent, while that of the bottom income quintile rose only 3.7 percent.
Fourth, the government must consider a new paradigm for the support for jeonse loans (guarantees) and policy for housing supply in view of the structural change in the housing rental market. The government needs to shift the focus of its support system from home purchase to leasing considering market demand, and to provide support to not only home owners and jeonse deposit renters but also to households on monthly rent.
Fifth, as the public sector is not fully capable of supplying public rental housing, the government needs to scrutinize the budget structure and business structure of the public rental housing project in order to render it more sustainable.
Han Nohdeok
First, even though the supply of guarantees on the loans for jeonse -- a deposit-based housing rental system in Korea -- achieved the expected results from the perspective of helping people afford their jeonse deposits, it may cause the jeonse price surge as an incidental effect. As this unintended consequence militates against the original intent of housing stabilization policy, the government needs to devise more thorough and rational policy to prevent the jeonse deposits from rising inordinately and to improve the housing affordability index (HAI) for low-income earners.
Second, regression analysis using the HAI shows that the housing support involving jeonse loan guarantees has some factors that may undermine housing stabilization, while the increase in the supply of rental housing serves to maintain overall rents at affordable levels.
Third, according to analysis of the HAI for each income quintile, the disparity between the first and third income quintile has been increasingly widening since 2010. The analysis of the HAI for the last six years shows that the HAI of the median income rose 29.2 percent, while that of the bottom income quintile rose only 3.7 percent.
Fourth, the government must consider a new paradigm for the support for jeonse loans (guarantees) and policy for housing supply in view of the structural change in the housing rental market. The government needs to shift the focus of its support system from home purchase to leasing considering market demand, and to provide support to not only home owners and jeonse deposit renters but also to households on monthly rent.
Fifth, as the public sector is not fully capable of supplying public rental housing, the government needs to scrutinize the budget structure and business structure of the public rental housing project in order to render it more sustainable.
Han Nohdeok