For U.S. Department of Housing and Urban Development, July 24 2013 Korean Low-Income Housing Assistance Programs - Policy Design and Main Outcomes MOILT (Ministry of Land, Infrastructures, Transport) 1
Content 1. Overview 2. Two Housing Assistance Program 3. Main outcome and limitation 2
1. Overview Korean Housing System Market-oriented model for homeownership - One house for One household since 1970 Residual welfare approach for housing - target group: only low-income tenant Central government-driven system - Policy preference: supply-side subsidy>demand-side subsidy Now, focus on Universal Housing Welfare 3
1. Overview Korean Rental Market Structure Private rental-dominated market private vs. public = 82 : 18 Private rental 82% Public rental 18% 10 over long-term Public rental; 10% Homeownership rate: 54.2% Rental Chonsei rental : 21.7% Monthly rent with deposit: 18.2% Monthly rent without deposit: 3.3% [Figure 1] Korean housing tenure type 4
1. Overview Housing Problems of Low-Income Households Tenure insecurity - ensuring only two years of lease, unworkable rent regulation High rent burden - real income: stagnant or increase by around 1% - rent: high increased by 7 to 9% every year Low housing quality - 72.6% of low-income households: do not meet Minimum Housing standard 5
2. Two Housing Assistance Program Housing Problems of Low-Income Households 1. Loan Program 2. Public Rental Housing Program Financed by National Housing Fund Chonsei Deposit Loan for extremely low-income Chonsei Deposit Loan for wage earners 10 types assorted by target group, lease period, financing, rent level, providers [Figure 2] Composition of Public Rental Housing Stock by Type (As of the end of 2012: the Total Public Rental Housing stock = 1.49 million units, Long-term Public Rental Housing Stock = 936 thousand units) 6
2. Two Housing Assistance Program Income-related support style-public Rental Decile 10 Decile 6 Below 80~90% Market Rent Private Decile 5 Decile 4 Decile 3 Decile 2 Decile 1 30% of market rent YounGu RPH Purchased Multifamily RPH Below 50% Existin g Chonse i PRH Below 50~80% Kookmin PRH 10-years PRH 5-years PRH Rental Sector Minimum Housing Standard Housing Size below 40 m2 below 60 m2 below 60 m2 30 m2 ~60 m2 below 85 m2 7
3. Main outcome and Limitations Some questions Q1. What is the biggest achievement made through the supply of public rental housing? Stock growth: 2.3% PRH in 2000, 5.0% in 2012 Q2. How much did the public rental housing supply contributed to the rental market stabilization? Positive effect or Negative effect? 8
3. Main outcome and Limitations Some questions Q3. Did public rental housing crowd out private investments? No clear evidence Q4. Which program is more cost-effective? Loan program, or public rental supply program? Policy taste : strongly public rental housing provision 9
3. Main outcome and Limitations Some questions Q5. Which type of public rental housing program was the most preferred? The most preferred types: Purchased public rental and Public Chonsei Rental Q6. Are the public rental housing affordable? One size does not fit all Q7. How many more public rental housing units are needed? Should be increased up to 10% of total housing stock 10
3. Main outcome and Limitations Limitations and future direction Quantitative growth Qualitative management - reinforcement of tenant management Cost-based rent setting system More affordable rent system - affordable housing affordability, affordable rent - more financial viability for provider Enhancing equality: Horizontal and Vertical equality More active participation of local government and private sector 11