A housing shortage problem has been improved, but a new housing problem has recently appeared due to a serious housing affordability crisis
Seoul has seen a 2.3 times increase in its housing stock between 1990 and 2015, and the proportion of dwellings to households is estimated to be over 100%. Because of the continuous housing supply, now there is little possibility of that the soaring of housing prices is being caused by a housing shortage. Quite seriously, however, the Price-to-Income Ratio(PIR) is 11.2 times in Seoul which is higher than other country’s capital cities. Moreover, the Rent-to-Income Ratio(RIR) has been continuously increasing due to both an increase in monthly rent contracts and a decrease in Jeonsei leases. What is especially noteworthy is that soaring rents are expected to lead to the reasons for the lack of affordable and quality housing. Therefore, the Seoul Metropolitan Government should increasingly focus on price affordability for tenants of private rental housing.
Working Towards Ensuring an affordable housing supply through public-private partnership is a global trend
In order to provide more affordable housing, the United Kingdom, Australia, and the United States of America have offered developers tax incentives, subsidies, and warrant loans. In exchange for this, each government limits housing rental prices. Additionally, the local governments of New York and London – the cities whose housing markets are known for their notoriously high rental prices - have extra programs to sustain housing affordability.
According to the above examples, both rental income taxes and tax credits are strong vehicles to provide more affordable housing. In this sense, it is suggested that the Seoul Metropolitan Government consider taking into account a diversity of ways by which to potentially support housing providers. They include providing tax credit liquid bonds (for use in a long-term, tradable bond market) issued either by financial intermediaries or by syndicators.
Seoul needs a revised housing policy in response to low birth rates and an aging population during this era of slow economic growth
In this era of slow economic growth, housing welfare policy should be expanded and strengthened to help more young adults and low -income families. The Seoul Metropolitan Government should provide increasingly affordable and quality housing, before monthly rent contracts are signed and become more widespread in the private rental housing market. The government also needs to develop initiatives for improving housing conditions. Moreover, an intergenerational approach between young adults and older people is necessary. To be specific, the government should offer older landlords some incentives such as lower taxes and encourage them to lease the houses to young adults at an affordable price. This will contribute to an effective and fair housing policy.
Policy implications in order to provide affordable rented housing
High-density housing development close to metro stations is necessary to provide affordable housing for potential renters with low incomes. Additionally, the Seoul Metropolitan government should offer landlords a subsidy for housing extension and renovation.
Public housing and rent-assistance programs should be also improved in the way to support social housing and tax incentive housing through public-private partnership.
In order to achieve an intergenerational housing policy, the government should support landlords to keep their homes in good quality by offering renovation subsidy for all types of houses. This should include flexible floor plans which can help a huge unit to be subdivided into quarters for several different households.
The support for housing finance should increasingly focus on both first-time home buyers and affordable housing providers.
Lastly, real estate tax reform including rental income tax incentives should be revised to provide more affordable housing. In addition to this, the government needs to oblige all of the landlords to register their rental homes and then regulate the initial rental rate along with any later increases in rent.
1_Background and Purpose
2_Main Contents and Research Methods
02 Housing Production and Housing Market
1_Housing Supply, Conditions, and Affordability
2_Housing Market Trends
03 Housing Needs and Problems by Generation
2_Housing Needs and Issues of Tenants and Landlords
04 Affordable Housing Policy in Developed Countries
1_Affordable Homes Programme in the United Kingdom
2_Low Income Housing Tax Credit in the United States of America
3_National Rental Affordability Scheme in Australia
05 Housing Policy Strategies in Seoul
1_The Strategies in Response to Slow Economic Growth
2_The Strategies in Preparation for Low Birth Rates and Aging Population
06 The Way Forward for Affordable Housing in Seoul
1_High-Density Rental Housing Production Nearby Rail Transit Impact Area
2_Recommendations of Prior Housing Programs for Low-Income Families
3_Providing Subsidies and Promoting Flexible Floor Plans
4_Improvement of Housing Financial Structure
5_Housing Tax Reform
6_Suggestions Regarding the Housing Lease System