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A Study on How to Improve First-Time Home Buyer Programs

Eun-Cheol Park⋅Su-Kyoung Kim

This study aims to propose policy directions and program suggestions in order to offer more opportunities for first-time home buyers. The increased gap between household income and housing prices has led to decrease in housing affordability. The policy for first-time home buyers, however, has been ineffective.

The method of the study is to cover literature review and data analysis. By doing so, we find out how to work the current programs and mention that the government needs to strengthen the first-time home buyer programs. Based on the data, the average PIR(Housing Price to Income Ratio) for those who are not owned a house is 19.1. Plus, K-HAI(Korea Housing Affordability Index) is 160 and K-HOI(Korea Housing Opportunity Index) is less than 10%, which means that non-home owners has been struggling with housing affordability. First-time home buyers play an important role in maintaining the housing market system healthy by enabling vacancy chain and houisng filtering. The policy and programs for them has advantages in terms of policy equity and effectiveness. Therefore, the government needs to strengthen the programs for the first-time home buyers. This study introduces some cases for developed countries following liberal welfare states such as the United States, the United Kingdom, and Australia, They have various and systematic policy for first-time home buyers. In particular, the countries define the target group clearly.

As a result, the study found that South Korea also needs to systematic policy and various programs to promote first-time home buyers. Firstly, eligible targets shall be defined as first-time home buyers among non-home owners based on income, asset and housing prices. Additional programs shall be revised and improved: ①the special supply system for the first-time home buyers needs to improve in the way to support them; ②the government offers subsidies for those who provide affordable housing and promote equity-sharing houses; ③the government also offers home buyers acquisition tax reduction and low interest rates; ④the government-guaranteed mortgages should be expanded, the government protects delinquent borrowers, and offers a savings system; ⑤the government needs to sell expensive public housing to renters and finance to provide more affordable public housing; ⑥education and consulting is necessary in order to promote the slogan, “wholesome home-buying for primary residence”.