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Establishing Income-based Rent System of Integrated Public Rental Housing(IPRH) in Seoul

Nam Won-seok & Lee Ga-in

With implementation of the central government's Integrated Public Rental Housing(IPRH) policy, the rent system for public rental housing has shifted from a cost-based system to an income-based system that takes into account both rental market prices and household income. However, when IPRH is provided in areas with high rental prices, such as Seoul, the rent burden for residents increases compared to existing Public Rental Housing(PRH) types. Therefore, it is necessary to adjust the rent system for IPRH so that the specificity of Seoul with high rental prices could be taken into account. In addition, to spread the income-based rent system, it is necessary to consider the supply of IPRH utilizing not only new construction, but also existing PRH stocks. Therefore, this study aimed to develop an adjustment factor to realise the reduction of rent levels, to reduce rent burden disparities between income groups and regions and to find a way to realise the supply of IPRH utilizing existing vacant stocks.
First, we set the upper limit of rent-to-income ratio(RIR) for moving-in households at 25% as the basic direction for calculating the adjustment factor. The adjustment factor could be calculated by estate based on the current Ministry of Land, Infrastructure and Transport(MOLIT) standards. Given the nature of the income-based rent system, the adjustment factor could also be Establishing Income-based Rent System of Integrated Public Rental Housing(IPRH) in Seoul94 calculated by household. Considering these two aspects, we suggested four alternatives for calculating the adjustment factor. Each alternative has its advantages and disadvantages from three perspectives: the size of the landlord's rent income, the equity of the rent burden among tenants and the possibility of mixed-income housing. Therefore, in the actual project stage, it will be necessary to select an appropriate alternative that meets the policy direction by considering characteristics of each alternative.
Next, the supply of IPRH utilizing existing vacant stocks may cause considerable confusion and conflict for prospective tenants, existing tenants, new tenants and landlord(SH corporation). Considering these constraints, this study suggested the following realistic alternatives: 1) converting existing public housing stocks to IPRH after the end of the lease obligation period or after a rehabilitation project; 2) piloting individual estates first and then gradually expanding the program; and 3) increasing the rent for new tenants over some time instead of starting at the beginning of the tenancy to reach the level of IPRH rents. The IPRH policy needs to be continuously supplemented and ultimately developed into a policy that could contribute to housing stability of residents. This will require comprehensive consideration of not only the rent system, but also other institutional factors such as financial support from the central government, housing allocation and welfare service provision.

Keywords: Integrated Public Rental Housing(IPRH), Income-Based Rent System, Seoul