Lowered Barriers for Housing Pension Enrollment... How Will It Change?

4 Changes Included in the Amendment Proposal

Archive photo / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Park Sun-mi] Going forward, people who own houses valued at around 1.2 to 1.3 billion KRW and those who own residential officetels will also be eligible to join the Housing Pension program. The partial amendment to the Korea Housing Finance Corporation Act passed the National Assembly's Legislation and Judiciary Committee plenary session held on the 25th, leaving only the vote in the National Assembly's Legislation and Judiciary Committee and the plenary session vote remaining.

What is the Housing Pension?

The Housing Pension is a product that allows couples aged 55 or older to receive a fixed monthly amount in the form of a lifelong loan by using their owned house as collateral.

Introduced in 2007 to support elderly people in maintaining a stable life in old age while continuing to live in their own homes, it has become an alternative income source for the elderly, with more than 10,000 households joining annually. In November last year, the government announced measures to expand the eligibility and strengthen the guarantees of the Housing Pension through the "Housing Pension Activation Plan," and a bill to amend the Korea Housing Finance Corporation Act with the same purpose was proposed and discussed in the Legislation and Judiciary Committee of the National Assembly.

Lowered Threshold for Housing Pension
Changes Part ①

According to the passed partial amendment to the Korea Housing Finance Corporation Act, the price ceiling for houses eligible for the Housing Pension will be raised from the current market price of 900 million KRW to a publicly announced price of 900 million KRW.

Due to inflation and rising housing prices, about 120,000 households (as of 2019) who wanted to join the Housing Pension but found it difficult will now be able to secure stable retirement income through the Housing Pension. However, even if a house valued over 900 million KRW is enrolled in the Housing Pension, the payment amount will be limited to the standard for a 900 million KRW house (1.87 million KRW per month for a 60-year-old). Considering that the apartment publicly announced price realization rate is 69%, it is expected that houses valued at around 1.2 to 1.3 billion KRW will be eligible for enrollment.

Kim Byung-wook, the ruling party secretary of the National Assembly's Legislation and Judiciary Committee and a member of the Democratic Party of Korea, was the main proposer of the amendment to change the Housing Pension enrollment ceiling to a publicly announced price of 900 million KRW. Regarding the passage of the amendment containing this content through the Legislation and Judiciary Committee plenary session, Representative Kim said, "This is to enable more low-income households to utilize the Housing Pension," adding, "Ultimately, it will help expand consumption among low-income households and revitalize the economy."

Changes Part ②

The criteria will be changed so that people living in residential officetels can also join the Housing Pension. Until now, about 46,000 elderly households living in residential officetels (as of the end of 2019), which were not considered "houses" and thus ineligible for the Housing Pension, will now be able to join.

Earlier, Shim Sang-jung, a member of the Justice Party, was the main proposer of a bill to allow residents of residential officetels to join the Housing Pension. Since residential officetels are classified as quasi-housing and are excluded from the Housing Pension support targets under the current Housing Act, there is a claim that they should be adjusted to be eligible for the Housing Pension to alleviate the housing burden of elderly residents in officetels.

After passing the National Assembly and going through the Cabinet meeting, the increase in the collateral house price ceiling and the allowance for residential officetel enrollment will be implemented immediately from the date of promulgation.

Changes Part ③

Enrollment in the trust-type Housing Pension will also become possible upon the subscriber's request.

This will allow the pension rights to be automatically transferred to the spouse if one of the couple dies, enabling the surviving spouse to secure stable retirement income. Until now, all heirs of the house had to agree for the spouse to inherit the pension rights upon the subscriber's death. Additionally, enrollment of single-family or multi-family houses partially rented out as a single room lease and partial rental of the enrolled house will also be allowed.

Changes Part ④

Another new change is the introduction of a seizure-protection account to protect Housing Pension payments.

Up to the amount necessary for living expenses under the Civil Execution Act (1.85 million KRW per month) from the Housing Pension payments will be deposited into an account where seizure is prohibited, supporting stable living in old age and protecting pension rights. The introduction of the seizure-protection account will be implemented six months after the promulgation date.

Why Relax Housing Pension Enrollment Requirements?

The bill to relax the Housing Pension enrollment requirements was also proposed in the 20th National Assembly but was not deeply discussed. However, as apartment prices have continued to rise recently, complaints have poured in that the existing Housing Pension enrollment criteria do not reflect reality, leading both ruling and opposition parties to recognize the need for change.

The standard price for high-priced houses that are not allowed to enroll in the Housing Pension has remained at "market price 900 million KRW" for 12 years since 2008. Meanwhile, the median price of apartments in Seoul nearly doubled during the same period, reaching 927.87 million KRW as of July.

According to the Korea Housing Finance Corporation, the number of Housing Pension enrollments was 5,124 from January to June this year. The annual figures have stagnated around 10,000 cases: 10,308 in 2016, 10,306 in 2017, 10,237 in 2018, and 10,098 in 2019. Although the enrollment age was lowered from 60 to 55 years old starting April this year, expanding the eligible range by about 1.15 million households, the actual number of enrollments from April to June this year was 2,737, showing little difference compared to 2,660 during the same period last year.

This content was produced with the assistance of AI translation services.