[Exclusive] The 'November 19 Rental Policy' is a 6 Trillion Won Project... Public Housing Expenditure Expected to Reach 22 Trillion Won Next Year

Government Estimates Total 6 Trillion Won Over Two Years with Annual 3 Trillion Won
As of Late October, Housing and Urban Fund Surplus Amounts to About 39 Trillion Won
Market Criticizes "Only Quantity, No Concern for Quality"

On the 19th, when the government announced its 24th real estate policy, posters criticizing the government's real estate policy and listing information were posted at a real estate agency in Songpa-gu, Seoul. Photo by Moon Honam munonam@

[Sejong=Asia Economy reporters Kim Hyunjung and Jang Sehee] The government plans to pour about 6 trillion won over two years into the 'November 19th Jeonse Measures' aimed at stabilizing housing for low-income households. It is expected that an annual budget of 3 trillion won will be invested not only in renovating or remodeling vacant units but also in new construction purchase agreements. Accordingly, the public housing-related budget of the Housing and Urban Fund, which typically spends about 18 to 19 trillion won annually, is expected to increase to 22 trillion won. Although the government states that "there is no controversy as the fiscal capacity is sufficient," there are voices of criticism regarding the massive fund injection into projects with uncertain effectiveness.

According to a compilation of Asia Economy's coverage on the 20th, the source of funds for the 'Support Plan for Housing Stability for Low-Income and Middle-Class Households' announced by the government the previous day is the Housing and Urban Fund, which had about 39 trillion won in surplus funds as of the end of October. The Housing and Urban Fund is formed from sources such as national housing bonds, subscription savings, and lottery fund transfers. The surplus fund size has decreased over recent years: ▲41.3 trillion won in 2017 ▲37.8 trillion won in 2018 ▲36.8 trillion won in 2019.

The core of the measures is the supply of 114,000 rental housing units over two years. The government estimates that about 6 trillion won will be required, with an annual expenditure of 3 trillion won for related projects. The project details (over two years) include ▲utilization of public rental housing vacant for more than three months (39,100 units) ▲public Jeonse housing (18,000 units) ▲new construction purchase agreements (44,000 units) ▲remodeling of vacant non-residential spaces such as commercial, office, and lodging facilities (hotels) (13,000 units). The estimated project scale of 6 trillion won includes all costs such as renovation costs for purchased rental housing, purchase costs for new construction purchase agreements, remodeling costs for vacant non-residential spaces, and long-term low-interest loan support. This estimate mixes costs that become assets after purchase and costs that are non-recoverable.

Accordingly, the cost the government will procure from the Housing and Urban Fund for public housing-related projects is expected to increase from the usual 18 to 19 trillion won to up to 22 trillion won next year. This is considered a comfortable level compared to the current surplus funds (about 39 trillion won). A government official explained, "The Housing and Urban Fund will invest including new construction purchase costs and remodeling costs for vacant units, and the Korea Land and Housing Corporation (LH) will generally execute the projects," adding, "Considering the usual public housing project costs and the surplus fund balance, it is judged to be a manageable level, so there should be no controversy over funding." The official also said, "The supply of public rental units will increase by about 10% compared to the average annual 220,000 units, so it can be implemented quickly."

Minister of Land, Infrastructure and Transport Kim Hyun-mi is attending the '10th Real Estate Market Inspection Meeting of Related Ministers' held at the Government Seoul Office in Jongno-gu, Seoul on the 19th. Photo by Kang Jin-hyung aymsdream@

However, apart from the public fiscal capacity, controversy remains over whether this measure will be effective in the market. In particular, there are many criticisms that the focus is only on 'quantity and speed' rather than 'quality.' Yang Ji-young, director of R&C Research Institute, said, "By focusing only on supply volume, the fundamental reasons for vacancies are not addressed, and there is no plan for supplying preferred housing types (apartments)." She emphasized, "Among construction-type rental housing and purchase-type rental housing, the construction type is blocked due to reconstruction regulations, and the purchase type has actually decreased due to increased capital gains tax on multi-homeowners and strengthened residency requirements."

Professor Shim Kyo-eon of the Department of Real Estate at Konkuk University’s Business School pointed out, "Usually, a supply of about 10,000 units or more at once in Seoul causes shocks in the sales or rental markets. However, the current scale and method are likely to only make a faint sound." Professor Shim added, "The government's proposed measures are unlikely to bring market changes in terms of volume or budget size. In the mid to long term, it is necessary to increase the supply of quality Jeonse housing and, on the other hand, consider revitalizing sales through deregulation."

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