The Lee Jae-myung government is expected to completely overhaul the structure and method of public housing projects, announcing a focus on the public nature of housing supply through its first real estate supply plan. There is a high possibility that public dwellings will emerge that encompass not only vulnerable groups but also the middle class, rather than simply increasing public rental dwellings for the disadvantaged.
According to the Ministry of Land, Infrastructure and Transport on the 8th, the government plans to supply 1.35 million households over five years through direct implementation of public land by the Korea Land & Housing Corporation (LH).
In conjunction with this housing supply policy, the government is reviewing improvements to the types and structure of public dwellings through the LH reform committee. There is a high possibility that the structure of public dwellings will be reformed to allow not only rental housing for vulnerable groups but also for the middle class.
Vice Minister Lee Sang-kyung noted that 'LH direct implementation does not only mean rental dwellings,' adding, 'For rental housing, we are thinking of types of rental dwellings that the middle class can occupy, similar to the Gyeonggi Province basic dwellings from the past, rather than existing small-scale rental dwellings.'
He further stated, 'Just because LH is supplying does not mean the quality of dwellings will decline or that they will only supply small units, but rather, we will promote various types of dwellings exceeding 85 square meters.'
The basic dwellings mentioned by the Vice Minister refer to public housing that allows anyone without a home, including the middle class, to live in high-quality housing for over 30 years with a low rental rate at the level of construction costs.
If the government introduces rental housing similar to the concept of basic dwellings, it is expected that the eligibility criteria for the current public housing subscription will be greatly relaxed. Currently, the eligibility criteria for general supply of integrated public rentals require a monthly average income below 150% of the median income and total assets below 337 million won. In the case of sale dwellings, it must be below 100% of the previous year's monthly average income of urban workers and real estate (land and buildings) assets below 215.5 million won.
The government also considers raising the basic quality of public rental dwellings. There have been continuous criticisms that small units of public rental dwellings, such as 30 square meters, are too limited.
A Ministry of Land, Infrastructure and Transport official stated, 'We are still in discussions with the LH reform committee, so we will discuss issues such as expanding subscription conditions.' He added, 'There is a part where the size of public rental dwellings is too small, and we are considering increasing it.'
However, the government has yet to decide whether to prioritize sales or rentals in public housing.
The official from the Ministry of Land, Infrastructure and Transport remarked, 'The ratio of sales to rentals in public housing will be determined through public discussions with the LH reform committee,' noting, 'If LH directly builds housing on public land, it can be for sales or rentals.' He also clarified, 'However, there is a misunderstanding that the rental portion will be greatly increased because of a decrease in the sales part in next year's budget, which stems from differences in budget allocation methods.'
The success of the government's policy to expand public housing depends on how much it can improve the quality of dwellings. This is because there has been a negative perception among the public regarding the quality of public housing, especially rental dwellings.
According to a report titled 'Study on Public Rental Housing Brand Implementation,' published last year by the LH Land and Housing Research Institute, 45.9% of the general public viewed using LH as a brand for public rental housing negatively. The main reasons for this perception were that respondents believed LH had the image of rental apartments and that negative perceptions of LH increased due to issues such as missing rebar and land speculation by employees.
Ultimately, for the policy of supplying high-quality dwellings to succeed, securing resources for LH will be essential. The government states that it will follow private design and branding to improve the quality of apartments; however, this will inevitably raise construction costs. Since reducing construction costs will lead to a decline in quality, there will likely need to be contemplation about this structure.