To popularize senior towns, the market-entry barrier for private corporations must be lowered. Only by reducing the burden of initial investment expense and creating an environment where revenue can be generated can private corporations actively move to build senior towns. In Japan, when building senior towns, the government subsidizes construction costs and also covers building repair and maintenance expense. Experts said in unison that attention should also be given to fostering operators that specialize in senior housing and nursing facilities.
◇ Up to 10 million won per household in Japan for construction subsidies, but "0 won" in Korea
Japan's Ministry of Land, Infrastructure and Transport provides subsidies covering up to 10% of construction costs when private corporations build "Service Senior Housing (Sakoju)." The maximum subsidy per household is 1.2 million yen (about 11.3 million won). If a building previously used for another purpose is remodeled into Sakoju, or if repairs and maintenance are needed due to aging, the government covers 30% of the total expense. The cap is 1.8 million yen per unit. In addition, if it is built as a "zero-energy house" that self-generates energy with solar or wind power, the subsidy limit increases by 1.2 times. If medical or nursing services are partnered, subsidies are added further.
If entry by private corporations into the senior housing market had been regarded solely as a for-profit activity, such support would have been impossible. Of course, the Japanese government was not proactive from the start. It regulated so that only social welfare corporations or nonprofit corporations could build senior housing facilities. But as the older population soared amid rapid aging, in 2011 it opened the market so private corporations could become the project principals.
Helped by this government support, senior housing facilities operated by private corporations increased 40-fold, from 1,024 in 2000 to 40,537 in 2023. According to the Ministry of Land, Infrastructure and Transport of Japan, as of Oct. last year there were 8,327 Sakoju facilities, with a capacity of 290,720 residents. There are 17,833 fee-based senior homes (689,810 people), and 14,297 group homes (small shared dwellings for people with dementia) with 218,300 people.
Fee-based senior homes are mainly used by the middle class and above, provide meals, and offer health management and care services, making them most similar in nature to domestic senior towns. Sakoju presumes independent living, and on-site social workers provide only welfare checks and daily living support services. Instead, they feature low deposits and affordable monthly rent. Combined, the two account for 26,160 facilities. In Korea, senior welfare dwellings numbered only 43 (9,231 people) as of the end of 2024. Under the Welfare of Senior Citizens Act, senior towns are classified as senior welfare dwellings.
◇ "Only by lowering development costs is a cut in user fees possible"
Adjunct Professor Lee Ji-hee of Suwon Women's University's Department of Social Welfare said, "The senior housing business requires substantial initial investment funds from land acquisition to building construction and facility operation, making it difficult to generate revenue in the short term," adding, "Like Japan, where construction costs are supported, the government should actively step in with funding support." Lee added, "Japan has dedicated loan products that allow 100% of project costs to be financed at low interest over long terms," noting, "Such loan support is also worth the government's consideration."
Executive Director Yoo Bok-jae of KB Golden Life Care said, "Measures that give incentives to private corporations, such as enabling cheaper land purchases or raising floor area ratios, would also be effective," adding, "Only when development costs fall can the operating corporations lower facility user fees, which is also a way to reduce users' expense burden."
Experts also stressed the need to foster operators that specialize in "operating" senior housing and nursing facilities. Yoo said, "To spur supply, developers and operators must be separated so each can build its own ecosystem," adding, "Only when specialized operators emerge will service quality further improve." As an example, Yoo cited Japan's "Sompo Care." Sompo Care is a specialized corporation that operates 28,500 fee-based senior homes and Sakoju nationwide, 90% of which were established based solely on usage rights without owning land or buildings. In Korea, to operate a nursing facility (senior welfare dwellings were excluded by an enforcement decree revision in May last year), one must operate on land and in buildings they own.
Some also argue that legal and institutional foundations must first be put in place. Associate Professor Ryu Jae-gwang of Kanda University of International Studies in Japan said, "For the government to provide support, laws and systems to back it must be in place, but Korea has no such law," adding, "It is included only in part under the Welfare of Senior Citizens Act, and without a legal infrastructure, the senior housing market and industry cannot grow."
A bill related to housing facilities for middle-class older adults is currently pending in the National Assembly. Lawmaker Lee Heon-seung of the People Power Party and Lawmaker Song Ki-heon of the Democratic Party of Korea jointly proposed the "Special Act on Senior Care Dwellings" in Aug. last year. It includes provisions allowing the state or local governments to reduce taxes related to the construction, acquisition, and management of senior care dwellings under the Act on Restriction on Special Cases Concerning Taxation. It also allows the Minister of Land, Infrastructure and Transport to support senior care dwelling projects with the housing & urban fund.
[Senior town field notes] ① Visiting the Japanese senior dwellings Coco Pan… Meals and nursing care for 1.5 million won a month
[Senior town field notes] ② A child raised in a coexisting-generation nursing home returns as a childcare teacher
[Senior town field notes] ③ "Robot hands improved care quality"… Japan's state-of-the-art nursing home "Santa Fe Garden Hills"
[Senior town field notes] ④ In downtown Seoul at around 2 million won a month… From a privilege of the wealthy to lowered barriers