Starting next year, "universal public rentals," which lower the bar for move-ins to include the middle class, will be rolled out in earnest. Because it expands eligibility for public rentals long viewed as a housing-welfare tool for low-income groups, some say it is the nationwide version of the "basic housing" plan that President Lee Jae-myung pushed when he was Gyeonggi governor.
Basic housing did not lead to large-scale supply due to obstacles such as legislation and securing funding, but universal public rentals are expected to overcome basic housing's limits as the Korea Land & Housing Corporation (LH) will implement the program under the central government's lead. Still, LH's financial burden remains an issue to resolve if it supplies good locations and larger units at low rents for long periods.
According to the Ministry of Land, Infrastructure and Transport on the 7th, the supply of universal public rentals next year will total 36,000 households. Of those, 26,000 will be construction-type, and 5,000 each will be purchase-type and jeonse-type. A budget of 6.2 trillion won has been allocated.
Universal public rentals are dwellings that lower the move-in bar compared with existing public rentals so that a range of income groups, including young people, newlyweds, and the middle class, can move in. More than 50% of the supply will be allocated to young people without homes. Tenancies can last up to 20 years. Specific income and asset criteria and rent levels, among other detailed move-in conditions, have not yet been finalized.
The policy direction of universal public rentals is similar to the basic housing Gyeonggi pushed in 2020. Basic housing also envisioned allowing non-homeowners to live in public rental dwellings for long periods regardless of income, assets, or age.
However, basic housing did not extend to large-scale supply. Because basic housing would be held for more than 30 years after construction, project costs could not be recovered quickly like for for-sale dwellings, and the more supply increased, the more Gyeonggi Housing & Urban Development Corporation (GH), the project operator, would inevitably face heavier borrowing fund and liability burdens—factors that hindered expansion.
Land for development was also a problem. Basic housing was slated for key station-area locations such as the third new towns, but GH could not independently decide land use and dwelling types for those third new towns. Gyeonggi also sought to bear low rent levels by raising floor area ratios and procuring project costs at low interest from the housing & urban fund, but because the funding plan was not institutionalized, the project did not progress. At the time, Gyeonggi proposed basic housing rents of 400,000–600,000 won per month for exclusive areas of 59–85 square meters.
Universal public rentals must overcome these limits of basic housing. With the central government injecting budget funds and LH taking on the project, universal public rentals appear to have a different starting point from basic housing.
For construction-type universal public rentals, LH will break ground on land it already secured, so there is no need to start from coordinating new land allocations with the central government as with basic housing. Another difference from basic housing is that not only construction-type but also purchase-type and jeonse-type will be used together to diversify supply methods and spread fiscal burdens.
However, universal public rentals have not fully resolved the business feasibility issues that basic housing faced. Next year, initial project costs will be supported through disbursements and loan from the housing & urban fund, but a significant portion must be repaid by LH. The more mid-size dwellings are built in station areas and rents are kept low, the slower construction costs are recovered and the greater the long-term operating burdens such as interest and maintenance costs become. Ultimately, for universal public rentals to continue at tens of thousands of households each year, the key will be how to share government fiscal support, fund support, rent levels, and LH's long-term holding burdens.
Seo Jin-hyung, a professor in the real estate and legal affairs department at Kwangwoon University, said, "The direction of supplying public rental dwellings is desirable, but project costs such as construction costs and rental operations could burden LH," and added, "It should proceed after weighing budget efficiency."