Charting the Future of Korean Social Housing: Insights from the Dutch Example
Hong Seunghyun(Economic Policy Team)
When I was young, my family moved almost every year. Every time we moved, it added more problems: our home became smaller and got further from my school and my friends. Thankfully, we were freed from the troubles of moving after my parents bought a small apartment. If we’d had a place of residence, cheaply available for as long as we needed without having to own it, we would not have had to go through all the trouble every year, nor spend years saving enough money to buy a house.
Since the start of the Moon Jae-In administration, from 2017 to 2020, there have been 24 adjustments to the real estate policy. However, the prices of apartments soared ceaselessly, with deposits and rents following suit, worsening people’s economic burden. The government is now attempting to stabilize the housing prices by increasing the supply as part of the Third New Town development plan. However, without institutional reforms like a price ceiling, such actions will likely only fuel further market speculation and funnel profits to construction companies. Here we must ask ourselves: is increasing the supply the only way to stabilize housing prices? Is home ownership the only way to ensure stable housing?
The ratio of housing to households ratio in South Korea was 104.8% as of 2019. On the other hand, according to the Ministry of Land Infrastructure and Transport, the homeownership rate was 56.8% in 2015 and 57.9% in 2020 (with newer data pending Sept. 2022). In other words, the housing supply increased beyond 100%, but the homeownership rate remained more or less the same. Korea’s homeownership rate is significantly lower than Romania’s 95.8%(the world’s highest), Japan’s 80.5% (19th highest), and the Netherlands' 69% (37th highest).
Even if the housing supply increases, most of that extra housing would flow into the speculation market and expand the holdings of landlords with multiple housing units already. The question here then is whether the government can control the private rental market. Currently, according to 2019 OECD figures, Korea’s public housing comprises 7.2% of the rental market, lower than the OECD average of 8%, and significantly lower than the Netherlands’ 35%. Consequently, it is difficult to control housing prices as most of the housing rental market is composed of private rentals. Real estate experts say that to affect the rental market, public housing should at least compose 15% of it. If the government had secured and maintained public housing during the redevelopment and New Town projects, today’s situation would be different. So, how can we dramatically increase public housing and achieve housing stability by controlling the rental market? As late as it is, to increase the supply of social housing, fill in the gaps in the of public rental supply, and exert influence on the private rental market, a budget must be allocated to expand the public housing stock of both central and local government, and incorporate social housing organizations in the New Town projects and redevelopment plans..
Let us examine social housing in Korea. The Korean Social Housing Association was founded in 2015, and has supplied 4,389 (3,316 in Seoul, 883 in Gyeonggi-province) housing units in the Seoul metropolitan area as well as the Jeollabuk-do province, and the city of Busan. With cooperatives, schools, small and medium enterprises and non-profit organizations participating, the Association provides social housing appropriate to Korea’s conditions (revitalizing empty homes, collective housing etc.). However, still in its nascent stage, it is financially dependent on local government funding, thus leading to a very low supply. The current data casts doubt over the future sustainability of the Association, and a new direction of improvement must be sought.
How Dutch social housing reached such a high distribution
The Netherlands’ social housing started in the 19th century to solve the housing crisis of urban workers. Through the World Wars, the urban housing shortage worsened, and the government supported the establishment of cooperatives to provide workers with social housing. However, unlike Korean public housing, which is limited to low-income households, Dutch social housing was universal, available to everyone. In addition, the Netherlands’ social housing is operated not by the government but by housing associations (80% non-profit, 20% for-profit). Currently, the Netherlands has 2.25 million units of social housing. And in its capital, Amsterdam, nine housing associations under the Amsterdam Federation of Housing Associations own and operate 190,000 housing units.
During the post-World War 2 reconstruction period, Dutch social housing was mostly government-driven. However, starting in 1960, a committee of various interest groups, including housing associations, construction contractors, local government and central government, was established to further develop social housing. In 1965, the direction of development was solidified around the housing associations rather than the government. The prioritization of the associations in construction projects led to great qualitative and quantitative improvements through the mid-1970s. In Korea, the redevelopment and New Town projects funnel massive profits to corporations and speculators while leaving scraps for the people. While our public works serve the interest of a specific class rather than the public as a whole, the Dutch policy prioritizing social housing associations in urban redevelopment shows us a significant alternative.
Of course, the Dutch social housing is not entirely perfect. The neoliberal offensive led by the European Union, pushing for selective welfare and market competition, has cut off government funding to social housing, leading to much financial difficulties. Moreover, contrary to the original intent of the system, Dutch social housing has become means-tested (for incomes of 38,000 €/year), and some applicants in Amsterdam have waited 9 years before moving into a social housing unit. However, despite difficulties, the system maintains significant influence over the housing rental market.
One of the notable lessons from the Dutch social housing system is a grading system which determines the rent based on the conditions and location of the housing unit. This provides tenants with high confidence, and makes social housing competitive in the rental market, strengthening it against the neoliberal offensive.
How can Korean social housing, supported by the national and local government, survive the increasing neoliberalization of society?
Many people that analyze the current Dutch social housing system argue that it is not appropriate for the social conditions of south Korea, and that we must develop our own system more fitting for the current conditions. However, before laying the first brick, one must lay a strong foundation. Thus, rather than creating a system based on the current conditions, we must change the existing conditions by developing the foundation for social housing. The Dutch example provides a glimpse for the future of Korean social housing, where housing associations are prioritized in urban redevelopment and strengthen the foundation of social housing.
Hopefully social housing will take root in south Korea as well, and serve as a pillar of housing stability.