1.1 “Happiness House” Program
The “Happiness House” program seeks to alleviate housing uncertainty for young Koreans (including students, the newly employed, and newlyweds) by supplying public rental housing with low monthly rent near workplaces and schools or in locations with convenient access to public transportation. The main targets are university students, the newly employed, newlyweds, senior citizens, and other vulnerable population segments, with varying income standards for each group.
The “Happiness House” program seeks to alleviate housing uncertainty for young Koreans by supplying public rental housing with low monthly rent near workplaces and schools or in locations with convenient access to public transportation.
Table 14. Main Targets of “Happiness House” Policy Segment Eligibility
University students Enrolled or expected to re-enroll at nearby university; within two years of graduation or withdrawal from university or high school
Newly employed Employed for five years or less or retired for up to one year from nearby workplace, with eligibility to receive unemployment benefits
Newlyweds Employed at nearby workplace or meets criteria for university student, married for at least five years and able to authenticate marriage prior to occupancy
Senior citizens Person age 65 or older in corresponding region (city/county) Vulnerable segments Resident of corresponding region eligible for housing allowance benefits
Table 15. Income Criteria by Target Segment
Segment Income Criteria
University students Student or parents’ combined income below 100% of average income*; student meets asset criteria for national public housing
Newly employed Beneficiary earns up to 80% of average income (100% for household), meets five-/ten-year asset criteria for national public housing
Newlyweds Household income of up to 100% of average income (120% for dual incomes), meet five-/ten-year asset criteria for national public housing
Senior citizens Household income of up to 100% of average income, meet five-/ten-year asset criteria for national public housing
Vulnerable segments Meet asset criteria for national public housing
Newly employed Household income of up to 100% of average income (120% for dual incomes), meet five- /ten-year asset criteria for national public housing
The standard rental amount for determining rent level is based on the key money and rental market values for the surrounding region, ranging between 60~80 percent of market value depending on an occupant’s category.
Source: Ministry of Land, Infrastructure and Transport Hompage (http://www.
molit.go.kr)
Source: Ministry of Land, Infrastructure and Transport Hompage (http://www.
molit.go.kr)
Table 16. Standard Rent by Occupant Category
Occupant category Standard rent level
University students 68% of market value
Newly employed 72% of market value
Newlyweds, industrial complex employees 80% of market value Senior citizens (non-vulnerable) 76% of market value
Vulnerable segments 60% of market value
Through the Happiness House provision plan, 26,000 units in 2014, 38,000 in 2015, and 38,000 in 2016 were supplied from public, urban renewal, and public enterprise-owned land. An additional 48,000 units are being supplied in 2017, with project approval scheduled for a combined 150,000 units.
Table 17. Table 18. Happiness House Supply and Plan for 2017 Supply target
(2014~17)
Units supplied Planned for Total 2014 2015 2016 2017
No. of units receiving
project approval 150,000 102,000 26,000 38,000 38,000 48,000
No. of prospective
occupants found 31,000 11,000 - 1,000 10,000 20,000
No. of units occupied 14,000 3,000 - 1,000 2,000 10,000
The Happiness House program is characterized by its provision on lifecycle stages rather than income and the restriction of major sites to areas of job-housing proximity.
And while public rental housing is restricted to those earning below a certain income or enrolled in subscription savings, Happiness Houses chiefly target the young generation and have received praise for setting a new standard for housing supply.
The supply of Happiness Houses remains in the early stage, with relatively few units available on the market; critics also contend that the rents are relatively high.
Young people have complained that while rent for public rental housing is based on construction costs, that for Happiness Houses is set according to market value. Since its early stage, the program has been the target of resident objections to their construction and questions over whether supply can be easily achieved amid a shortage of land designated for such homes. Early delays occurred in the site designation process amid objections from area residents who feared that such housing could result in slumification.
The plan was ultimately downscaled or amended in areas with particularly favorable
Source: Ministry of Land, Infrastructure and Transport Hompage (http://www.
molit.go.kr)
Source: Ministry of Land, Infrastructure and Transport, 2017 Annual Housing Plan
1.2 Jeonse Type Rental Housing for Young People
The rental housing system for young people based on Jeonse is designed to support university students and recent graduates about to enter the job market to develop residential independence. Residences are sought for students or recent graduates selected as targets and re-leased after the signing of a Jeonse contract between Korea Land & Housing Corp. (LH) and a landlord.
The principal targets of this program are university students from other cities and counties and job-seeking graduates of a university or high school in the past two years.
Eligibility for application to the program requires enrollment in a university within the project target region (including those scheduled to return to school in 2017 but not those expected to graduate or postpone graduation in 2017), as well as residence in another city or county to meet the respective criteria for tenancy priority categories.
The rental amount is a security deposit of KRW 1 million to 2 million with monthly rent of KRW 80,000~130,000; deposit and rent amounts differ among the three priority categories.
Table 18. Basic Rental Conditions (Deposit and Rent)
Jeonse deposit Monthly rent Category 1
Category 2 KRW 1 million 1–2% of annual key money not including rental deposit (separate allowance for bad debts equaling 0.5% of rent amount) Category 3 KRW 2 million 2–3% of annual key money not including rental deposit
(separate allowance for bad debts equaling 0.5% of rent amount)
The supply plan calls for 6,000 housing units each with an area of 85 square meters;
residential officetels are to be supplied for 2017. One issue with the residential support policy for young people is that while 81 percent of it comprises key money for rental housing, the recent rise of homes requiring monthly rent means that the majority of available housing to suit the level of government support is rental housing. Even when key money-based housing is found, landlords often shun signing contracts providing key money-based rental housing to young people. Contracts are often not signed, as landlords dislike the cumbersome administrative procedures and prefer to conclude a leasing contract with a student rather than LH.
Source: 2017 LH announcement to solicit prospective tenants for Jeonse rental housing for young people
1.3 Landlord-remodeled Rental Housing
Landlord-remodeled rental housing aims to supply affordable rental housing to students.
Landlords renovate outdated housing to supply as rental units for housing-vulnerable segments, with financing (USD 300,000) provided for the improvements. LH selects the participating students and supervises the move-in and exit process.
The program’s main targets are the landlords of standalone and/or multi-family housing 10 or more years old or those owning vacant land without structures.
If a shortage of rental demand occurs in the first priority category (university students and senior citizens living alone), recruitment is held for such students and job-seeking graduates (unemployed within three years of graduation) to grant renter eligibility. If rental demand is still insufficient through recruitment for the second priority category, recruitment is extended to the general population.
Table 19. Major Details of Pilot Project for Landlord-remodeled Rental Housing
Details Additional info
Owner criteria
① Owner of standalone or multi-family housing built at least 10 years earlier
② Owner of land with no structures
* Owner not granted real rights by way of security
Preference for retirees, single homeowners
Site criteria Preference for areas with large rental demand among university students &
senior citizens
Rental period Eight to 20 years at landlord’s discretion Rent amount 80% of market rate
(50% for residential allowance recipients & other low-income segments)
Financing
Maximum KRW 200 million / 1.5% interest rate / 8~20 year repayment plan deferred for one year (linked to rental duration)
① Pension type (Rental income > Project costs): Equal installments
② Asset type (Rental income ≦ Project costs): Equal or mixed installments (35% lump sum repayment)
Tenants
① University students: Enrolled or scheduled for enrollment or resumption of studies within three months
② Senior citizens living alone: Age 65 or older & comprising single-person household
Income level considered
While students and senior citizens living alone are supplied housing units for 80 percent of market value, low-income households are charged half of market value (with a deposit equal to one year of rent). Landlords entrust rental to LH for the desired period of eight to 20 years, with the government-run corporation collecting rent and providing repayment installments on the landlord’s behalf.
Source: Ministry of Land, Infrastructure and Transport news release, Oct. 2, 2015, “Landlord-remodeled Rental Pilot Project Commences!”
Providers are selected by adding the appraisal values of the site and owner.
- Site appraisal value of 70+ points (out of 100): More favorable rating with better area market rates, site area, university accessibility, concentration of single-person households of senior citizens, conditions for construction implementation, amenities, and transportation accessibility.
- Landlord appraisal value of 20+ points (out of 30): More favorable rating with fewer homes owned, lower income, and higher age (landlords earning fewer than 20 points are also administered as prospective providers if project goals are not met).
Because the landlord-remodeled rental project encompasses demolishing standalone houses and building small-scale multi-family housing, smaller architectural and
construction companies can participate and thus spur job creation. Critics contend that the required rental periods of eight or more years result in low earnings and excessively long leases.
One advantage of the project is that it favors senior citizens (retirees), granting low-interest loans to those who lack the funds to renovate old housing but are concerned over post-retirement funds to sell it. The most appealing aspects include low-interest loans and the recruiting of tenants on the landlord’s behalf, mitigating fears of potential vacancies.