HOUSING SUPPORT FOR YOUNG GENERATION IN KOREA RESPONDING TO SOCIOECONOMIC CHANGES

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HOUSING SUPPORT FOR YOUNG GENERATION IN KOREA

RESPONDING TO

SOCIOECONOMIC CHANGES

MISEON PARK KRIHS SPECIAL REPORT 39

KOREA RESEARCH INSTITUTE FOR HUMAN SETTLEMENTS SPECIAL REPORT 2017

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Miseon Park is a research fellow at Housing Research Division of Korea Research Institute for Human Settlements.

She holds Ph.D. in Urban Affairs and Public Administration at Cleveland State University in USA. Her research interests include public housing, housing voucher program, housing policy, and rental housing market.

Major research outputs are as follows:

• Housing Situation and Policy Consideration for Young-single Generation. KRIHS, 2017.

• Housing Policy Responding to One-person Households Increase, KRIHS, 2017.

• Housing Welfare Programs to Enhance Housing Stability and Relieve Housing Cost Burden for Newly-weds. KRIHS, 2017.

• Lessons from Korea: Policy Recommendations for Rental Housing in Latin America and the Caribbean. IDB-KRIHS, 2017.

• Young Single Adults as an Emerging Housing Precariat, Space and Environment, 2017

• Achievements and Limitations of Korea’s Housing Policy in Respect to the New Urban Agenda in United Nations Conference on Housing and Sustainable Development (Habitat III), Space and Environment, 2016

• Changing Landscape of Private Rental Market in Korea: Focus on Chonsei System, KRIHS, 2015

• Housing Voucher Program Design, Molit, 2014.

• A Primer on the Korean Planning and Policy: Housing Policy, KRIHS, 2013

• Housing Voucher as a Means of Poverty Deconcentration and Race Desegregation: Patterns and Factors of Voucher Recipients’ Spatial Concentration in Cleveland. 2013.

• ‘Housing Policies in the Republic of Korea’, 2016, Asian Development Bank Institute.

• ‘Fraud and Improper Payment in Housing Choice Voucher Program in the USA’, Housing Studies Review

• ‘Factors Affecting Tenure Choice During 1990-2010’, Journal of the Korea Urban Management Association

Miseon Park

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Summary

Young single adults in Korea recently have faced extended transitional period due to longer education, higher housing price, and gloomy outlook of job market situation.

During last three decades, one-person households have emerged from the least popular household type to the most prevalent one, which leads to huge impact on housing demand and policy. However, due to the severe housing shortage, housing policy in Korea has been focused on the massive production of new apartments, support for the households with dependents, and owner-occupation during last several decades. As a result, single person households and young people have hardly regarded as the priority target group to be considered and rather excluded from the policy consideration, even though it is not intended to. Moreover, housing price is not affordable for young-single and private rental market requires higher deposit and/or higher monthly rent for young generation including college students, newly graduate, and newly-weds.

This research is to investigate the housing conditions of young-single in Korea including housing tenure, affordability, rent burden, living conditions, and their housing policy needs. In addition, questionnaire survey results are incorporated to explore their needs and difficulties in the process of searching, contracting, residing in the private rental market. Finally, the author investigates the question on how the current housing situation has impact on the future life course decision such as seeing someone, getting marriage, having and raising a child, and possessing homeownership.

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Results unfold that young-singles, in particular living in Seoul, face housing hardship in entering housing market to mobilize both heavy deposit and monthly rent due to their weak financial ability and instable job conditions. Lack of education and awareness of rental contract practice put them in dangerous and precarious situation when they search dwelling units and make lease contract. Young people also experience unfair treatment from the property owners and real estate agents due to their age and a lack of knowledge. High cost of living in private rental markets and unaffordable housing price make young people in disappointment, resulting in serious negative impact on the future life decision. According to the questionnaire survey, high housing cost and rent burden would have negative impact on their dating, marriage, having a child, and purchasing a home.

Inclusive policy should be put in place for young-single to provide more affordable housing, enhance housing conditions, residential stability, and provide soft services and education. Providing affordable units include utilizing vacant units through remodeling into share housing for singles. Considering housing subsidy for young-single could give them time to save money for the better units and to accumulate higher deposit. Raising public awareness on the way of searching and contracting the units with the rights and responsibility of tenants will be prerequisite to position them in a better situation.

Considering young generation would be one of the most urgent and inclusive ways of achieving sustainable society.

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CHAPTER I.

Introduction

All governments worldwide consider housing and related support as important matters.

In Korea, housing issues rank high among the Moon Jae-in administration’s top 100 governance tasks, including creating a housing environment in which the working class can “live with peace of mind” (Task No. 46), reducing the housing burden of young people and newlyweds (No. 47), and overcoming the country’s low birth rate by investing in future generations (No. 48). A key feature in this regard is focus on young people. While past administrations recognized the need for and made efforts to support housing for young people (i.e., the Happiness House program), the problem did not command enough priority to be listed as a governance task. Under the Moon administration, however, the young generation is considered important enough to be a major focus of housing policy, and the key demographic in housing welfare has led to concrete measures provide housing support as a governance task. Traditionally, the young generation has not been a significant focus of policy, as members have the ability to work and take on adult responsibilities. But rapid changes in the country’s socioeconomic conditionsfaced by young people, their exposure to worsening housing conditions, and their inability to secure adequate housing through personal efforts mean the housing issue for the young generation requires more serious consideration when broadening the reach of housing welfare. Given the importance of the young generation this paper is to investigate the rationale of why young generation be considered as a new policy target, what types of support be relevant regarding their affordability and housing needs, and finally which directions be taken into account to support them and to make society sustainable as a whole.

Under the Moon administration, the young generation is considered important enough to be a major focus of housing policy, and the key demographic in housing welfare has led to concrete measures provide housing support as a governance task.

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CHAPTER II.

Changing Environment for Housing Policy

1. The Development of Housing Policy

1.1 Focus on Heads of Households, Low-income Bracket, and Vulnerable Population Segments

So far, a severe housing shortage justified prioritizing housing for heads of households raising children within a family framework.

Korean housing policy has undergone a transformation toward promoting housing welfare and improving residential quality after having tackled a quantitative shortage of dwelling units. Initially, the absolute lack of housing resulted in an approach in which limited resources were distributed according to priorities based on a certain standard. In this case, housing policy gave priority to the heads of households, families with multiple children, and support for senior citizens and the low-income bracket. This approach gained legitimacy as a reflection of the circumstances of the times.

In Korea’s past, severe housing shortage justified prioritizing housing for heads of households raising children within a family framework.

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In a society where universal welfare did not adopted housing policy focused on support directed mainly on the segmentation of low-income and vulnerable population.

Inevitably, this meant that those who have the capacity to work (including young people) and those with little or no childcare burden (such as single-person households) ranked low on the housing policy.

Given the objective lack of housing and limited resources, the priority targets for policy measures were heads of households raising children within a family framework. In allocating the limited housing supply, the approach of prioritizing low-income household heads who were raising two or more children and caring for elderly parents gained legitimacy. Government support also consisted of distributing housing resources to vulnerable population segments, including low-income earners, senior citizens, and the disabled. The social climate at the time compelled the adoption of a residual welfare model rather than one of universal welfare, and the channeling of support to the lowest-earning and most vulnerable population segments emerged as an important facet of housing policy. Inevitably, this meant that those who could work (including young people) and those with a relatively small childcare burden (such as single-person households) ranked low on the list of policy priorities.

1.2 Housing Price Escalation and Inadequate Support

Given the rise of housing prices, the promise of home ownership by the young generation has gradually receded because of their insufficient economic means. The supply of low-cost housing that young people can afford also remains inadequate. About twenty percent of young generation who entering private rental market should mobilize relatively small amount of security deposit (under KRW 10million) but they face high housing cost burden considering their income and ability to pay. (Park et al., 2014) To ensure the continued soundness of the National Housing and Urban Fund, the system of assistance for rental deposit loans is based on a renter’s ability to repay. This makes it substantially difficult for young singles to secure such loans, given their difficulty proving a stable income to qualify.

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2. Changing Household Structures: Sharp Rise in Single- Person Households, Sharp Dip in Average Household Size

2.1 Poor Policy Response to Sharp Rise in Single-person Households The rise in single-person households in Korea has been faster and steeper than predicted, and the government’s policy response has failed to keep pace with societal changes. Further constraining policy to respond to this situation are prevailing perceptions of young people’s issues as “family matters” to be resolved by family.

2.2 Shrinking Size of Average Household

The average household size in Korea has undergone change as rapid as the country’s economic growth. In 1980, the prevailing household type was a large family, with 49.9 percent of households consisting of five or more members. The number of families with four or more members has steadily declined, however, and the last population census conducted in 2015 showed that the single-person household is the most

common household type in Korea with 27 percent, with two-person households coming in second. This situation demands changes to housing policy, which has traditionally focused on households with three to four members.

2.3 Increase in Single-person Households

According to Statistics Korea, a single-person household is defined as a household consisting of one individual residing alone and sustaining an independent lifestyle, including cooking and sleeping (Statistics Korea homepage). The number of households in Korea is projected to decline after peaking at 22.34 million in 2043. By 2045, the figure is expected to dip to 22.32 million, and with the expected drop in the number of households, minus growth is predicted to begin from 2044. As a result, the average number of household members is projected to fall from 2.53 in 2015 to 2.1 in 2045.

The single-person household is expected to see the greatest increasing in number through 2045. Household forecasts by Statistics Korea (2017) say that by 2045, the Korean household will have shifted from a family-centered structure to one centering on single- or two-person households. As of 2015, the predominant household form consisted of a married couple and children (32.3 percent), followed by a single person (27.2 percent) and married couple with no children (15.5 percent). In 2045, however, 36.3 percent of households will consist of one person while the figures for married couples without and with children are predicted to fall to 21.2 and 15.9 percent, respectively.

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Figure 1. Household Forecasts: No. of Households & Household Growth Rate (2015~2045)

(10,000 households) (%)

Household growth rate All households 2,500

2,000

1,500

1,000

500

0

2.0

1.0

0.0

-1.0

2000 2001 2005 2017 20432010 2015 2020 2025 2030 2035 2040 2045

1,451

1,901

2,164 2,234 2,232

1.65 1.85

1.24

0.01 -0.07

Source: Statistics Korea, 2007, Future Household Estimates (2015~45), p. 2.

Figure 2. Changing Component Ratios for Major Household Types (2015~45)

15.9

32.3 15.5 10.8 14.2

10.6 14.9

20.7

19.3 34.6

11.0 14.7

24.2 31.9 18.3

21.2

36.3 10.1 16.5

27.2

Couple + children Single person Couple Parent + children Other

0.0 20.0 40.0 60.0 80.0 100.0

2015

2025

2035

2045

(%) (Year)

Source: Statistics Korea, 2007, Future Household Estimates (2015~45), p. 2.

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The nature and characteristics of the rise in single-person households suggest that the latter’s number will rise from 5.18 million in 2015 to 8.1 million by 2045. Accordingly, the share of single-person households will also rise from 27.2 to 36.3 percent of all households over the same period. By age group, people in their 30s accounted for the largest number of single-person households in 2015 at 1.91 million, with the number predicted to dip to 1.77 million in 2045. Among family types, households consisting of a childless married couple appear likely to see a steady decrease. By 2045, the number of senior citizens age 65 and over living alone will have jumped 3.1 times its 2015 level.

Figure 3. Component Ratios for No. of Household Members (2015~45)

■ 1 ■ 2 ■ 3 ■ 4 ■ 5+

100%

80%

60%

40%

20%

0%

6.4 3.6 2.3

9.5 20.2

33.4

34.6 36.3

35.0 19.8 13.0 7.4

21.0

30.5

31.9 18.8

21.5

26.1

27.2

2015 2025 2035 2045

1.6

Figure 4. No. of Single-person Households by Age Group (2015~45)

(10,000 households) 800

600

400

200

0

2015 2025 2035 2045

191 85 66 87 89 518

810

316

121 108 87 177

■ 30s and under ^■ 40s ^■50s ^■60s ^■70s and over Source: Statistics Korea, 2017,

Household Forecasts, p. 2.

Source: Statistics Korea, 2017, Household Forecasts, p. 2.

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The age group accounting for the largest distribution of single-person households is also predicted to change. As of 2015, people in their 20s and 30s were the most representative group among single-person households, with relatively large distributions of those in their 40s and 50s. Due to Korea’s low birth rate, however, a steady decline has occurred in young single-person households and an increase in those comprising 50- and 60-somethings. In 2045, most single-person households will be of the elderly in their 60s and 70s, suggesting that more attention now is needed to those in their 30s and 40s.

Figure 5. Changing Component Ratios for Single-Person Households by Age Group (2015~45)

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

<20s 20s 30s 40s 50s 60s 70s 80s 90+

2015 2025 2035 2045 1.2

17.2 18.5

16.4 16.7

12.8

11.4

5.3

0.5 0.8

11.3

9.8 10.8

13.4

15.0

21.5

14.8

2.8

Source: Statistics Korea, 2017, Household Forecasts

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Single-person households of the elderly age 65 and over are predicted to surge in both number and percentage. The number of such households is expected to rise from 1.2 million in 2015 to 3.7 million 30 years later, indicating an urgent need for response measures. The growth rate of this demographic is roughly on par with that of Japan, where the aging population trend is severe. In Korea , the percentage of single-person households age 65 and over by 2035 is projected to reach 39.2 percent, or roughly equivalent to Japan’s rate of 40.8 percent. Needless to say, comprehensive measures to prepare for this phenomenon are needed.

Figure 6. Proportion of Senior Citizen Overtime

1,000

800

600

400

200

2015 2025

121 310

120

372

37

98

23

36

21

51

2035 2045

■ Childless couples ■ Single persons ■ Couples with children

■ Three or more generations ^■ Parents with children (10,000 households)

Figure 7. Household Projection of Over 65 years by Country

2015 2035

Korea 19.3

U.K.

Japan

0

(%) 10 20 30 40 50

28.5

35.7 39.2

37.0

40.8 Source: Statistics Korea, 2017, Future

Household Estimates, p. 3.

Source: Statistics Korea, 2017, Future Household Estimates, p. 3.

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The percentage of single-person households in Korea (27.2 percent) is below the OECD average (30.7 percent). At the same time, reports indicate an unusually fast increase in the number of single-person households in Korea compared to major developed countries.

Figure 8. Single-person Household Component Ratios by Country 50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

Finland Norway

Estonia Denmark Germany Switzerland Netherlands Austria Sweden Japan Latvia Belgium France Luxembourg Slovenia Czech Republic Hungary Iceland Italy U.K. Canada Korea U.S. Greece Slovakia Poland Australia Ireland

OECD Avg.(30.7)

New Zealand Spain Portugal

41.0 39.6

37.3 36.4 36.2

34.4 33.8 32.8 32.1 31.1

27.627.226.7 25.3 23.9 23.5 21.4

Mexico

7.6

Source: Statistics Korea, 2017, Future Household Estimates, p. 23.

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3. Late Marriage, Lifelong Singlehood, Low Birth Rate, and Aging

3.1 The Sharp Drop in Marriage among the Young Generation is due to Economic Instability, the Childcare Burden, and Severe Housing Cost Burden

The past 10 years have witnessed the societal trends of decreasing marriage and childbirth rates for Korea’s young generation. The number of marriages declined from 331,000 in 2006 to 282,000 in 2016; the number of marriages per 1,000 people also fell from 6.8 to 5.5 over the corresponding period. First-time marriages saw a steady decline from 259,000 in 2011 to 238,000 in 2015. The number of births also fell from 448,000 in 2006 to 406,000 in 2016. The same figure for 2017 is projected to fall below 400,000, indicating a fast-approaching demographic cliff.

Table 1. Number of Married Couple (2015)

Category Total 1st year 1st to 2nd year 2nd to 3rd year 3rd to 4th year 4th to 5th year

All newlyweds 1,471,647 290,766 294,962 299,543 297,118 289,258

First-time marriage 1,248,896 258,637 257,003 255,554 239,427 238,275

Source: Statistics Korea, 2015, Demographic Trend Statistics (Marriage)

3.2 Persistence of Low Birth Rate

Korea’s birth rate is near the very bottom among OECD member countries, with a total fertility rate (TFR) of 1.17 in 2016. This means Korea was just ahead of only Singapore and several other countries, placing 220th among 227 countries in TFR.

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Figure 9. Korea’s No. of Childbirths & Total Fertility Rate

2

1

0 600

500

400

2005 435

1.076 1.123

1.25 1.192

1.149

1.226 1.244 1.297

1.187 1.205 1.239

1.172

448.2

493.2

465.9

444.8

470.2 471.3

484.6

436.5 435.4 438.4

406.2

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

No. of children born (1,000)

Total fertility rate (childbirths per fertile female population)

No. of children born

Total fertility rate (childbirths per fertile female population)

Source: e-Nara Indicators (http://www.index.go.kr/potal/main/EachDtlPageDetail.do?idx_cd=1428)

3.3 The Reduced Ability to Afford Housing among Newlyweds is a Societal Issue Closely Tied to Korea’s Low Birth Rate and Preparation for Sustainable Future Society

Research shows that the housing cost burden for young people is poised to negatively influence dating, marriage, and childbirth and childcare, with the situation rated as “highly severe” for marriage (83 out of 100 points) and childbirth (87) (Park et al., 2017).

Provincial housing and rental deposit prices have also been found to discourage marriage and childbirth, while household residential costs have significant influence over a couple’s decision to postpone having children.

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3.4 Reducing the Housing Cost Burden for Newlyweds

The Korean government in the past sought to provide housing for newlyweds. The incumbent Moon administration has carried on this tradition by announcing plans to supply 200,000 units of public rental housing to newlyweds by 2022 (No. 47 of the administration’s top 100 governance tasks). In particular, the government plans to raise the percentage of the special housing supply for newlyweds when building customized housing for them and selecting tenants for public rental housing.

4. Need to Prepare for the Future

4.1 Structure Change: Crippling Housing Market

Changing socioeconomic conditions and demographic structure are calling into question a policy focus that had been taken for granted in the past. The government’s response has failed to keep pace with societal change, as the number of single-person households has surged faster than expected. In certain respects, the housing problem for young Koreans has been worsened due to lack of policy support and the widespread perception that the issues of young people are family matters that should be resolved by parents or relatives. In the past, poor residential environments were a temporary, transitional phenomenon; in contrast, today’s dilemma involves structural aspects that could make the problem entrenched if left unaddressed. While parental support was considered partially in the past, the situation now is a deep divide between young people who receive such support and those who do not. This further raises the threat of social inequality being deepened in housing culture. In addition, whereas the older generation lived in an era in which the family home was inherited in return for caregiving for elderly parents, today’s generation is faced with the responsibility of preparing for its own retirement and diminishing capabilities to support children. Accordingly, the prospectof home ownership is also declining among the young generation. Fears have grown of a collapse in the “Housing Ladder” leading from rental units through key money (jeonse) leases and eventual home ownership. Young Koreans are also at greater risk of entering the working poverty class given the rise in temporary employment and low economic growth. Sustained in the past despite a difficult housing environment, lifecycle progression to marriage, childbirth, and childcare has given way to late marriage, lifelong singlehood, and postponement of or abstention from childbearing. This critical situation impedes social vitality and raises new questions about sustainable development.

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Table 2. Environment Changes and Issues for Young Households

Past Present Issue

Poor housing

environment Temporary, transitional Structural Potential for entrenchment

Support from

parents Partial Divide according to parental

support

Societal inequality replicated in housing culture

Tenure Type Parents’

generation

Housing inherited as “package”

with caregiving responsibilities for elderly parents

Eroding ability to support children as parents prepare for retirement (housing pension)

Declining possibility of home ownership

Tenure Type

Ownership preference;

Key money lease ^⇒ Home ownership

Ownership unlikely; deposit/

rental arrangements predominate Collapse of “Housing Ladder”

Jobs Socioeconomic expansion, opportunities for regular employment

Low-growth conditions, scarcity

of permanent jobs Threat of rise in

“working poor” population

Societal ripple effects

Cycle of marriage, childbirth,

& childrearing sustained

Lifelong singlehood, late marriage, couples postponing/forgoing childbirth

Low birth rate, rapidly aging society, diminished social vitality

4.2 Similar Trends Occurring Overseas

These phenomena are not unique to Korea, but have been witnessed overseas.

Economic crises and severe housing inflation have raised fears throughout the world that the transitional period from youth to adulthood is being prolonged. The situation is critical enough that some characterize the transition not as deferred or prolonged but as

“frozen,” while many note the severity of young people’s inability to make the transition to the next lifecycle stage (Clapham et al, 2012; Mackie, 2016; Minguez, 2016; Kuhar

& Reiter, 2012; Mckee, 2012). Support for young households means assuming societal responsibility for issues that households cannot resolve on their own, and requires a policy response to social and economic changes and concerted efforts from everyone for a sustainable future.

Source: Author

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CHAPTER III.

Residential Conditions for Young Households and the Severity of the Housing Cost Burden

Any decision on the type of housing support to be provided is closely tied to determination of the young generation’s housing issues and identification of problem areas. This section focuses on instability in entering the housing market; dependence on parents due to limited access to funds; and weaknesses in the housing search, contracting, and occupancy process. The findings are based on questionnaires along with in-depth interviews with 500 young people in the Seoul Metropolitan and Busan areas in 2017 between June and July.

1. Instability in Entering the Housing Market

Analysis of data on key money transactions between 2011 (when such data were first collected) and 2014 showed a decline and concentrated spatial distribution in low deposits of under KRW 50 million from two years prior, along with localized increases in deposits of KRW 300 million or more (Park et al., 2014). By age group, a rapid hike was seen in people in their 20s entering the rental housing market. At the same time, a market difference was also found according to tenure type (key money or Jeonse vs. MRD(Monthly Rent with Deposit) and residence type (apartment vs. non- apartment). On average, Jeonse deposits were larger than MRD; for apartments, Jeonse amounted to roughly double the deposit amount for non-apartments. In light of the financial situation and access to funds by people in their 20s, this is likely to represent a transfer of wealth from their parents’ generation, indicating the potential for deepening intragenerational inequality in the housing market.

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Table 3. Changing Key Money and Rental Amounts for 20s Koreans

Avg. price(Units: KRW 10,000 )

2011 2012 2013 2014 (1st half)

Jeonse

Apartment (a) 9,213 10,370 11,040 11,940

Non-apartment (b) 4,757 5,256 5,646 5,903

Ratio (a/b) 1.9 2.0 2.0 2.0

MRD

Apartment (a) 2,675 2,837 2,854 3,079

Non-apartment (b) 1,709 1,806 1,796 1,738

Ratio (a/b) 1.6 1.6 1.6 1.8

Rent Apartment 46 46 46 44

Non-apartment 33 34 34 35

2. Limited Accessibility to Public Fund and Increased Reliance on Parents

According to the Ministry of Employment and Labor, the average monthly wage for Koreans in their 20s was KRW 1,718,000 as of 2015, with averages of KRW 2,070,000 for regular workers and KRW 1,059,000 for irregular or temporary staff (Survey of Working Conditions by Employment Type). The national median rent in 2015 for a deposit-based rental in row or multiplex housing was KRW 360,000. Even for those possessing the funds necessary to put down a deposit, the amount was roughly 33.7 percent of the monthly income of a 20s irregular worker. Moreover, regular workers saw annual wage increase of 4.7 percent on average over the past 10 years, but the rise for irregular workers was only 1.7 percent, the lowest growth among all age groups.

Thus it is hardly surprising that surveys on young single in Seoul and Busan residents found that they depend on parental support for an average of 71 percent of deposit and 65 percent of monthly rent. This provides indications of the potential for young people to occupy and eventually purchase suitable housing without parental support is hardly achievement. Access to affordable housing is expected to decline in the absence of market changes in income levels or financial conditions for the young generation, suggesting the need for supply of affordable housing units.

Source: Park, 2015, Changing Landscape of Private Rental Market in Korea

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Table 4. Deposit Amount and Parental Reliance Deposit

(KRW 10,000) Amount of parental support

(KRW 10,000) Reliance on parents (%)

Deposit(Average) 2,066 1,476 71.4

Jeonse 7,148 4,430 62.0

MRD 1,542 1,178 76.4

Monthly rent 34.6 22.5 64.9

Monthly maintenance cost 5.0 2.1 42.5

Total monthly living cost 90.3 46.0 50.9

Figure 10. Deposit Amount & Parental Reliance

Deposit amount

OOO

\0 \0

OOO Parental

support

62%

Parental support

76.4%

11.8KRW ^million

Jeonse

KRW 71.5 million KRW 15.4 million^MRD

44.3

KRW ^million

2.1 Housing Burden of Young Koreans: Heavy Reliance on Parents, High Costs of Housing and Interest

Security deposits for housing average KRW 20.7 million, of which with parental support covers 71 percent or KRW 14.8 million. Average monthly rent comes to KRW 350,000, 65 percent of which is paid by parents. Young Koreans are also found to spend KRW 900,000 per month in average living costs, of which their parents chip in an average of KRW 460,000 (50.9 percent). University students showed similarly high levels of parental reliance for housing security deposits and rent before entering the job market after graduation. Once young people started working, reliance on parents was found to sharply decline, with those employed paying half of their housing deposit and all of their rent in general.

Source: Park, 2017, Housing Policy Consideration for Young-single in Korea

Source: Park, 2017.

Source: http://www.krihs.re.kr/issue/

infographicView.do?seq=421 (Park, 2017)

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Table 5. Housing Costs & Reliance on Parents for Young Koreans by Life Stage University

students Recent university

graduates Employed

Deposit

Deposit amount (KRW 10,000s) 1,584 1,844 2,980

Parental support (KRW 10,000s) 1,344 1,535 1,488

Reliance (%) 84.9 83.2 49.9

Rent

Amount of rent (KRW 10,000s) 35.4 34.2 34.5

Parental support (KRW 10,000s) 30.9 28.4 2.4

Reliance (%) 87.3 82.9 7.0

This reliance on parental support is closely tied to the housing cost burden. Monthly rent was rated as the largest housing cost burden with 80 points (a score of 100 represented

“extremely burdensome”), followed by security deposit with 72. By life stage, university students (who heavily rely on parents to cover housing security deposits) expressed a relatively lower perception of the housing cost burden and a higher perception of the rental cost burden. Those working gave relatively low ratings to the housing burden, but exhibited little differences from university students and expressed a considerable sense of burden.

Source: Park, 2017, Housing Policy Consideration for Young-single in Korea

This reliance on parental support is closely tied to the housing cost burden.

Monthly rent was rated as the largest housing cost burden with 80 points (a score of 100 represented “extremely burdensome”), followed by security deposit with 72.

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3. Issues in the Housing Funding, Leasing, and Occupancy and Subsequent Effects

Young people in Korea confront numerous issues in the process of finding, leasing, and residing proper housing to reside independently from their parents. To begin with, the acquisition of information on the housing search occurs chiefly online or through acquaintances. A shortage of affordable housing leaves young people with few options, and housing of poor quality is often available to them given their tight financial circumstances. Young people also lack basic knowledge of potential issues in the lease- signing process and have little recourse when confronted with high brokerage costs, unsatisfactory service, and temporary contract demands. In the occupancy stage, they are vulnerable to refusals or fees for wallpapering and flooring, rent hikes, and excessive utility bills. The housing cost burden as perceived by young people has the potential to strongly influence major life decisions.

3.1 Extended Effects of Housing Cost Burden

In forecasting the effects of the housing cost burden, relatively significant dissatisfaction was reported in dating (65 out of 100 points, with 100 representing “extremely serious”), which would appear to have little connection to housing. This indicates that young people are so anxious over high housing costs that they feel unable to pursue even an integral part of human life. Negative effects due to their perception of the housing cost burden also greatly impacted on their plans for the next stages of the lifecycle: marriage (83 points), childbirth and child rearing (87), and home ownership (87).

Among life stages for young people, the most severe effects were observed among job- seeking university graduates, an apparent reflection of this group having the least certain prospects and the greatest psychological instability.

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Table 6. Negative Effects of Housing Cost Burden on Life Course Decision

Degree of influence (points)

All University students Job-seeking graduates Employed

Dating 65.4 64.3 66.2 65.1

Marriage 83.1 83.5 83.9 81.3

Childbirth & childrearing 86.7 88.3 87.4 83.7

Home ownership 87.2 86.1 88.3 86.1

In increasing order of intensity, respondents reported that their perceived level of housing cost burden could influence them to postpone or forgo the lifecycle decisions of dating, marriage, childbirth and childrearing, and home ownership. The survey findings thus support the conclusion that young people are seriously considering delaying or even forgoing marriage, childbirth and childrearing, and home ownership when the housing cost burden is severe enough for them to even put off dating.

Figure 11. Influence of Housing Costs on Future Decisions

Dating

65.4

86.7

Marriage

83.1

87.2

Childbirth & childrearing

Home ownership Severity of Housing Cost Influences on Future Decisions for Young Single-

Person Households

Note: Effects of the housing cost burden have been measured on a scale of 0~100 points, where 100 represents the heaviest burden. A higher score indicates a more negative effect.

Source: http://www.krihs.re.kr/issue/

infographicView.do?seq=421 (Park, 2017)

Note: Converted to scale of 0~100 points, where 100 represents “severe enough to postpone or forgo.” Higher scores indicate greater severity.

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4. Vulnerable Housing Environment

4.1 Housing Types

Data from the Housing Conditions Survey were used to analyze housing conditions for young people, focusing on single-person households ages 19~34.

Housing type: Detached > Officetel > Apartment

As of 2016, 50.5 percent of all young Koreans living alone occupied a detached dwelling, while 24.1 percent lived in an “officetel” (combined residential and commercial dwelling).

In the Greater Seoul area, officetels accounted for over a third (37.4~43.1 percent) of those living in detached dwellings. Since 2006, the percentage of young Koreans living alone in detached houses has fallen while that of those residing in officetels has risen; the proportion of officetel occupancy has conspicuously surged in the Greater Seoul area.

Table 7. Housing Types for Young Single-Person Households (2016)

(Unit: %) Detached Apartment Row/Multiplex Non-residential Officetel

All households 35.3 48.1 11.1 1.7 3.1

Young single-person households 50.5 13.9 9.9 0.9 24.1

Greater Seoul 43.1 6.5 11.4 0.7 37.4

Seoul proper 48.3 5.9 9.1 1.3 33.9

Outside Seoul area 59.7 23.2 8.1 1.0 7.5

Prevalent Type of Tenure for a Young Single-person Household was a Rental Arrangement with Deposit (56.8 percent)

The prevalent type of tenure for a young single-person household was a rental arrangement with a deposit with 56.8 percent, or more than double the average for that tenure type nationwide (20.3 percent). The highest percentage was found in Seoul (59.0 percent), while monthly rent without deposits accounted for a relatively large percentage outside of the Seoul area (15.3 percent).

Source: Housing Conditions Survey, 2016.

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Table 8. Tenure Types for Young Single-person Households (2016)

(Unit: %)

Home ownership Jeonse MRD Rental without deposit Free of charge

All households 56.8 15.5 20.3 3.4 4.0

Young single-person households 6.2 21.8 56.8 9.8 5.4

Greater Seoul 5.5 26.5 59.0 5.4 3.6

Seoul 3.9 29.4 60.7 3.0 3.1

Outside Seoul area 7.1 15.9 54.0 15.3 7.7

Housing Prices and Rent

Key money for young single-person households in 2016 averaged KRW 64.76 million, while rent averaged KRW 380,000 with a KRW 9.87 million deposit. Deposits and rent were markedly higher in the Greater Seoul area and Seoul Metropolitan Area; for the latter, the average monthly rent rose to KRW 500,000. This resulted in an additional financial burden of over KRW 20 million for key money or KRW 10 million for a rental deposit for those relocating to Seoul from outside the capital region, as well as an additional rent burden of over KRW 200,000 a month.

Table 9. Housing Cost & Rent Burden for Young Single-person Households

(Unit: %)

Home ownership Key money Rental with deposit Rental without

deposit

Deposit Rent

All households 24,353 12,798 2,075 31.9 24.2

Young single-person households 17,323 6,476 987 37.9 26.2

Greater Seoul 20,491 7,393 1,298 44.6 27.9

Seoul Metropolitan Area 23,919 7,705 1,645 49.2 27.4

Outside Seoul area 14,258 4,566 565 28.9 25.4

Continous Rise in Housing Cost Burden since 2006

Between 2006 and 2016, the average amount of key money rose KRW 27 million, that of a rental deposit over KRW 3 million, and that of rent over KRW 100,000 a month.

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Table 10. Housing Prices & Rent Burden for Young Single-person Households (Nationwide, 2006~16)

(Unit: KRW 10,000s)

Home ownership Key money Rental with deposit

2006 12,212 3,797 622 28.4

2008 12,962 3,857 847 30.9

2010 11,572 4,719 828 30.6

2012 13,064 6,816 890 33.2

2014 15,958 5,671 1,000 36.6

2016 17,323 6,476 987 37.9

Table 11. Housing Prices & Rent Burden for Young Single-person Households (Greater Seoul, 2006~16)

(Unit: KRW 10,000s)

Home ownership Key money Rental with deposit

2006 16,434 4,558 777 34.1

2008 16,842 4,286 1,125 34.3

2010 18,741 5,581 1,092 36.1

2012 16,143 8,100 1,051 37.1

2014 17,263 6,962 1,441 43.5

2016 20,491 7,393 1,298 44.6

The rent-to-income ratio (RIR) equaled 19.7 percent for 2016, higher than the 18.1 percent for all households.

Source: Housing Conditions Survey, each year.

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4.2 Housing Vulnerabilities

Percentage Living in Studio, Basement, Semi-basement, and Rooftop Dwellings The number of young single-person households occupying housing units like studios, basement or semi-basement homes, rooftop dwellings, flophouses , and single rooms with three or more occupants was greater than the average for all households nationwide. Roughly seven out of ten young people occupied a studio apartment (68.9 percent). Young people accounted for a higher percentage (6.5 percent) than the national average (3.9 percent) for occupancy in vulnerable residence types (basement, semi-basement, or rooftop home, flophouse, or a single room with three or more occupants), with conspicuously high rates of vulnerable residence occupancy for the Greater Seoul area (11.6 percent) and Seoul proper (15.7 percent). The percentage of young people living in studio apartments steadily rose from 51.8 percent in 2006 to 68.9 percent in 2016.

Table 12. Young Single-person Households Occupying Vulnerable Residence Types (2016)

(Unit: %)

Studio Basement/

Semi-basement/Rooftop Flophouse Single room with 3 or

more occupants All vulnerable residences

All households 9.4 3.1 0.4 0.2 3.9

Young single-person households 68.9 5.4 1.1 - 6.7

Greater Seoul 70.4 9.7 2.0 - 11.6

Seoul proper 69.0 12.3 3.5 - 15.7

Outside Seoul area 67.0 - - - 0.4

Housing Below Minimum Residential Standards

The percentage of households occupying housing units that failed to meet minimum residential standards was higher for young people (6.9 percent) than for all households (5.4 percent). Per capita housing area was also a bit lower for young people than the national average.

Table 13. Occupancy Rates for Housing below Minimum Residential Standard & Housing Area Per Capita

(Unit: %, ㎡)

Source: Housing Conditions Survey,

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4.3 Housing Stability: Relocation and Average Duration of Residence Young single-person households showed an 82 percent relocation rate within two years of occupancy, with an average residence duration of just 1.3 years. As of 2016, 89.9 percent of young people had moved within the previous two years and the average residence duration was nine-tenths of a year, indicating a slightly improved situation in housing stability. Average residence duration was 7.7 years for all households and six years for single-person households, indicating a trend of frequent relocation. Korea is considered to have a high rate of population migration among OECD member countries, with a markedly high moving rate for young people (OECD, 2016).

5. Threat of Housing Cost Burden to Expand Working Poor

5.1 Potential for Housing Issues to Create Working Poor Class ^→ Diminishing Future Stability

It is a practical impossibility for young people to raise the funds needed for large rental deposits without parental assistance. Key money leases are also rapidly giving way to rental arrangements as the chief form of housing for young Koreans, with high levels of monthly rent. This means rent is growingly accounting for a larger percentage of young people’s monthly earnings. Policy is thus urgently needed to tackle the increasing likelihood of the emergence of a “working poverty” class, namely members of society who remain poor despite working hard.

5.2 Support for “Dirt Spoon” Claims As a result of excessive spending on

and high prices for housing, young people seem to suffer from a sense of deprivation and resignation vis-a-vis their prospects for obtaining home ownership on their own.

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CHAPTER IV.

Policy Measure to Support Young

Generation

1. Central Government Policy toward Housing Support for Young Generation

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.

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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)

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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

molit.go.kr)

Source: Ministry of Land, Infrastructure and Transport, 2017 Annual Housing Plan

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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

HOUSING SUPPORT FOR YOUNG GENERATION IN KOREA RESPONDING TO SOCIOECONOMIC CHANGES