Seoul’s revitalisation in youth housing
Real estate infrastructure in Seoul is relatively well established including office, hotel and commercial facilities. However, critics argue the city…
Real estate infrastructure in Seoul is relatively well established including office, hotel and commercial facilities. However, critics argue the city lacks residential facilities – especially for the “millennial” population.
A decent size of youth population continues to flow into Seoul as the capital offers education, wealth, and higher-wage jobs. According to the Korean Statistical Information Service, new residents moving into Seoul totaled 15,000 to 26,000 people annually over the last six years. Experts believe this trend will continue for the foreseeable future.
A main challenge is that although new apartments and villas are constantly introduced, “affordable housing” remains as a distant dream for young people with high rental rates in Seoul.
Table : Number of young population moved into SeoulSource: Korean Statistical Information Service
New “2030 Youth Housing” programme to alleviate housing challenge in Seoul
The government has announced a youth housing programme, “2030 Youth Housing”, to alleviate this problem. The project sets to revitalise youth housing (‘2030’ refers to the people in their 20s and 30s) by providing quality residences with access to subway stations for young people – college students, recent graduates, and newlyweds.
The project has drawn keen interest from investors, as the government is willing to provide development benefits. Some benefits include increasing the floor area ratio of private land near subway stations, tax reductions and a streamlined process for government applications.
However, many experts believe there is difficulty for investors to enter the rental housing business. Major benefits from this project include the floor area ratio upgrade, but the minimum land area requirement for such an upgrade for a ‘Semi-Residential Area’ is 500 square metres, and 1,000 square metres for ‘Commercial Area’. This means since many lots near-subway station areas are usually less than 200 square metres, to make a deal, investors must obtain at least five agreements with landlords, which is unrealistic.
Regarding rents, the project would require a developer to charge 60-80 percent of market rental rates within each subway station area for at least the first couple of years. After this period, as demand near subway station area is robust, property owners would raise the rent of this new supply to market rates. However, this incentive will disable normal market rental forces as the new supply together with regulated rents will ensure the area’s rent for the near future with limited growth potential.
Government’s programme a positive step
In summary, it is good that the government is actively trying to solve the housing problem in Korea. However, a number of key points need to be rectified as pointed out by critics. Authorities will need to reduce the land size requirement; also it is more realistic to provide rental housing with a relatively lower level of rent by broadening the distance of the subway station areas as rental levels are high.
Nevertheless, 44 sites (or 16,681 households) in Seoul have been selected for the initiative. Moreover, the provision of affordable housing is top priority for the new government. We believe this project would lead Seoul to rise to conquer the housing challenge for Seoul’s young generation.