Korea's public rental purchase program broke ground on fewer than one in 20 proposed units

A newly built home bought for public rental has to clear seven stages after a developer applies: review, a purchase agreement, land acquisition, construction start, completion, purchase and move-in ^[9]. Last year the drop-off came before the fourth stage. About 95 of every 100 units applied for did not break ground ^[1]. The counts come from data the Land Ministry and the Korea Land & Housing Corporation (LH) submitted to Rep. Boo Seung-chan of the Democratic Party ^[10].

The ministry plans to supply 90,000 purchased rental units in greater Seoul this year and next, 66,000 of them in regulated zones of Seoul and Gyeonggi Province ^[8]. Counting supply as ground-breaking, that is 45,000 a year ^[2], about 3.2 times the 14,195 that started last year ^[3]. The report does not say whether the 14,195 figure is national or Seoul-area only ^[10]. If it is national, the Seoul-area gap is wider than 3.2 times ^[3].

According to the report, the job inside the program is to screen out projects with weak viability and clear the obstacles that come up before units are delivered ^[18]. The new terms go at the developer's cash and at the delays from construction-cost checks ^[11][12], with regulatory easing under way to improve project viability ^[19]. Inside the program the developer already has a buyer, so financing is most of what stands between an application and a start. I'd expect the 4.9% conversion rate to rise ^[1].

The wider collapse in permits is a different problem. A public purchase sidesteps the demand side of it for the units LH buys and leaves it in place for every other project. The report lists the causes as the fallout from jeonse (lump-sum deposit lease) fraud, worries about falling home prices, high land and construction costs, rising financing expenses and a stronger preference for apartments ^[6]. Private developers found it harder to recover costs through presales or leases, and a frozen project-financing market weakened the incentive to start anything ^[7].

The outcomes split by channel. The purchase program could hit its count while private permits stay near their low, leaving LH as the main buyer of new villas and officetels. Private permits could extend the modest pick-up the report notes ^[5] without new landlord incentives. Or units could be built where tenants do not want them, an outcome the report warns against when it urges supply criteria that reflect location and quality ^[14]. I think the first is likeliest. The counter-case is that 45,000 purchases a year ^[2] is enough to ease rents whatever private developers do. A full-year permit count well above last year's, reached without any measures for private landlords, would prove this view wrong ^[2].

Kim In-man, head of the Kim In-man Real Estate Economic Research Institute, argues for the private route. "Non-apartment homes have become hard to sell and hard to lease, and with land and construction costs up, building new ones in Seoul is not easy," he said ^[15]. "The priority is improving both financing and regulation to create an environment where the private sector can take on projects again," Kim said ^[16]. The report makes the same case, urging policymakers to draw private landlords back and promote corporate long-term rental housing instead of relying solely on public purchases ^[17].