Refer Report
Korea Land and Housing Corporation (LH) will supply more than 50,000 new rental housing units in the metropolitan area this year. It plans to supply more than 100,000 units by next year.
On the 2nd, LH held a briefing session on the current status of new purchase and lease at its Seoul Regional Headquarters and announced that it would expand housing supply by raising government support prices and adjusting the upper limit of the debt ratio. Purchased rental housing refers to public rental housing where LH purchases existing villas and officetels and rents them out to young people or newlyweds at up to 80% of the market price.
LH will supply 18,000 of these as solid rental housing that can be rented for 8 years, and 50,000 as conversion to sale housing that can be purchased after 6 years of residence if desired. In particular, in Seoul, where non-apartment supply is insufficient, LH will not impose quantity restrictions and will purchase without limit until the supply normalizes.
The target volume announced this time greatly exceeds LH’s past purchase of new housing for lease. LH’s new housing for lease supply performance was 16,254 households in 2021, 11,830 households in 2022, and 4,439 households in 2023. Therefore, there are concerns that if housing purchases and supply are drastically increased, low-quality housing may be purchased and supplied at high prices.
LH President Lee Han-joon said, “We plan to increase the number of housing purchase personnel in the metropolitan area from 87 people in 4 teams to 200 people in 9 teams,” and added, “We will strictly manage each stage of design, construction, and completion to ensure that there are no quality issues.” He added, “We will set an appropriate price and purchase by cross-checking using the ‘construction cost linkage’ and ‘appraisal methods.’”
If the number of rental housing units increases, LH’s financial burden will also increase. The average purchase price of new rental housing units supplied by LH so far was 250 million won, and the Ministry of Strategy and Finance’s subsidy was only 160 million won. LH has been paying the remaining 90 million won. LH plans to increase the government subsidy ratio from 65% last year to 95% by 2028.
The government adjusted the unit price of support for rental housing purchases in the budget plan for next year released last month, raising the subsidy ratio to 72%. It plans to increase it to 86% in 2026, 90% in 2027, and 95% in 2028. President Lee explained, “We will consult with the government to make the support unit price realistic over a five-year period until 2028.”
LH has also decided to increase its debt. This is to cover the cost of building a third new city and a new industrial complex along with the supply of new purchase rental housing. Currently, LH’s debt is 153 trillion won, and its debt ratio is 218%. The Ministry of Strategy and Finance has requested LH to lower its debt ratio to 208% by 2027.
The CEO said, “In order to promote the 3rd new city and 14 new national industrial complexes, we need to raise more private debt and compensate for it,” and “We are in discussions with the government to change the debt ratio, which should be lowered to 208% by 2027, to 233% by 2028.”
The CEO said, “Unlike other public institutions, LH’s debt is structured to acquire assets by borrowing debt, so it can be recovered by selling the land after 5-6 years.” He added, “Out of the 83 trillion won in financial sector debt, the National Housing Fund accounts for 45 trillion won, and private debt does not even account for 40 trillion won, so it is not a level of debt that the public or the government should be concerned about.”
Oh Se-seong, Hankyung.com reporter sesung@hankyung.com
Source: Korean