South Korea's ambitious rental housing target faces slow progress

South Korea's government is pushing to supply 90,000 rental housing units in the Seoul metropolitan area by next year as a measure to stabilize the volatile jeonse (lump-sum deposit) and monthly rent market. Despite this ambitious goal, current contract performance is raising concerns about its feasibility.

Data from the Ministry of Land, Infrastructure, and Transport reveals that between January and April of this year, the Korea Land and Housing Corporation (LH) signed agreements for only 3,217 rental units in the metropolitan region. This figure, comprising 2,678 newly built units and 539 existing ones, represents a mere 10.4% of the year's target for the region. Even considering that contracts often concentrate towards the end of the year, this performance is deemed insufficient to meet the overall objective.

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Already the non-apartment market has seen significant price drops, and the situation is not good, coupled with the fact that public purchase prices for non-apartments are very low, making it difficult for new businesses to enter.

Rental housing, where public institutions like LH purchase existing or new homes to lease at below-market rates, is a key strategy for easing supply-demand imbalances and supporting vulnerable groups such as young adults, newlyweds, and low-income households. The government has previously announced plans to supply 140,000 new rental units over five years, with 70,000 to be fast-tracked within two years. More recently, the focus has shifted to supplying 90,000 units by next year, with a significant portion allocated to Seoul and 12 regulated areas in Gyeonggi Province.

However, the slow pace of contract finalization is a major concern. At the current rate, projections suggest only around 20,000 units will be supplied by next year, falling significantly short of the 90,000 target. Industry insiders attribute this lag to the low pricing of public land and construction costs, which do not adequately reflect inflation, making the business proposition unattractive for private developers. Kim Je-gyeong, a consultant at Tumi Real Estate Consulting, noted the declining non-apartment market and the low purchase prices by public institutions, creating a difficult environment for new projects. He emphasized the need to find a balance, as purchasing non-apartments at high prices could be seen as a waste of national funds.

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There is also a dilemma that if the government buys non-apartments at high prices and supplies them, it could be a waste of national funds. Finding an appropriate balance will be important.