As in other countries, industrialization in Korea proceeded in parallel with urbanization. In 1960, only 27.7 percent of Korea's population lived in cities. In 2000, 88.3 percent of Korea's population lived in cities. But this trend has started to ebb; 81.5 percent of Korea's population lived in cities in 2005.

This rapid population growth in urban areas led to a housing shortage and spiraling land prices in cities. In order to solve the housing shortage problem and stabilize housing costs, increasing the supply of land available for residential construction and the building of small housing units have continuously been one of the top priorities of the government.

In 1988, the government established and promoted its "Two Million Housing Units Construction Plan" for the period of 1988-1992. Actual housing construction for the period totaled 2.7 million units, and this massive supply contributed to a sharp stabilization of previously rising housing prices.


The government supplied an average of 500,000 to 600,000 housing units per year from 1993 to 1997. As a result, the housing supply ratio increased to 102.2 percent in 2004 from 72.4 percent in 1990.

In Korea, housing rental involves a unique system. Rentals with monthly payments are rare, with most rentals requiring the payment of a lump sum deposit, usually ranging between 50 to 70 percent of the housing unit price. Under this jeonse system, that is similar to a long-term lease, the landlord earns rental charges from the interest on the deposits. The deposit is refunded in full upon expiration of a jeonse contract.

With rising land prices and a marked preference for modern lifestyles, the rate of people living in apartment buildings has continued to increase. In 1985, only 13.5 percent of housing units were apartments, but in 2005, 52.5 percent of all housing units were apartments. In Korea, most apartments, like condominiums in America, are owned by individual families. Apartment units are normally occupied by the owner or a jeonse tenant; leaving very few for monthly rentals.



Housing Status

The number of housing units in Korea increased from 7.16 million in 1990 to 10.96 million in 2000, up 53.1%. Single family housing units increased from 72.2% to 87.1%. The average number of households per housing unit decreased from 1.6 to 1.3. The ratio of free-standing single family units decreased drastically from 66.0% to 37.1%, while the ratio of condos jumped from 22.8% to 47.7%. In 1990, the ratio of single family units versus condos in cities was 51.9% to 33.2%. However, 10 years later, this ratio stood at 25.6 to 57.5% in favor of condos. Currently, condos are the dominant housing type in urban areas. The average floor space decreased from 84.3m2 to 81.6m2 nationwide. The average space in urban areas was reduced from 91.6m2 to 84.6m2 while it grew in the rural areas from 63.5m2 to 73.1m2. Despite the reduction in the average size of condos nationwide, the average living area per person increased from 14.2m2 to 20.2m2; in the cities, the living space per person increased from 13.6m2 to 19.2m2. More space became available per person because there were less households per housing unit and less people per household, making more rooms per unit, from 4.0 to 4.8 rooms.

According to the 1995 national census, 40.38 million Koreans, or 87.8% of the total population, were living in urban areas. The housing supply ratio in these areas was 86.5%. Of those who own a home, 55.1% were living in a condo. As of 2000, 48.2% of the total population of Korea were living in Seoul, Busan, Daegu, Incheon, Gwangju, Daejeon and Ulsan, the seven metropolitan cities. These seven cities had a total of 5,815,000 households, or 48.1% of the national total. The HSR was 81.5%, lower than the national average. Seoul had 3,086,000 households, 21.5% of the national total.

The housing units in Seoul stood at 1,979,000, with a housing supply ratio of 86.1%, the lowest home ownership level in the country.







Housing Policies Directions


1962-1971

The year 1962 marked the beginning of the First Five-Year Economic Development Plan. During this period, the government's involvement in housing construction was minimal because the nation was preoccupied with expanding its general industry with an aim to achieve rapid economic development. The government instead encouraged the private sector to invest in residential construction. The government's efforts were largely limited to streamlining its own organizations, laws and regulations concerning the housing industry. In 1962, the National Construction Agency was expanded to the Ministry of Construction, and the state-run Korean National Housing Corp. (KNHC) was established. In 1963, the Public Housing Law, the Compulsory Land Acquisition Law, the Urban Planning Law and the Building Codes were either revised or newly enacted.

During the First and Second Five-Year Economic Development Plan periods, housing construction was largely taken up by the private sector. During the First Plan period (1962-1966), 326,000 housing units were constructed. Of those, 286,000, or 88%, were built by the private sector. During the Second Plan period (1967-1971), 541,000 units were newly added. Of those, 471,000 units, or 87.1%, were built by the private sector.

Apartment complexes.

1972-1981

In 1972, the Construction Ministry established a housing construction project apart from the Five-Year Economic Development Plan. The project was part of the ministry's 10-Year Comprehensive National Development Project. The Housing Promotion Law was enacted in the same year to promote construction efforts. The law still remains the backbone of the country's home building projects. The 10-year housing project was aimed at adding 2.5 million units by 1981. In 1973, the government established a national housing fund and introduced foreign loans to invest in the project. However, the project had to be revised in 1974 and 1975 in the wake of the 1973 oil crisis and the economic difficulties that followed. The revised project aimed at raising the housing supply ratio to 82.8% in urban areas, and to 88.4% nationwide. To this end, the government encouraged the development of the housing industries, created master plans for new towns, designated condo development zones, and converted many industrial areas into residential zones. Despite the series of government's policies, the housing market was thrown into great confusion in the latter half of the 1970s because of skyrocketing housing prices and rampant profit-seeking speculation. Consequently, in order to stabilize the housing market, the government expedited housing construction projects while instituting a series of laws and ordinances prohibiting speculation as well as regulating the methods and conditions of house transactions.

Between 1972-1976, the housing industry built 761,000 new units, of which 531,000 units, or 70%, were offered by the private sector. Between 1977-1981, 1,116,000 units were added, of which 535,000 units, or 48% were provided by private builders. This period is characterized by increasing government participation and intervention in the industry.


1982-1991

The government's major policy objective during the first half of the 1980s was to stabilize housing prices through the increased supply of homes, while discouraging speculative deals. Price Control Law that was enacted in the late 1970s was further reinforced. In 1982, the Rental Housing Promotion Act was passed to stimulate the rental housing market. But these measures were not enough to solve the chronic housing shortage. The situation was getting worse as the urban population continued to grow along with the increasing number of nuclear families. As supply deteriorated, house prices jumped, and speculative deals put the market in turmoil. In an effort to ease the situation, the government decided in May 1988 to build two million new units within a five-year period and raise the HSR to 72.9%. The target units represent 1.7 times more than those built in the previous five years. For this project, the government had to invest 65 trillion won, or 6.5% of the GNP.

The government's new policy was born in reaction to the inadequate housing supply. During 1982-1986, 1,155,000 units were newly built, of which 549,000, or 48%, came from the private sector. Between 1987-1991, a total of 2,386,000 units were constructed, but the housing shortage and its high prices persisted despite the government's active role in the residential construction market.


1992-1997

When President Kim Young-sam took office in 1993, housing projects were incorporated into the new administration's Five-Year New Economy Plan. Between 1993-1997, the government decided to construct 500,000 to 600,000 units every year with the aim of reaching a 90% HSR by 1998. The government stressed the need to supply housing on a stable and long-term basis within the framework of the national economic situation.

In pursuing the construction project, the government clarified the roles of the public and private sectors, generally expanding the responsibilities of the latter. The public sector was mainly involved in furnishing shelter for lower-income families. It planned to build 200,000 to 250,000 smaller units of less then 60m2 for lower-income families.

The government began to revise laws and regulations made in the 70s and 80s to invigorate the private sector. By doing so, the government allowed the private sector to better meet the diverse housing needs of the single, elderly, and other special groups. As the nation's standard of living improved, considerations had to be given to the sizes, designs and quality of the new homes as well as to people's different lifestyles. To this end, the government eased restrictions on land use and gave other incentives to private builders.


Housing Policies After 1998

The Kim Dae-jung Administration set ambitious plans to achieve a 100% Housing Supply Ratio by the year 2002 by supplying 500,000 to 600,000 new units each year. Interestingly, the new government believed its goals could be reached without direct government involvement in the private sector. Instead, it left the task of housing construction to the free market economy. To make this theory work, the government drastically deregulated the housing industry. And it issued mortgage-backed securities to facilitate home financing. At the same time, the government encouraged the private sector to invest in the rental housing market in an effort to ease the housing shortage.

In the past 30 or 40 years, the government's housing policies have gradually become more organized and sophisticated. In the process, public housing agencies were set up and related laws were made and revised to fit the situation. The government's intervention in the market ebbed and flowed in an attempt to stabilize the situation. The increase in affordable public housing is the result of the government's policy implementation made through its public corporations and local administrative agencies. Often, the government's expanded role meant more regulations. It even had to specify how, to whom, and at what prices a new unit should be offered. Between 1982 and 1997, the government controlled the prices for new condos, and restrictive regulations existed. However, since 1998, the general policy direction has been for the government to phase out the housing business and leave the market in private hands. Along with the mortgage financing and other reforms, the housing market and government policies are experiencing a positive transformation at the threshold of the 21st century.