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Low-income housing policies in the Republic of Korea
Cities 1994 11 (2) 107-114
Low-income housing policies in the Republic of Korea Seong-Kyu Ha Department of Regional Development, Chung-Ang University, 221 Heuksok-Dong, Seoul, 156-756, Republic of Korea. This paper examines low-income housing problems and housing policies in the Republic of Korea. It focuses on the role of the public sector and the attempts that are currently being made to supply public housing for the low-income group. During the past 20 years the government has concentrated on a policy of state-developed housing for sale rather than on expanding rental dwellings. Paradoxically, it was found that state-developed housing tended to aid the middle- or upper-income groups. In the late 1980s, the government recognized that the paramount objective for the public sector is greater equity or social welfare. A permanent rental dwelling programme was launched in 1989, and represented the beginning of a social housing tradition directed at low-income households. Social housing has in the past not taken into account local housing needs and the number of units is far too few for the number of the poor.
Economic analysts frequently use such adjectives as 'remarkable', and 'spectacular' to describe the Republic of Korea's (henceforth Korea) economic development performance during the last 30 years. This performance has been achieved despite the fact that the country has no significant reserves of national resources, the population density is among the highest in the world, and most of the physical infrastructure was destroyed during the Korean war (1950-53). The Korean economy is projected to grow at an average rate of 7% pa over the next ten years. 1 Per capita GNP will accelerate to reach close to US$ 17 000 by the year 2001, about the same level as that of the UK and Italy today. Although Korea has been an economic success story, Korean cities today share with most other developing countries the problems of increasing urbanization. The influx of poor people from rural areas into cities means that urban housing becomes ~Korea's gross national product increased from US$80 per capita in 1961 to $5569 per capita in 1990. In the period, the economy recorded a tremendous export boom, with the real GNP growing at 12.6% per year, and the GNP per capita nearly doubling from US$2194 in 1985 to $4060 in 1988 (see Korea Herald, 1988; Economic Planning Board, 1991; Bank of Korea, Economic Statistics Yearbook, various issues). An earlier version of this article was presented at the Fifth International Research Conference on Housing held in Montreal, Canada, 7-10 July 1992.
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scarce, expensive, and inadequate. Government policies have been ineffective in providing adequate housing, particularly for the urban low-income group. This paper is primarily concerned with the role of the state in low-income housing. The basis of the housing problem in urban Korea is that the total number of housing units is smaller than the number of households. At the same time, the inferior housing environment for low-income families is cause for serious social concern. This paper examines the evolution of low-income housing policies to tackle the urban housing problems. How has the Korean government reacted to the low-income housing issue? Who benefits from the public housing programmes and who loses? How does the allocation mechanism for state-developed housing actually function? Housing poverty
Essentially, housing problems in Korea can be explained in terms of the difficulty of meeting housing needs caused by sustained urbanization2 and accelerated formation of nuclear households. The housing shortage is expressed in continuously declining hous2The total population of Korea was about 22 million in the late 1950s and the urban population was about 18%. Today the population has reached more than 43 million, more than 78% of whom live in cities (Economic Planning Board, 1991).
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Low-income housing policies in the Republic of Korea: Seong-Kyu Ha Table 1 Selective indicators of dwelling size and various types of amenities in the substandard housing areas of Seoul
Indicators
No of rooms per dwelling No of households per dwelling No of persons per dwelling No of persons per household No of persons per room Floor space of dwelling (pyong) c Piped water (%) Equipped (own) Equipped (communal) Other Toilet facilities (%) Conventional Modern (flush) Other
Substandard housing areas (1989) a
Seoul (1985) b
3.5 2.2 9.68 4.4 2.76
4.3 1.98 4.08 1.92
18.35
29.1
60.4 34.5 5.1
98.80
80.5 9.5 10.0
29.7 70.3
The case study of a selected substandard area is Sadang 4 and Sangge 2 district in Seoul. The sample size was 181 households (78 owner occupants and 103 tenants) in 1989. b Economic Planning Board, 1987. c 1 pyong is equivalent to 3.3 m 2. o Prevalence rate of water supply in 1988. Sources: Ministry of Home Affairs, 1989; Korea National Housing Corporation; 1989, EPB, 1987. a
ing supply ratios in urban areas, measured as the number of units of housing stock over the number of households. The housing supply ratio for the country as a whole was 70.9% in 1989, but those for Seoul and the Capital Region were 60.9% and 63.5%, respectively. The number of households has continuously increased at a rate of 3.3% annually, whereas that of the dwelling units has increased, only by about 2% a year. On the other hand, there are no universally applicable criteria for deciding whether a unit is fit for habitation, since these concepts vary widely according to the climate, cultural background and economic conditions of each country. Korea has not classified substandard housing by such related aspects as physical character of dwelling, user control, environmental locus, relative locus and socioeconomic conditions (Ha and Merrett, 1984). The criteria for measuring substandard housing in Korea are primarily physical quality and legality. This is clearly shown in the following substandard housing classification standards for urban renewal set by the Ministry of Construction; (1) dwelling floor area is less than 7 pyong (23.1 m 2); (2) unauthorized buildings on public land; (3) housing built without due permission; (4) housing with poorly built structures such as tents, communal huts, barracks, and shanties using inadequate building materials; (5) housing lacking basic services and facilities such as water supply, electricity, and sewerage.
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At this stage, it should be noted that accurate statistics on the extent of urban squatting are difficult to obtain; in addition, confusing administrative terms and classifications have made interpretation of the figures difficult. The percentage of the urban population living in slums and squatter settlements varies from city to city, but figures of 20-30% were common in the 1960s and 1970s. During the 1980s, the number of illegal dwellings seems to have decreased. The most important point is that illegal housing is most prevalent in the capital, Seoul. The next section examines Korean evidence on substandard housing in view of housing poverty. It concentrates mainly on size and facilities. Dwelling size is conventionally defined in terms of number of rooms and floor space standards (Table 1). The average number of rooms per substandard dwelling in 1989, 3.5, was smaller than that of Seoul in 1985. Average floor space per dwelling in substandard areas was 61 m 2 (18.35 pyong), and this was also much smaller than that of the city average. Moreover, the number of households per dwelling, a useful index of involuntary sharing, was also markedly higher in substandard housing areas with a very high value of 2.2. The physical character of substandard dwelling is described by an appalling lack of basic services and internal facilities. This aspect is measured by the range of internal amenities, including piped water supply, kitchen and toilet. The proportion of housing units with selective amenities is given in Table 1. In 1989, the majority of dwellings in substandard housing areas had piped water supply, but about 35% of housing units had communal water supply or tanks for their water supply. On the other hand, the basic service with the lowest standard of provision is toilet facilities. The majority of housing units (80.5%) had conventional facilities, such as a pit latrine. Surprisingly, about 10% of housing units had neither private toilet nor even a communal toilet. Housing units in substandard areas are far below the level that would ensure comfort with fitness for habitation.
Low-income housing programmes Re-location and 'site and services' programmes Urban squatting in Korea has a long history, although in its early stages it was not extensive. Since 1945, an unexpectedly large group of returnees and refugees from neighbouring countries and from North Korea have settled in large cities. They simply settled in open spaces and constructed their own houses without the consent of the city government. All housing materials were of low quality and development was totally unplanned. During the 1960s and 1970s, the rapid economic
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Low-income housing policies in the Republic of Korea: Seong-Kyu Ha Table 2 KNHC housing supply by tenure types (1962-89). Total
Rental housing Short-term
Long-term
Permanent
For foreigners
Housing for sale
536 755 (100.0%)
150 149 (27.9%)
5 000 (0.9%)
30 026 (5.6%)
2 790 (0.5%)
348 790 (65%)
Source: Korea National Housing Corporation, 1990.
development of Korea was accompanied by an enormous wave of migration from rural areas to the metropolis. The influx of population from outside the city created an acute housing shortage. The rapid growth of new substandard housing in a variety of forms was an attempt to bridge the gap between supply and demand. Clearance programmes were prevalent in the late 1950s and the early 1960s. These schemes were devised for use in uncontrolled housing areas, and were known as the Panjajib 3 clearance schemes under which governments are empowered to remove squatters, using bulldozers and policemen. In the late 1960s, the government recognized that 'site and services' programmes were an important approach to the housing problem of the poor, particularly the development of new land to facilitate construction of individual houses. Twenty kilometres south-east from the centre of Seoul, a new 'site and services' estate was designated in 1968, called the Gwang-Ju Danchi. It was intended that eventually the estate would house 60 000 households; in fact, when the programme came to an abrupt halt in summer of 1971, roughly 27 000 households had been relocated in the area. The critical problem faced by the poor originally relocated in Gwang-Ju was lack of employment, as few of the proposed industries had actually begun operation. The Gwang-Ju programme destroyed the squatter pattern of employment while it provided no alternative. Water, sewerage and electrical facilities had not been installed and squatters were forced to live in tents or makeshift shelters for periods of anything up to a year. A large majority of relocated families went back to squatting or doubling up with relatives in Seoul. In terms of lower-income housing policy, this programme was a failure. In the early 1970s, the policy for low-income housing in Seoul could be characterized as relocation together with mass demolition. Since 1975, the authority has opted for building high-density, lowincome fiats in preference to relocation.
with state-developed housing4 for sale. During the 28 years from 1962 to 1989, the emphasis of the Korea National Housing Corporation (KNHC) was on the expansion of state-developed housing for sale rather than the provision of rental accommodation. Even though rental dwellings were produced by the corporation, such houses were sold when five years' period passed. As shown in Table 2, the proportion of permanent rental dwellings (social housing) was only 5.6%. To understand the state-developed housing programmes, we need to examine the provision of housing finance. Korea's financial policies for housing can be best understood in the way funds for housing finance are raised and provided to borrowers by the Korea Housing Bank (KHB), which is the sole organization responsible for raising and disbursing funds for housing. The bank's activities are structurally divided into two: the first is normal banking activities involving borrowing and lending activities, and the second is management of the National Housing Funds (NHF). 5 The government uses the NHF accounts independently of the regular bank accounts to support the low-income group and low-cost housing. The NHF accounts are composed of three main sources; the state housing pre-emption subscription deposits, the national housing bonds and the housing lottery. With regard to state housing pre-emption subscription deposits, these were designed to induce prospective purchasers to make deposits in advance, either in full or as partial down payment. A depositor must make a fixed amount of monthly installment for a certain number of contract periods. The NHF loans are earmarked for those who contribute to the funds, including the subscribers to the state housing pre-emption subscription deposits. The subscribers are the only people eligible to purchase Korea National Housing Corporation or local government developed new housing units. On the other hand, one interesting aspect of the NHF
State-developed housing for sale
4Traditionally, 'state housing' has meant housing that was built, owned, and managed by national or local governments (or by a non-profit-making housing association). In this paper the scope of state-developed housing is somewhat different, and can be divided into two categories: housing owned and managed by the Korea National Housing Corporation or local governments; and housing built by the corporation or local government for sale. 5KHB's loans and NHF together accounted for 86.4% of the total housing loans outstanding as of the end of October 1991 (The Korea Housing Bank, December 1991).
Korea does not have a long history of public housing and the amount of rental housing is small compared 3panjajib means a single house or dwelling unit, and Panjachon indicates a settlement consisting of a number of Panjajibs. The original meaning of Panjajib is a temporary house constructed by a timber framed structure.
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Low-income housing policies in the Republic of Korea: Seong-Kyu Ha
operation is that the private builders can claim for the funds when they decide to construct smaller housing units (floor area less than 60m 2) for the non-owner occupiers. Apart from the NHF, the bank's own funds are used for the private sector's housing construction or purchase. 6 In most cases, those who are eligible for these loans must be the subscribers to deposits. Only those who save can obtain loans. This prevents the low-income group from obtaining loans. Thus, it is difficult to say that the KHB is a low-income housing institution. The crux of the matter is that in Korea there is no well-organized mortgage market. The housing authority undertakes to identify the various sources of 'demand' for state-developed housing for sale. In most instances demand is expressed in the wish to start placing the State Housing Pre-emption Subscription Deposits (SHPSDs) in the KHB. Applicants for SHPSDs are limited to those who are non-home owners. In addition, a crucial factor in programme implementation is the adoption of the lottery system in the case of state-developed housing for sale. The purchasers are selected by drawing lots from applicants who have opened SHPSDs in the K H B , and paid installments for more than two years. The reason the KHB adopts the lottery system is that there are a large number of applicants who have opened SHPSDs to purchase state-developed housing. 7 Why would many households want to buy statedeveloped housing rather than buying direct from private developers? The answer is simple, as mentioned above, there are few loans available for private housing and the price of state-developed housing unit is cheaper than that produced by private developers. One weakness in the allocation policy of statedeveloped housing is that there are no standards of 'suitability' of properties for different types of households, based on age and type of structure, size and location. Korea has a fairly simple selection process for state-developed housing. There is a principal population or source of demand: qualifying non-owner occupiers who have opened SHPSDs. In Korea, it is by no means apparent that the poorest and most needy families are, in fact, the principal targets of the state-developed housing programme. The idea behind the sale of statedeveloped housing is that, if private institutions do not cater sufficiently well for housing of all kinds, 6The KHB lends to private home builders and individual home purchasers, and finances larger units that are less than 10 years old. In 1991, the terms of private housing loans included a ceiling of 25 million won (approximatelyUS$31 250), an 11.5% interest rate and maximum 80% loan to value ratio. In practice, however, the limited availability of funds means the average loan to value ratio is only 30% according to 1984 KHB data. 7As of February 1991, as many as 1.4 million participants had opened the SHPSDs in the KHB; (Korea Housing Bank, 1992). 110
Table 3
HousingDelivery Plan, 1988--1992. No of Dwelling
Income class
Dwelling type
Lowest-income
(1 000) 250
Permanent rental dwelling Low-income Worker's welfare 250 dwelling Low middle-income Small-sizeddwellings for sale 250 5-year rental dwellings 150 Middle-income Medium-sizeddwellings for sale 600 Upper-income Large-sizeddwellings 500 Total 2 000 Source: Ministry of Construction, 1989.
then the public sector should fill the gap. However the error has been to build to too high an architectural standard, without a clear understanding of the needs of the population. Government housing has generally been too expensive for the poor to buy. Many low-income households and non-homeowners do not deposit their money in the K H B because of their extremely low level of income. In addition, a large majority of low-income households in Korea do not have the ability to bear the economic cost of housing even at minimal standards. In the late 1980s, the government recognized that the paramount objective for the public sector is greater equity or social welfare. A permanent rental dwelling programme was launched in 1989, and represented the beginning of a social housing tradition directed to low-income households in Korea. Social h o u si n g
In the late 1980s, comprehensive housing development planning was instituted in Korea to determine the extent to which national resources should be allocated to public housing development for the poor. The government formulated a five-year housing supply plan for the purpose of constructing 2 million dwelling units between 1988 and 1992, or 400 000 units per year, so that the housing supply rate could increase from 69.2% in 1987 to 72.9% in 1992. Of the total 2 million new dwellings, 900 000 units (45%) will be public sector housing, while the remaining 1 100 000 houses will be private sector housing. One of Korea's housing policies aims to differentiate delivery to different income classes. Table 3 summarizes the essentials of the differentiated delivery system. Middle-income housing will be financed through the Korea Housing Bank funds, whereas, low middle-income and low-income housing will be funded by NHF. Permanent rental dwelling (social housing) is supported by the government budget and public finance. Whatever its ideology or form of government,
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Low-income housing policies in the Republic o f Korea: Seong-Kyu Ha
every society must devise some mechanism for allocating housing among its population. Korea employs a mixture of the private market system and a public sector allocation system. Theoretically, public sector housing is allocated to those households which are known to be in most immediate need. Bourne argues that the five principal sectors of the population - or source of demand - for public sector housing, ranked in a typical order of priority, are: (1) the homeless; (2) those requiring rehousing because of slum clearance and renewal, for which the local authority assumes 'special' responsibility; (3) those in urgent need because of medical or social problems, or because they represent 'key' workers; (4) those requesting transfers within the public sector for reasons other than the above, often to move to a preferred unit or location; and (5) those on the regular waiting list (Bourne, 1981, pp. 220-221). Priorities for social housing are given to three principal populations in Korea: (1) social welfare recipients; (2) displaced people who would be evicted from urban development and renewal activities; and (3) low-income veterans. Welfare families receive four different kinds of welfare programme: an in-house protection programme for the elderly, a facility protection programme, a living expense support programme for the poor, and a medical protection programme. Table 4 shows the selection criteria and grading points. In the late 1980s, there were improvements almost everywhere in Korea, for the government considered social housing to be an important factor in achieving social welfare and stability. Even though the social housing programme is more attractive than other low-income housing programmes, it poses many problems. The present situation promises to be even more complicated in the future. At this stage, two crucial questions can be raised: what is the main problem with the allocation policy of social housing, and what is its result? (1) Regarding the process of social housing allocation, local housing problems and local matters have not been carefully considered. Local governments have to follow the criteria and process that the national government has made. Some aspects of social housing policy are essentially local and, although the national government properly has some influence, basic decisions on local matters should be made locally. The highly centralized power structure of the Korean government makes good administration difficult. (2) The location and design of social housing are similar to those of the 'relocation programme' (Ha, 1987, pp. 100-101) which is characterized by relocation of the poor from the current low-income residential areas to the newly developed housing estates. The crucial problem Cities 1994 Volume 11 Number 2
Table 4 Allocation criteria and grading points for social housing (199o) Grading points Densities (persons per room) Age of household head Residence period Household size (no of persons per household) Household compositiona Others b Total
20 10 15 20 10 15 100
a There are four types of household groups: an extended family, a single parent family, a family with handicapped members, and a child household head. b To be determined by the head of each municipality. Source: Ministry of Construction, 1990.
faced by the very low-income group originally relocated in social housing estates was the lack of employment, coupled with the high cost of commuting to work. The location entailed a long journey to work and considerable daily travel expenses, which were obviously beyond their means. As to the state of employment for the poor in social housing estates, the authority has to provide various labour-intensive industries, together with a new vocational training centre. (3) One of the major criteria used for the selection of social housing residents includes housing density; ie number of persons per household and age of household head. Accordingly, large households have a better chance of being accepted. Household size is in fact counted twice if households live in one room. The preference for large household size will make a social mix of residents increasingly unbalanced with a concentration of large households in estates opened in the early stages and with small households predominant in later estates (Jang, 1990). (4) The social housing target groups are those in the lowest 10% of the income bracket, earning less than 240 thousand won a month (approximately US$300). Most of them are recipients of various government subsidies, including allowance for nutritious foods, support for children's education, fuel supply during the winter season, and medical services. There are estimated to be about 1 million households in these categories throughout the country. However, only 190 000 units of social housing had been constructed by 1992, so the number of units is far below the number of the poor. Limiting benefits to welfare families have also raised equity questions among the poor. 8 8The government plan for social housing production has been changed from 250 000 dwelling units to 190 000 units since September 1991 because the public sector faced a shortage of available funds. The number of social housing units is far below the number of the target group (estimated to be approximately one million households in 1991).
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Low-income housing policies in the Republic of Korea: Seong-Kyu Ha
(5) About 40% of welfare families live in urban areas and the remainder live in rural areas. All units of social housing will be built in urban areas: 80 000 in Seoul, 50 000 in Pusan, 30 000 in Taegu and Taejon, and 20 000 in Inchun, Kwangju, and other medium-sized cities. No social housing will be provided in rural areas. The allocation process of social housing is entirely urban biased.
Issues and policy options In general, the experience of state-developed housing in developing countries has been of dubious value. Most such housing has been either of high quality that has mainly been occupied by middleincome groups or of such low quality that it has alienated the recipient families (Gilbert and Gugler, 1992 p. 139; Drakakis-Smith, 1981). As mentioned above, Korea's experience is generally similar to that of developing countries. However, two city states, Hong Kong and Singapore, have successful public housing projects, with some 40% of their population living in public housing units. There are some significant differences between Korea and Kong Kong and Singapore in public housing policies. First, both Singapore's and Hong Kong's housing programmes have been integrated with efforts to provide accessible employment (Grimes, 1976, p. 106). In Hong Kong, early housing schemes were developed with the construction of flatted factories. In Singapore factory blocks also provide employment for residents of the estate. Unfortunately Korea's relocation and social housing programmes destroyed the squatter pattern of employment without providing an alternative. Second, in both Hong Kong and Singapore the financial arrangements for housing have respected tenants' incomes while being provident of public funds. In the case of Hong Kong, the government subsidies the public rental and home ownership projects by providing land free and loans from the Development Loan Fund for the construction work. The loans are repayable over 40 years at an annual interest rate of 5%. In order to alleviate the cash flow burden on the Authority, the Government does not require the interest to be paid in cash (Fong and Yeoh, 1987, p. 30). In Korea the National Housing Fund's clients are more likely to be middle-income groups than lower-income groups, because there was no income test when loans were made. In addition, the majority of the Korea Housing Bank's mortgage loans are tied to specific deposits. Finally, in developing countries housing standards must be consistent with prevailing income levels, but buildings have to be designed flexibly, so that they can be adopted as incomes rise. In both Hong Kong and Singapore government housing has generally 112
been inexpensive with regard to the needs of the recipient population, has offered flexibility in use, and has been in suitable locations. Government housing in Korea has been too expensive for the poor to buy. As noted above, applicants are required to deposit a considerable amount of money in the KHB to get state-developed housing. There are no subsidies for the low-income families who cannot pay a deposit in the KHB. However, the experience of these two city states indicates the principal ingredients of success in public housing. Of course, the precise form of Singapore's and Hong Kong's public housing would not be suitable for Korea, although the experience of Singapore and Hong Kong may serve as a lesson in framing housing development plans in Korea. For the public sector, the paramount objective must be greater equity, the extension of social welfare, the provision of adequate housing for all according to need. Government must help compensate for poverty and for inequality in the distribution of income. On the other hand, many would argue that the supply and distribution of housing should be left to the price mechanism. Struyk states that: To date Korea's basic housing strategy has essentially been based on the filtering concept: expansion of the supply of housing for moderate and high income households will eventually improve the housing available to lower income households and reduce the rate of increase in the price of housing services (Struyk, 1980, pp. 13-14). Korea's housing policy has long been biased in favour of middle- and higher-income housing. The expectation that the filtering process would look after lower-income housing has not been met. Regarding filtering strategies in Korea, the following comments can be made. First, the public sector housing was middle- and upper-income biased in terms of dwelling size. For a long time the average size of public sector dwellings (which account for more than 40% of total production) has been too large for the lower-income group. 9 Second, low-income groups maintained a constant relative distributional relationship vis-a-vis other groups. As mentioned above, the KHB loans are earmarked for those who contribute to funds including the subscribers to the state housing pre-emption subscription deposits. The subscribers are the only ones eligible to purchase state-developed housing. It means that only those who can save can obtain loans. Third, Chung has emphasized that the administration-controlled dwelling price is another aspect of Korea's higher-income biased housing poli9The average size of National Housing Fund housing between 1973 and 1982 was 56.1 m2 (16.9 pyong) while that of Korea HousingBank dwellingsbetween 1973and 1980was 67.6 m2 (20.5 pyong). Accordingto a study of affordabledwellingsize, 60% of tenants cannot afford dwellingsof 45.5 m2 (14.4 pyong). Cities 1994 Volume 11 Number 2
Low-income housing policies in the Republic of Korea: Seong-Kyu Ha
cy. In areas where the housing shortage is severe, newly built dwellings are sold at the administrationcontrolled price which is sometimes only 70% of the market price. To be eligible purchasers have to have made a given number of deposits at KHB's housing savings deposits. Moreover, they have to have been tenants or non-owner occupiers for a stipulated period of time. In spite of administration-controlled prices which are much lower than the market price, the dwellings are still too expensive for the lowerincome group (Chung, 1990, pp. 11-12). It is, in fact, hard to demonstrate that filtering strategies in Korea have encouraged distributional equity. Filtering is neither an efficient nor humane way of providing housing for low-income groups.
Conclusions The Korean government has not granted top priority to public housing. The main emphasis of government policy in the 1970s and 1980s was on the expansion of state-developed housing for sale rather than on the provision of rental accommodation. To develop a comprehensive set of alternatives for a future low-income housing policy in Korea, the following recommendations highlight and reinforce some of the views expressed above: (1) The existing housing stock in substandard housing areas must be preserved, to relieve the ever growing housing shortage. A comprehensive improvement programme must be put in hand, which will ensure better social and physical conditions in urban areas, without destroying existing housing units (2) The role of the public sector in housing should be clearly differentiated from that of the private sector. Not only from the point of view of efficiency but also from that of equity, it is highly desirable that middle- and upper-income housing should be the concern of the private sector. The state-developed housing for sale programme should be switched to rental housmg. (3) A study by K-H. Kim suggests that the impact of housing loans is the greater on supply than on demand and that the demand impact is not statistically significant. The loan-to-value ratio averaged at 24.7% and 23.3% for KHB and NHF in 1988 (Kim, 1990). Institutional arrangements governing housing finance inhibit the mobilization of savings or distort its allocation. Low-income households also have to pay interest rates that bear no clear relation to risk on their borrowings and to repay loans over short periods of time. Under some arrangements, the term of mortgages is limited to 19 years or less, which hampers the ability of poor families to repay. These circumstances strongly reinforce
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the tendency for the supply of new housing to go foremost to middle- and upper-income families. The NHF loans must be made longer term, have a higher cover ratio and be less expensive for the low-income group to take advantage of item. (4) In devising future social housing programmes, housing authorities have to clarify the ambiguity and define the target group, taking into account local housing situations and community-wide objectives relating to maintaining 'bottom-up' or popular participation in housing planning. On the other hand, top priority should be given to creating employment opportunities for the poor. The poor's ability to find suitable work needs to be strengthened through job training and improved job placement services. (5) Government efforts alone are not sufficient to solve Korea's housing problems. Co-operative methods can play an important role in helping to solve housing problems. Though housing cooperatives are not new to developing countries, Korea does not have a history of such cooperatives. Nevertheless, it should be possible for people to join together, pool their resources and provide themselves with good housing, through non-profit-making non-speculative cooperatives. As an alternative low-income housing strategy in Korea, housing co-operatives can serve as vehicles to channel state assistance to urban low-income groups and as a basis for participation and close cooperation between public agencies and a low-income clientele.
References Bank of Korea (various dates), Economic Statistics Yearbook, Seoul: Bank of Korea Bourne, Larry S. (1981), The Geography of Housing, London: Edward Arnold Chung, Joseph H. (1990), The Filtering Process and Housing Policy: The Korean Experience, Montreal: Montreal University Group, Discussion Paper 1-90 Drakakis-Smith, D.W. (1981), Urbanization, Housing and the Development Process, London: Croom Helm Economic Planning Board (1987), Population and Housing Census, Seoul: EPB Economic Planning Board (1991), Social Indicators in Korea, Seoul: EPB Fong, Peter K.W., and Anthony G.O. Yeh (1987), 'Hong Kong' in Seong-Kyu Ha, ed, Housing Policy and Practice in Asia, London: Croom Helm Gilbert, Alan and Josef Gugler (1992), Cities, Poverty and Development, Oxford: Oxford University Press Grimes, Orville F. (1976), Housing for Low-Income Urban Families, Washington: The World Bank Jang, Yong-Hee (1990), 'Toward low-income housing development: the evolution of public sector housing policies in Korea', Seoul: Paper presented at the Regional Seminar on Issues and Policies for Low-Income Shelter and Settlement Kim, Kyung-Hwan (1990), 'Housing finance and housing related taxes in Korea', Seoul: Paper presented at International Conference on Korean Housing Policies Korea Herald, 20 August 1988
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Low-income housing policies in the Republic of Korea: Seong-Kyu Ha Korea Housing Bank (1991), Monthly Economic Review, December 1991 Korea Housing Bank (1992), Monthly Economic Review, March 1992 Korea National Housing Corporation (1989), Housing Handbook, Seoul: KNHC Korea National Housing Corporation (1990), Housing Handbook, Seoul: KNHC Ha, Seong-Kyu, ed (1987), Housing Policy and Practice in Asia, London: Croom Helm Ha, Seong-Kyu (1991), Housing Policy In Korea, Seoul: Bakyoungsa
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Ha, Seong-Kyu and Steve Merrett (1984), 'Assessing housing consumption requirements: the case of Seoul', Third World Planning Review, 6(4), pp 331-337 Ministry of Construction (1989), Housing Delivery Plan, Seoul: MOC Ministry of Construction (1990), Evaluation of Public Sector Housing Programme, Seoul: MOC Ministry of Home Affairs (1989), Municipal Yearbook of Korea, Seoul: Ministry of Home Affairs Struyk, R.J. (1980), Housing in Korea's Fifth Five Year Plan: Possibilities and Constraints, Seoul: Korea Development Institute, Consultant Paper Series No 5
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Low-income housing policies in the Republic of Korea Seong-Kyu Ha Department of Regional Development, Chung-Ang University, 221 Heuksok-Dong, Seoul, 156-756, Republic of Korea. This paper examines low-income housing problems and housing policies in the Republic of Korea. It focuses on the role of the public sector and the attempts that are currently being made to supply public housing for the low-income group. During the past 20 years the government has concentrated on a policy of state-developed housing for sale rather than on expanding rental dwellings. Paradoxically, it was found that state-developed housing tended to aid the middle- or upper-income groups. In the late 1980s, the government recognized that the paramount objective for the public sector is greater equity or social welfare. A permanent rental dwelling programme was launched in 1989, and represented the beginning of a social housing tradition directed at low-income households. Social housing has in the past not taken into account local housing needs and the number of units is far too few for the number of the poor.
Economic analysts frequently use such adjectives as 'remarkable', and 'spectacular' to describe the Republic of Korea's (henceforth Korea) economic development performance during the last 30 years. This performance has been achieved despite the fact that the country has no significant reserves of national resources, the population density is among the highest in the world, and most of the physical infrastructure was destroyed during the Korean war (1950-53). The Korean economy is projected to grow at an average rate of 7% pa over the next ten years. 1 Per capita GNP will accelerate to reach close to US$ 17 000 by the year 2001, about the same level as that of the UK and Italy today. Although Korea has been an economic success story, Korean cities today share with most other developing countries the problems of increasing urbanization. The influx of poor people from rural areas into cities means that urban housing becomes ~Korea's gross national product increased from US$80 per capita in 1961 to $5569 per capita in 1990. In the period, the economy recorded a tremendous export boom, with the real GNP growing at 12.6% per year, and the GNP per capita nearly doubling from US$2194 in 1985 to $4060 in 1988 (see Korea Herald, 1988; Economic Planning Board, 1991; Bank of Korea, Economic Statistics Yearbook, various issues). An earlier version of this article was presented at the Fifth International Research Conference on Housing held in Montreal, Canada, 7-10 July 1992.
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scarce, expensive, and inadequate. Government policies have been ineffective in providing adequate housing, particularly for the urban low-income group. This paper is primarily concerned with the role of the state in low-income housing. The basis of the housing problem in urban Korea is that the total number of housing units is smaller than the number of households. At the same time, the inferior housing environment for low-income families is cause for serious social concern. This paper examines the evolution of low-income housing policies to tackle the urban housing problems. How has the Korean government reacted to the low-income housing issue? Who benefits from the public housing programmes and who loses? How does the allocation mechanism for state-developed housing actually function? Housing poverty
Essentially, housing problems in Korea can be explained in terms of the difficulty of meeting housing needs caused by sustained urbanization2 and accelerated formation of nuclear households. The housing shortage is expressed in continuously declining hous2The total population of Korea was about 22 million in the late 1950s and the urban population was about 18%. Today the population has reached more than 43 million, more than 78% of whom live in cities (Economic Planning Board, 1991).
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Low-income housing policies in the Republic of Korea: Seong-Kyu Ha Table 1 Selective indicators of dwelling size and various types of amenities in the substandard housing areas of Seoul
Indicators
No of rooms per dwelling No of households per dwelling No of persons per dwelling No of persons per household No of persons per room Floor space of dwelling (pyong) c Piped water (%) Equipped (own) Equipped (communal) Other Toilet facilities (%) Conventional Modern (flush) Other
Substandard housing areas (1989) a
Seoul (1985) b
3.5 2.2 9.68 4.4 2.76
4.3 1.98 4.08 1.92
18.35
29.1
60.4 34.5 5.1
98.80
80.5 9.5 10.0
29.7 70.3
The case study of a selected substandard area is Sadang 4 and Sangge 2 district in Seoul. The sample size was 181 households (78 owner occupants and 103 tenants) in 1989. b Economic Planning Board, 1987. c 1 pyong is equivalent to 3.3 m 2. o Prevalence rate of water supply in 1988. Sources: Ministry of Home Affairs, 1989; Korea National Housing Corporation; 1989, EPB, 1987. a
ing supply ratios in urban areas, measured as the number of units of housing stock over the number of households. The housing supply ratio for the country as a whole was 70.9% in 1989, but those for Seoul and the Capital Region were 60.9% and 63.5%, respectively. The number of households has continuously increased at a rate of 3.3% annually, whereas that of the dwelling units has increased, only by about 2% a year. On the other hand, there are no universally applicable criteria for deciding whether a unit is fit for habitation, since these concepts vary widely according to the climate, cultural background and economic conditions of each country. Korea has not classified substandard housing by such related aspects as physical character of dwelling, user control, environmental locus, relative locus and socioeconomic conditions (Ha and Merrett, 1984). The criteria for measuring substandard housing in Korea are primarily physical quality and legality. This is clearly shown in the following substandard housing classification standards for urban renewal set by the Ministry of Construction; (1) dwelling floor area is less than 7 pyong (23.1 m 2); (2) unauthorized buildings on public land; (3) housing built without due permission; (4) housing with poorly built structures such as tents, communal huts, barracks, and shanties using inadequate building materials; (5) housing lacking basic services and facilities such as water supply, electricity, and sewerage.
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At this stage, it should be noted that accurate statistics on the extent of urban squatting are difficult to obtain; in addition, confusing administrative terms and classifications have made interpretation of the figures difficult. The percentage of the urban population living in slums and squatter settlements varies from city to city, but figures of 20-30% were common in the 1960s and 1970s. During the 1980s, the number of illegal dwellings seems to have decreased. The most important point is that illegal housing is most prevalent in the capital, Seoul. The next section examines Korean evidence on substandard housing in view of housing poverty. It concentrates mainly on size and facilities. Dwelling size is conventionally defined in terms of number of rooms and floor space standards (Table 1). The average number of rooms per substandard dwelling in 1989, 3.5, was smaller than that of Seoul in 1985. Average floor space per dwelling in substandard areas was 61 m 2 (18.35 pyong), and this was also much smaller than that of the city average. Moreover, the number of households per dwelling, a useful index of involuntary sharing, was also markedly higher in substandard housing areas with a very high value of 2.2. The physical character of substandard dwelling is described by an appalling lack of basic services and internal facilities. This aspect is measured by the range of internal amenities, including piped water supply, kitchen and toilet. The proportion of housing units with selective amenities is given in Table 1. In 1989, the majority of dwellings in substandard housing areas had piped water supply, but about 35% of housing units had communal water supply or tanks for their water supply. On the other hand, the basic service with the lowest standard of provision is toilet facilities. The majority of housing units (80.5%) had conventional facilities, such as a pit latrine. Surprisingly, about 10% of housing units had neither private toilet nor even a communal toilet. Housing units in substandard areas are far below the level that would ensure comfort with fitness for habitation.
Low-income housing programmes Re-location and 'site and services' programmes Urban squatting in Korea has a long history, although in its early stages it was not extensive. Since 1945, an unexpectedly large group of returnees and refugees from neighbouring countries and from North Korea have settled in large cities. They simply settled in open spaces and constructed their own houses without the consent of the city government. All housing materials were of low quality and development was totally unplanned. During the 1960s and 1970s, the rapid economic
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Low-income housing policies in the Republic of Korea: Seong-Kyu Ha Table 2 KNHC housing supply by tenure types (1962-89). Total
Rental housing Short-term
Long-term
Permanent
For foreigners
Housing for sale
536 755 (100.0%)
150 149 (27.9%)
5 000 (0.9%)
30 026 (5.6%)
2 790 (0.5%)
348 790 (65%)
Source: Korea National Housing Corporation, 1990.
development of Korea was accompanied by an enormous wave of migration from rural areas to the metropolis. The influx of population from outside the city created an acute housing shortage. The rapid growth of new substandard housing in a variety of forms was an attempt to bridge the gap between supply and demand. Clearance programmes were prevalent in the late 1950s and the early 1960s. These schemes were devised for use in uncontrolled housing areas, and were known as the Panjajib 3 clearance schemes under which governments are empowered to remove squatters, using bulldozers and policemen. In the late 1960s, the government recognized that 'site and services' programmes were an important approach to the housing problem of the poor, particularly the development of new land to facilitate construction of individual houses. Twenty kilometres south-east from the centre of Seoul, a new 'site and services' estate was designated in 1968, called the Gwang-Ju Danchi. It was intended that eventually the estate would house 60 000 households; in fact, when the programme came to an abrupt halt in summer of 1971, roughly 27 000 households had been relocated in the area. The critical problem faced by the poor originally relocated in Gwang-Ju was lack of employment, as few of the proposed industries had actually begun operation. The Gwang-Ju programme destroyed the squatter pattern of employment while it provided no alternative. Water, sewerage and electrical facilities had not been installed and squatters were forced to live in tents or makeshift shelters for periods of anything up to a year. A large majority of relocated families went back to squatting or doubling up with relatives in Seoul. In terms of lower-income housing policy, this programme was a failure. In the early 1970s, the policy for low-income housing in Seoul could be characterized as relocation together with mass demolition. Since 1975, the authority has opted for building high-density, lowincome fiats in preference to relocation.
with state-developed housing4 for sale. During the 28 years from 1962 to 1989, the emphasis of the Korea National Housing Corporation (KNHC) was on the expansion of state-developed housing for sale rather than the provision of rental accommodation. Even though rental dwellings were produced by the corporation, such houses were sold when five years' period passed. As shown in Table 2, the proportion of permanent rental dwellings (social housing) was only 5.6%. To understand the state-developed housing programmes, we need to examine the provision of housing finance. Korea's financial policies for housing can be best understood in the way funds for housing finance are raised and provided to borrowers by the Korea Housing Bank (KHB), which is the sole organization responsible for raising and disbursing funds for housing. The bank's activities are structurally divided into two: the first is normal banking activities involving borrowing and lending activities, and the second is management of the National Housing Funds (NHF). 5 The government uses the NHF accounts independently of the regular bank accounts to support the low-income group and low-cost housing. The NHF accounts are composed of three main sources; the state housing pre-emption subscription deposits, the national housing bonds and the housing lottery. With regard to state housing pre-emption subscription deposits, these were designed to induce prospective purchasers to make deposits in advance, either in full or as partial down payment. A depositor must make a fixed amount of monthly installment for a certain number of contract periods. The NHF loans are earmarked for those who contribute to the funds, including the subscribers to the state housing pre-emption subscription deposits. The subscribers are the only people eligible to purchase Korea National Housing Corporation or local government developed new housing units. On the other hand, one interesting aspect of the NHF
State-developed housing for sale
4Traditionally, 'state housing' has meant housing that was built, owned, and managed by national or local governments (or by a non-profit-making housing association). In this paper the scope of state-developed housing is somewhat different, and can be divided into two categories: housing owned and managed by the Korea National Housing Corporation or local governments; and housing built by the corporation or local government for sale. 5KHB's loans and NHF together accounted for 86.4% of the total housing loans outstanding as of the end of October 1991 (The Korea Housing Bank, December 1991).
Korea does not have a long history of public housing and the amount of rental housing is small compared 3panjajib means a single house or dwelling unit, and Panjachon indicates a settlement consisting of a number of Panjajibs. The original meaning of Panjajib is a temporary house constructed by a timber framed structure.
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Low-income housing policies in the Republic of Korea: Seong-Kyu Ha
operation is that the private builders can claim for the funds when they decide to construct smaller housing units (floor area less than 60m 2) for the non-owner occupiers. Apart from the NHF, the bank's own funds are used for the private sector's housing construction or purchase. 6 In most cases, those who are eligible for these loans must be the subscribers to deposits. Only those who save can obtain loans. This prevents the low-income group from obtaining loans. Thus, it is difficult to say that the KHB is a low-income housing institution. The crux of the matter is that in Korea there is no well-organized mortgage market. The housing authority undertakes to identify the various sources of 'demand' for state-developed housing for sale. In most instances demand is expressed in the wish to start placing the State Housing Pre-emption Subscription Deposits (SHPSDs) in the KHB. Applicants for SHPSDs are limited to those who are non-home owners. In addition, a crucial factor in programme implementation is the adoption of the lottery system in the case of state-developed housing for sale. The purchasers are selected by drawing lots from applicants who have opened SHPSDs in the K H B , and paid installments for more than two years. The reason the KHB adopts the lottery system is that there are a large number of applicants who have opened SHPSDs to purchase state-developed housing. 7 Why would many households want to buy statedeveloped housing rather than buying direct from private developers? The answer is simple, as mentioned above, there are few loans available for private housing and the price of state-developed housing unit is cheaper than that produced by private developers. One weakness in the allocation policy of statedeveloped housing is that there are no standards of 'suitability' of properties for different types of households, based on age and type of structure, size and location. Korea has a fairly simple selection process for state-developed housing. There is a principal population or source of demand: qualifying non-owner occupiers who have opened SHPSDs. In Korea, it is by no means apparent that the poorest and most needy families are, in fact, the principal targets of the state-developed housing programme. The idea behind the sale of statedeveloped housing is that, if private institutions do not cater sufficiently well for housing of all kinds, 6The KHB lends to private home builders and individual home purchasers, and finances larger units that are less than 10 years old. In 1991, the terms of private housing loans included a ceiling of 25 million won (approximatelyUS$31 250), an 11.5% interest rate and maximum 80% loan to value ratio. In practice, however, the limited availability of funds means the average loan to value ratio is only 30% according to 1984 KHB data. 7As of February 1991, as many as 1.4 million participants had opened the SHPSDs in the KHB; (Korea Housing Bank, 1992). 110
Table 3
HousingDelivery Plan, 1988--1992. No of Dwelling
Income class
Dwelling type
Lowest-income
(1 000) 250
Permanent rental dwelling Low-income Worker's welfare 250 dwelling Low middle-income Small-sizeddwellings for sale 250 5-year rental dwellings 150 Middle-income Medium-sizeddwellings for sale 600 Upper-income Large-sizeddwellings 500 Total 2 000 Source: Ministry of Construction, 1989.
then the public sector should fill the gap. However the error has been to build to too high an architectural standard, without a clear understanding of the needs of the population. Government housing has generally been too expensive for the poor to buy. Many low-income households and non-homeowners do not deposit their money in the K H B because of their extremely low level of income. In addition, a large majority of low-income households in Korea do not have the ability to bear the economic cost of housing even at minimal standards. In the late 1980s, the government recognized that the paramount objective for the public sector is greater equity or social welfare. A permanent rental dwelling programme was launched in 1989, and represented the beginning of a social housing tradition directed to low-income households in Korea. Social h o u si n g
In the late 1980s, comprehensive housing development planning was instituted in Korea to determine the extent to which national resources should be allocated to public housing development for the poor. The government formulated a five-year housing supply plan for the purpose of constructing 2 million dwelling units between 1988 and 1992, or 400 000 units per year, so that the housing supply rate could increase from 69.2% in 1987 to 72.9% in 1992. Of the total 2 million new dwellings, 900 000 units (45%) will be public sector housing, while the remaining 1 100 000 houses will be private sector housing. One of Korea's housing policies aims to differentiate delivery to different income classes. Table 3 summarizes the essentials of the differentiated delivery system. Middle-income housing will be financed through the Korea Housing Bank funds, whereas, low middle-income and low-income housing will be funded by NHF. Permanent rental dwelling (social housing) is supported by the government budget and public finance. Whatever its ideology or form of government,
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Low-income housing policies in the Republic o f Korea: Seong-Kyu Ha
every society must devise some mechanism for allocating housing among its population. Korea employs a mixture of the private market system and a public sector allocation system. Theoretically, public sector housing is allocated to those households which are known to be in most immediate need. Bourne argues that the five principal sectors of the population - or source of demand - for public sector housing, ranked in a typical order of priority, are: (1) the homeless; (2) those requiring rehousing because of slum clearance and renewal, for which the local authority assumes 'special' responsibility; (3) those in urgent need because of medical or social problems, or because they represent 'key' workers; (4) those requesting transfers within the public sector for reasons other than the above, often to move to a preferred unit or location; and (5) those on the regular waiting list (Bourne, 1981, pp. 220-221). Priorities for social housing are given to three principal populations in Korea: (1) social welfare recipients; (2) displaced people who would be evicted from urban development and renewal activities; and (3) low-income veterans. Welfare families receive four different kinds of welfare programme: an in-house protection programme for the elderly, a facility protection programme, a living expense support programme for the poor, and a medical protection programme. Table 4 shows the selection criteria and grading points. In the late 1980s, there were improvements almost everywhere in Korea, for the government considered social housing to be an important factor in achieving social welfare and stability. Even though the social housing programme is more attractive than other low-income housing programmes, it poses many problems. The present situation promises to be even more complicated in the future. At this stage, two crucial questions can be raised: what is the main problem with the allocation policy of social housing, and what is its result? (1) Regarding the process of social housing allocation, local housing problems and local matters have not been carefully considered. Local governments have to follow the criteria and process that the national government has made. Some aspects of social housing policy are essentially local and, although the national government properly has some influence, basic decisions on local matters should be made locally. The highly centralized power structure of the Korean government makes good administration difficult. (2) The location and design of social housing are similar to those of the 'relocation programme' (Ha, 1987, pp. 100-101) which is characterized by relocation of the poor from the current low-income residential areas to the newly developed housing estates. The crucial problem Cities 1994 Volume 11 Number 2
Table 4 Allocation criteria and grading points for social housing (199o) Grading points Densities (persons per room) Age of household head Residence period Household size (no of persons per household) Household compositiona Others b Total
20 10 15 20 10 15 100
a There are four types of household groups: an extended family, a single parent family, a family with handicapped members, and a child household head. b To be determined by the head of each municipality. Source: Ministry of Construction, 1990.
faced by the very low-income group originally relocated in social housing estates was the lack of employment, coupled with the high cost of commuting to work. The location entailed a long journey to work and considerable daily travel expenses, which were obviously beyond their means. As to the state of employment for the poor in social housing estates, the authority has to provide various labour-intensive industries, together with a new vocational training centre. (3) One of the major criteria used for the selection of social housing residents includes housing density; ie number of persons per household and age of household head. Accordingly, large households have a better chance of being accepted. Household size is in fact counted twice if households live in one room. The preference for large household size will make a social mix of residents increasingly unbalanced with a concentration of large households in estates opened in the early stages and with small households predominant in later estates (Jang, 1990). (4) The social housing target groups are those in the lowest 10% of the income bracket, earning less than 240 thousand won a month (approximately US$300). Most of them are recipients of various government subsidies, including allowance for nutritious foods, support for children's education, fuel supply during the winter season, and medical services. There are estimated to be about 1 million households in these categories throughout the country. However, only 190 000 units of social housing had been constructed by 1992, so the number of units is far below the number of the poor. Limiting benefits to welfare families have also raised equity questions among the poor. 8 8The government plan for social housing production has been changed from 250 000 dwelling units to 190 000 units since September 1991 because the public sector faced a shortage of available funds. The number of social housing units is far below the number of the target group (estimated to be approximately one million households in 1991).
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Low-income housing policies in the Republic of Korea: Seong-Kyu Ha
(5) About 40% of welfare families live in urban areas and the remainder live in rural areas. All units of social housing will be built in urban areas: 80 000 in Seoul, 50 000 in Pusan, 30 000 in Taegu and Taejon, and 20 000 in Inchun, Kwangju, and other medium-sized cities. No social housing will be provided in rural areas. The allocation process of social housing is entirely urban biased.
Issues and policy options In general, the experience of state-developed housing in developing countries has been of dubious value. Most such housing has been either of high quality that has mainly been occupied by middleincome groups or of such low quality that it has alienated the recipient families (Gilbert and Gugler, 1992 p. 139; Drakakis-Smith, 1981). As mentioned above, Korea's experience is generally similar to that of developing countries. However, two city states, Hong Kong and Singapore, have successful public housing projects, with some 40% of their population living in public housing units. There are some significant differences between Korea and Kong Kong and Singapore in public housing policies. First, both Singapore's and Hong Kong's housing programmes have been integrated with efforts to provide accessible employment (Grimes, 1976, p. 106). In Hong Kong, early housing schemes were developed with the construction of flatted factories. In Singapore factory blocks also provide employment for residents of the estate. Unfortunately Korea's relocation and social housing programmes destroyed the squatter pattern of employment without providing an alternative. Second, in both Hong Kong and Singapore the financial arrangements for housing have respected tenants' incomes while being provident of public funds. In the case of Hong Kong, the government subsidies the public rental and home ownership projects by providing land free and loans from the Development Loan Fund for the construction work. The loans are repayable over 40 years at an annual interest rate of 5%. In order to alleviate the cash flow burden on the Authority, the Government does not require the interest to be paid in cash (Fong and Yeoh, 1987, p. 30). In Korea the National Housing Fund's clients are more likely to be middle-income groups than lower-income groups, because there was no income test when loans were made. In addition, the majority of the Korea Housing Bank's mortgage loans are tied to specific deposits. Finally, in developing countries housing standards must be consistent with prevailing income levels, but buildings have to be designed flexibly, so that they can be adopted as incomes rise. In both Hong Kong and Singapore government housing has generally 112
been inexpensive with regard to the needs of the recipient population, has offered flexibility in use, and has been in suitable locations. Government housing in Korea has been too expensive for the poor to buy. As noted above, applicants are required to deposit a considerable amount of money in the KHB to get state-developed housing. There are no subsidies for the low-income families who cannot pay a deposit in the KHB. However, the experience of these two city states indicates the principal ingredients of success in public housing. Of course, the precise form of Singapore's and Hong Kong's public housing would not be suitable for Korea, although the experience of Singapore and Hong Kong may serve as a lesson in framing housing development plans in Korea. For the public sector, the paramount objective must be greater equity, the extension of social welfare, the provision of adequate housing for all according to need. Government must help compensate for poverty and for inequality in the distribution of income. On the other hand, many would argue that the supply and distribution of housing should be left to the price mechanism. Struyk states that: To date Korea's basic housing strategy has essentially been based on the filtering concept: expansion of the supply of housing for moderate and high income households will eventually improve the housing available to lower income households and reduce the rate of increase in the price of housing services (Struyk, 1980, pp. 13-14). Korea's housing policy has long been biased in favour of middle- and higher-income housing. The expectation that the filtering process would look after lower-income housing has not been met. Regarding filtering strategies in Korea, the following comments can be made. First, the public sector housing was middle- and upper-income biased in terms of dwelling size. For a long time the average size of public sector dwellings (which account for more than 40% of total production) has been too large for the lower-income group. 9 Second, low-income groups maintained a constant relative distributional relationship vis-a-vis other groups. As mentioned above, the KHB loans are earmarked for those who contribute to funds including the subscribers to the state housing pre-emption subscription deposits. The subscribers are the only ones eligible to purchase state-developed housing. It means that only those who can save can obtain loans. Third, Chung has emphasized that the administration-controlled dwelling price is another aspect of Korea's higher-income biased housing poli9The average size of National Housing Fund housing between 1973 and 1982 was 56.1 m2 (16.9 pyong) while that of Korea HousingBank dwellingsbetween 1973and 1980was 67.6 m2 (20.5 pyong). Accordingto a study of affordabledwellingsize, 60% of tenants cannot afford dwellingsof 45.5 m2 (14.4 pyong). Cities 1994 Volume 11 Number 2
Low-income housing policies in the Republic of Korea: Seong-Kyu Ha
cy. In areas where the housing shortage is severe, newly built dwellings are sold at the administrationcontrolled price which is sometimes only 70% of the market price. To be eligible purchasers have to have made a given number of deposits at KHB's housing savings deposits. Moreover, they have to have been tenants or non-owner occupiers for a stipulated period of time. In spite of administration-controlled prices which are much lower than the market price, the dwellings are still too expensive for the lowerincome group (Chung, 1990, pp. 11-12). It is, in fact, hard to demonstrate that filtering strategies in Korea have encouraged distributional equity. Filtering is neither an efficient nor humane way of providing housing for low-income groups.
Conclusions The Korean government has not granted top priority to public housing. The main emphasis of government policy in the 1970s and 1980s was on the expansion of state-developed housing for sale rather than on the provision of rental accommodation. To develop a comprehensive set of alternatives for a future low-income housing policy in Korea, the following recommendations highlight and reinforce some of the views expressed above: (1) The existing housing stock in substandard housing areas must be preserved, to relieve the ever growing housing shortage. A comprehensive improvement programme must be put in hand, which will ensure better social and physical conditions in urban areas, without destroying existing housing units (2) The role of the public sector in housing should be clearly differentiated from that of the private sector. Not only from the point of view of efficiency but also from that of equity, it is highly desirable that middle- and upper-income housing should be the concern of the private sector. The state-developed housing for sale programme should be switched to rental housmg. (3) A study by K-H. Kim suggests that the impact of housing loans is the greater on supply than on demand and that the demand impact is not statistically significant. The loan-to-value ratio averaged at 24.7% and 23.3% for KHB and NHF in 1988 (Kim, 1990). Institutional arrangements governing housing finance inhibit the mobilization of savings or distort its allocation. Low-income households also have to pay interest rates that bear no clear relation to risk on their borrowings and to repay loans over short periods of time. Under some arrangements, the term of mortgages is limited to 19 years or less, which hampers the ability of poor families to repay. These circumstances strongly reinforce
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the tendency for the supply of new housing to go foremost to middle- and upper-income families. The NHF loans must be made longer term, have a higher cover ratio and be less expensive for the low-income group to take advantage of item. (4) In devising future social housing programmes, housing authorities have to clarify the ambiguity and define the target group, taking into account local housing situations and community-wide objectives relating to maintaining 'bottom-up' or popular participation in housing planning. On the other hand, top priority should be given to creating employment opportunities for the poor. The poor's ability to find suitable work needs to be strengthened through job training and improved job placement services. (5) Government efforts alone are not sufficient to solve Korea's housing problems. Co-operative methods can play an important role in helping to solve housing problems. Though housing cooperatives are not new to developing countries, Korea does not have a history of such cooperatives. Nevertheless, it should be possible for people to join together, pool their resources and provide themselves with good housing, through non-profit-making non-speculative cooperatives. As an alternative low-income housing strategy in Korea, housing co-operatives can serve as vehicles to channel state assistance to urban low-income groups and as a basis for participation and close cooperation between public agencies and a low-income clientele.
References Bank of Korea (various dates), Economic Statistics Yearbook, Seoul: Bank of Korea Bourne, Larry S. (1981), The Geography of Housing, London: Edward Arnold Chung, Joseph H. (1990), The Filtering Process and Housing Policy: The Korean Experience, Montreal: Montreal University Group, Discussion Paper 1-90 Drakakis-Smith, D.W. (1981), Urbanization, Housing and the Development Process, London: Croom Helm Economic Planning Board (1987), Population and Housing Census, Seoul: EPB Economic Planning Board (1991), Social Indicators in Korea, Seoul: EPB Fong, Peter K.W., and Anthony G.O. Yeh (1987), 'Hong Kong' in Seong-Kyu Ha, ed, Housing Policy and Practice in Asia, London: Croom Helm Gilbert, Alan and Josef Gugler (1992), Cities, Poverty and Development, Oxford: Oxford University Press Grimes, Orville F. (1976), Housing for Low-Income Urban Families, Washington: The World Bank Jang, Yong-Hee (1990), 'Toward low-income housing development: the evolution of public sector housing policies in Korea', Seoul: Paper presented at the Regional Seminar on Issues and Policies for Low-Income Shelter and Settlement Kim, Kyung-Hwan (1990), 'Housing finance and housing related taxes in Korea', Seoul: Paper presented at International Conference on Korean Housing Policies Korea Herald, 20 August 1988
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Low-income housing policies in the Republic of Korea: Seong-Kyu Ha Korea Housing Bank (1991), Monthly Economic Review, December 1991 Korea Housing Bank (1992), Monthly Economic Review, March 1992 Korea National Housing Corporation (1989), Housing Handbook, Seoul: KNHC Korea National Housing Corporation (1990), Housing Handbook, Seoul: KNHC Ha, Seong-Kyu, ed (1987), Housing Policy and Practice in Asia, London: Croom Helm Ha, Seong-Kyu (1991), Housing Policy In Korea, Seoul: Bakyoungsa
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Ha, Seong-Kyu and Steve Merrett (1984), 'Assessing housing consumption requirements: the case of Seoul', Third World Planning Review, 6(4), pp 331-337 Ministry of Construction (1989), Housing Delivery Plan, Seoul: MOC Ministry of Construction (1990), Evaluation of Public Sector Housing Programme, Seoul: MOC Ministry of Home Affairs (1989), Municipal Yearbook of Korea, Seoul: Ministry of Home Affairs Struyk, R.J. (1980), Housing in Korea's Fifth Five Year Plan: Possibilities and Constraints, Seoul: Korea Development Institute, Consultant Paper Series No 5
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