South Korea Housing Situation

Seoul is the capital of South Korea with a population of 10,297,004 (one fourth of the total national population) as of the end of 2005. The total area of Seoul is 605. 52 square kilometers, which is only 0. 6% of the country’s total area. . The Hangang River divides the city into two parts: the northern part (called Gangbuk) and the southern part (Gangnam). The Gangbuk area totals 297. 97 square kilometers while Gangnam is 307. 55 square kilometers. Seoul is divided into twenty-five autonomous administrative units called ‘gu’. In 1394, Seoul had become the capital of South Korea and since then the population of Seoul has grown 110 times.

Due to rapid migration from rural to urban areas, the city has grown since the administrative reorganization in 1973. A rapid growth of cities around the capital took place after 1970 (Seoul Metropolitan Government). Rapid economic development took place in Korea during the 1960s and 1970s, and a large number of people migrated from the rural areas to Seoul. In the beginning, the migrants constructed their own houses without the consent of the city government, with low quality housing materials, and in an unplanned way (Ha- b).

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The first unplanned (unlicensed) occupation in Korea occurred during Japanese occupation in the form of “mud hut villages”. These were a collection of houses with straw matting roofs and were found in the steep mountain slopes and at the bank of small streams; the mud hut dwellers were very poor. After their independence in 1945 and the Korean War in 1953, a huge number of people migrated and formed ‘shanty towns’ at the outskirts of the city (Ha, Shin and Seong).

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Housing was a major problem faced by most of these cities in developing countries and the same applies to Seoul. This paper will examine the current housing situation in Seoul, the government’s initiatives and policies to improve it, and will provide some suggestions in the conclusion to overcome these problems.

Economic growth vs. Housing growth in Korea

The average economic growth rate in South Korea was 17% during 1994-1997, but due to the Asian financial crisis in 1997 it dropped to -8. 7% and to -38. 8% in 1999. However, the average growth rate became positive again in 1999 at 36. 3%, until settling in 2003 at -1. 4% (Pyo 1-2). The annual per capita GNP (Gross National Product) of South Korea increased from US$ 69 to US$ 10,079 from 1960 to 1995.

Houses increased annually by more than 5% in the 1960s and 1970s, but this was insufficient to meet the demand of the growing population (Ha 2004a).

Housing situation in Seoul

In 2000, nearly one quarter (23. 1%) of all households in Seoul lived in accommodations that did not meet minimum standards (such as floor space and basic facilities) set by the government. Many families lived in single illegal or sub-standard rooms, or in houses built of vinyl and thin wooden boards, most of which lacked even basic facilities. The minimum standard for housing set by the Korean government was based on the following factors (Ha 2004a):

  1. Minimum floor space (adequate space and privacy): the dwelling floor space area for a household of four persons must be more than 37 square meters.
  2. Facilities (provision of basic services): any housing lacking basic services and facilities, such as running water, electricity or a sewer system is judged to be below standard;
  3. Structure and environment: housing with poorly built structures such as tents, communal huts and barracks using inferior building materials are also judged to be below standard. (Table 1 in Annexure A (page 11) shows the housing situation in Korea from 1980 to 2000).

The price of houses and rent continued to increase due to economic growth and shortage of houses. In Seoul Metropolitan area, housing price to income ratio (PIR) was 6. 3 in 1997, higher than the global average 5. 2. Similarly, rent to income ratio (RIR) was 27% compared to global average 18% (Ha 2004a). According to data of the Financial Supervisory Service (FSS) as of September 2006, the average house price to income ratio (PIR) among wage-earning households nationwide stood at 4. 9, close to the 3-5 optimum level. However, the PIR was 10. 1 for apartments in Seoul and 12. 9 for apartments in Seoul’s Gangnam district!

The PIR in Seoul was much higher than major international cities, such as New York at 7. 9, London at 6. 9 (“Research Body; Ministry disagrees over Korea’s housing bubble”). In recent years the housing sector investment accounted for 4. 5% of GDP in South Korea (Lee and Ahn). Apartment construction in Korea began in the early 1970s, and became the dominant housing development pattern in the country. Apartments accounted for 81 percent of all new dwellings constructed in Korea between 1995 and 2000. From 1990 to 2002, a total of 12, 521 apartment buildings with 2,205,116 flats of different size had been constructed in Seoul (Hwang and John).

Apartment business accelerated in 1999 due to the high demand and scarcity of land. Almost 60% of Seoul citizens don’t own the houses, but live in rental houses. The owner occupancy in the Korea has declined from 79% to 54. 2% from 1960- 2000. This decline was mainly limited to urban areas where it fell from 62% to 46. 4% from 1960 to 2000. ‘Chonse’ is a rental system in which the tenant pays a lump sum to the landlord and gets the money back when he/she leaves. The earned interest on the Chonse is the rent paid for, and the Chonse contract is legally set for two years (Ha 2004b).

People are forced to live in “mud hut villages” or in ‘shanty towns’ due to extreme poverty and very low living cost. Moreover, most of these types of settlements grew near industrial areas, because of the employment opportunities in the industries. After 1970, typical residential cities for poor people became known as the “moon” or “hill” neighborhoods. In the 1980’s, “moon” neighborhoods had become the prime target of redevelopment and the residents had to move further outwards of the city and form new types of squatter neighborhoods.

Vinyl house communities are the type of developments that can be seen in Figures 1 and 2 in Annexure B (Ha, Shin and Seong). As mentioned by Ha (2004) in the 1960’s and the 1970’s, about 20-30% of people in Korea lived in the ‘slum’. He has classified slum as: Binilhaus, Beoljip and Jjogbang.

Binilhaus (vinyl house)

These houses are constructed with thin wood board layers and vinyl covering on the outside. Most Binilhaus occupants are poor tenants. Binilhaus squatters simply settle in vacant hillside areas or public open spaces without any rights of land ownership and/or building permits.

A research conducted by Ha, Shin and Seong (2002) found that 10,930 households with 35,000 people lived in vinyl houses in the Seoul region.


These are various kinds of basement or attic residences in low-income housing areas. Most of the Beoljip are located near the industrial areas with low-income laborers as residents.


These are one type of rental accommodations with a daily pay system for the lowest income groups and the homeless. Very poor people live in these types of accommodations.

Korean Government’s initiatives to face the problem

Before the 1960s there was no redevelopment policy on the emerging slums. During the period from 1961 to 1972, a new policy of removal and maintenance for slum and resettlement was adopted, resulting in new apartment buildings and resettled villages (Ha 2004b). From 1962 to 1970, about 40,000 low-income households had been relocated to 20 new areas where there were no planned residential areas such as hillside and quasi-agricultural areas, where living conditions were not good (Ha, Shin and Seong). The entire removal approach was attempted from 1974 to 1982.

In the late 1980s, the government formulated a five-year housing supply plan with the objective of constructing 2 million dwellings from 1988 to 1992; this program was more or less successful (Ha 2004a). Korean housing policies aimed at providing subsidized apartments to middle class consumers. Public sector organizations like Korean Land Corporation and the Korea National Housing Corporation developed and provided inexpensive land to homebuilders, who in turn sold apartments at regulated prices (Hwang and John). The housing regeneration project included three components: Redevelopment, Improvement, and Rebuilding (Ha 2004b).


This project is named the ‘Joint Redevelopment Project’ (JRP), where the association of landlords and the housing developer(s) agree on certain terms and conditions and construct new apartments according to government regulations. In the end the home owner gets a flat to live in, and the developer makes profit by selling excess flats. The buildings are 15- 25 stories and on average 118 m2 (Lee, Chung and Kim 55-80). Once the buildings and related facilities are built by the developer, it is then sold to landlords in lots and houses according to their original portion.

Page 6 Although this program was meant to provide residence to poor people it failed to do so because there were many households who could not afford to pay for the development work, so they sold their share and moved outwards from the city and formed new slums. This project brought profit for the developers and middle class people however, who could afford the work. Moreover, serious human rights violations occurred due to the eviction of unwilling owners or tenants; again, tenants had little rights under this program.

In Seoul 720,000 residents were evicted from their homes between the years of 1985 and 1988 (Ha 2004a).


The second type of housing regeneration scheme is the ‘Improvement of Residential Environment’, created in 1989, which was designated on the area where the buildings were very old and improvement needed. Unlike JRP, the aim of this program was to enhance shelter for squatters without displacing them. It required a local government to provide much of the infrastructure for new or rehabilitated residences.

Under the program’s individual improvement scheme, residents rehabilitated their housing, such as the self-help housing throughout the 1970s, but the government relaxed the building codes and provided affordable loans. For this program, the resident upgrading alternative supposedly placed residents in charge, but they may lack the skills, technology, and experience necessary to manage home improvement.


The rebuilding took place under the provision of revised regulations of ‘Act on the Promotion of Housing Construction’ in 1993.

Buildings more than 20 years old could be reconstructed under this act, but almost 76. 2% rebuilding took place abusing the exceptional clauses of law. The land owners and developers found it profitable to rebuild the houses because of the rising trends of flats, moreover by rebuilding they could increase the number of flats. Lee and Ahn (2007) have identified five policies executed by the government, they are:

  • Land development projects
  • Housing units supply programs
  • Reconstruction or redevelopment programs
  • Public housing supply or support instruments
  • Tax benefits and housing fund or loan supports

The policies had the following goals (1) mass supply and construction of hosing units, (2) stability of house price or the control of real estate speculation, (3) living stability for the low income bracket and (4) vitalization of housing. In their recent research Lee and Ahn concluded that the government housing policies were effective. The residential environment improvement projects have been initiated by communities. The government has drawn up plans to provide support for this project by providing 1 million public housing units by 2013, for low-income communities.

The focus of residential environment improvement projects is to improve illegal and deteriorated housing and to maintain public facilities under the Act on Temporary Measures for the Improvement of Dwelling and Other Living Conditions for Low-income Urban Residents, enacted in 1999. According to the Act, local government should improve the urban infrastructure in the areas designated for residential environment improvement projects. Finally, the government enacted the Housing Law in 2003 which states that government should establish minimum housing standard and priority should be given to those who are living below those standards (Ha 2004b).

Ministry of Construction and Page 8 Transportation (MOCT) announced a long term housing master plan to improve the national dwelling wealth and stability (Lee and Ahn).


The housing sector in Seoul could not cope with the rapid industrialization and rural urban migration. To face this problem the government has adopted many policies, some of which did not work as effectively as they were supposed to do, such as JRP which has gotten criticized for favoring the wealthy rather than the poor.

Although the study on the effectiveness of government policies conducted by Lee and Ahn has concluded that government policies were effective, Ha (2004b) has criticized the housing policies for being over centralized and over controlled by the national government. This has weakened the role of municipal government in housing. To solve the housing problems and to eliminate the illegal or substandard living conditions, the Korean government can take the following steps in terms of policy measure:

  • Decentralization of administration and industries.Korea can relocate some of its labor intensive industries to other locations, where the population density is not so high. The government should create employment opportunities in the rural areas so that rural urban migration is low.
  • The government should involve Non-Government Organizations (NGOs) and Community Based Organizations (CBO) and members of the civil society in planning and in policy formulation and implementation stages. Local government should be strengthened and given responsibilities to implement housing policies in collaboration of local people.
  • It is surprising that the life of the buildings in Seoul are only 20 years, after 20 years the homeowners demolish the building and build a new building with a greater number of flats.The owners and developers are interested in demolition because they get benefited due to rising trend of apartment cost. But buildings should be constructed with strong materials, so that they last at least 100 years. The government should take measures in that line because construction after every 20 years causes disturbance in the neighborhood, environmental problems, as well as unnecessary costs.
  • All the earlier policies of the government failed to eliminate the slums because they were not pro poor.There is always a section of the population with very low income who would not be able to afford buying a flat. The government should formulate policies to address this section of the population, such as building houses and renting them out for a nominal price, which after five years they would become the owner. The government can also give away flats to the extremely poor free of cost or with a nominal cost.
  • Government financial policies should be such that the housing prices are not so high.

A study conducted by Cho and Ma (2006) found a long term negative equilibrium relationship between the interest rate and housing value. So, by controlling the interest rate, housing value can be controlled. Page 10

Works Cited

  1. Cho, D. and Ma, S. “Dynamic Relationship between Housing Values and Interest Rates in the Korean Housing Market. ” Journal of Real Estate Finance and Economics 32 (2006):169-184.
  2. Ha, Seong. K. “Housing Poverty and the Role of Urban Governance in Korea. ” Environment and Urbanization. 16. 1 (2004): 139- 155.
  3. Ha, Seong-K. , Shin, Myong-Ho and Seo, Jong-Gyun. “The Last Resort of Destitute Families in Korea; Investigation Report on Vinyl House Communities and Actual Conditions of its residents. ” Research Report 2000-2, 2002.
  4. Ha, Seong. K. “Urban Poor and Housing Regeneration in Seoul” Asian Real Estate Society 2004 International Conference. New Delhi, India. 9-12 August, 2004. 26 April 2007. <www. asres. org/2004Conference/papers/127_Ha. doc>.
  5. Hwange, M. and John, M. “The Dividend Pricing Model: New Evidence from the Korean Housing Market. ” Journal of Real Estate Finance and Economics 32 (2005): 205-228.
  6. Lee, Bun S. , Chung, Eui C and Kim, Yong H. “Dwelling Age, Redevelopment, and Housing Prices: The Case of Apartment Complexes in Seoul” Journal of Real Estate Finance and Economics 30:1 (2005): 55-80.
  7. Lee, Jin K. and Ahn Kun H. “Categorization and Effectiveness of Korean Housing Policy – An Analysis of Effectiveness and Price Impact. ” 2002. 27 April 2007 <www. asres. org/2004Conference/papers/Lee%20&%20Ahn. doc>.
  8. Pyo, Hak K. , “Investment Stagnation in East Asia and Policy Implications for Sustainable Growth. ” Korean Institute for International Economic Policy (KIEP) 2005. <www. nira. go. jp/ice/nwdtt/2005/DAT/1200. html>.

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South Korea Housing Situation. (2017, Apr 14). Retrieved from

South Korea Housing Situation

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