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Rental housing policy in response to the increase in the share of wolse (monthly lease)

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Rental Housing Policy in Response to the Increase in the Share of Wolse (Monthly Lease)*
Inho Song, Fellow at KDI
“In Korea, jeonse is continuing to decrease while monthly leases (‘wolse’ in Korean) increase, particularly among the young and senior populations. Indeed, compared to other age groups, they face larger financial and credit constraints. Thus, a market for wolse with deposit must be created with quality homes and varying deposits to establish a broader range of housing choices for these groups. To that end, policy efforts are needed to eliminate any loopholes in support programs in order to secure housing stability for senior wolse tenants who are in the bottom income decile.”
Ⅰ. Increased Proportion of Wolse and Changes in Rent Prices
There are three types of monthly leases or wolse in the Korean rental market: security deposit with monthly rent (or ‘wolse with deposit’), monthly rent with no deposit, and deduction of monthly rent from a lump sum payment. However, all methods of wolse are swelling in number as jeonse (or key money deposit, referring to a large lump sum payment without monthly rent) continues to decline. Indeed, the proportion of wolse reached 55.0% in 2014, outgrowing that of jeonse (45%), and gained another 5.5%p in 2016 to mark 60.5%. The increase was mainly driven by the growing proportion of wolse with deposit, which accounts for 85.6% of the wolse market and 51.8% of the total rental


Full Text
Title Rental housing policy in response to the increase in the share of wolse (monthly lease)
Similar Titles
Material Type Articles
Author(English)

Song, Inho

Publisher

Sejong : Korea Development Institute

Date 2017-09
Series Title; No KDI FOCUS / No. 86, eng.
Pages 8
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic Administration
Social Development
Holding 한국개발연구원; KDI국제정책대학원
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Abstract

In Korea, jeonse is continuing to decrease while monthly leases (‘wolse’ in Korean) increase, particularly among the young and senior populations. Indeed, compared to other age groups, they face larger financial and credit constraints. Thus, a market for wolse with deposit must be created with quality homes and varying deposits to establish a broader range of housing choices for these groups. To that end, policy efforts are needed to eliminate any loopholes in support programs in order to secure housing stability for senior wolse tenants who are in the bottom income decile.

- Low interest rates cause jeonse lessors to increase the deposit or convert to wolse with deposit.

- Lessors make use of their strong bargaining power to induce tenants to choose wolse instead of jeonse amid the growing trend of high jeonse deposits.

- The RIR of wolse tenants is higher than that of jeonse tenants.

- The rental housing market is exhibiting a continued trend of decreasing
jeonse and increasing wolse particularly among the young and seniors.

- The level of monthly income of the young and seniors is mostly lower than other age groups.

- The RIR of young and senior wolse tenants is higher than that of other age groups.

- Almost a half of senior wolse tenants in the bottom income decile were found to spend over 50% of their income on housing.

- Most young and senior tenants live in multi-unit housing or ‘other housing’ with poor service quality.

- Of senior wolse tenants in the bottom income decile (D1), an estimated 73,000 are excluded from the government housing support program.

- The financial resources for the rental housing policy need to be distributed to vulnerable groups such as low income and senior households.

- A rental housing market must be created where financially burdened tenants can choose from a variety of quality wolse homes with varying deposits.

- The New Stay project needs to shift its focus towards using existing rental apartments (unoccupied) instead of building new ones.

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