Calls are growing to accelerate the supply of non-apartment homes to stabilize Seoul's rental market. Low-rise multi-unit housing, urban-living housing and officetels — studio units used as either a home or an office — can be built relatively quickly compared with apartment complexes. The government is trying to revive supply by expanding purchases of privately built units for public rental housing and by offering financing support, but industry observers say stronger financing and looser rules are needed as construction costs climb and business conditions deteriorate. Rather than relying solely on public purchases, they add, policymakers should draw private landlords into the market and promote corporate long-term rental housing to build a stable base of lease supply.
Permits for Non-Apartment Homes Down 77% in Four Years
Non-apartment supply has fallen sharply, though it has picked up somewhat recently. Permits for non-apartment homes totaled 33,061 units last year, down 11.4% from 37,330 units a year earlier, according to the Ministry of Land, Infrastructure and Transport on the 2nd. Construction starts fell 7.7% over the same period. As of August this year, permits were down 76.5% and starts down 78.1% from 2022.
The plunge reflects a combination of factors: the fallout from jeonse — a lump-sum deposit lease — fraud cases, concerns about falling home prices, high land and construction costs, rising financing expenses and an intensifying preference for apartments. For private developers, recovering project costs through presales or leasing has become harder than in the past, and a frozen real estate project financing market has further weakened the incentive to launch new projects. In effect, a large share of the housing that could be delivered relatively quickly in city centers has stalled at the development stage.
That is why the government has turned to public purchases of privately built rental units as its main tool for reviving non-apartment supply. The ministry plans to supply 90,000 such rental units in the greater Seoul area this year and next, concentrating 66,000 of them in regulated zones in Seoul and Gyeonggi Province. To achieve the intended supply effect, officials need to screen out projects with weak viability and clear the obstacles that arise before units are actually delivered. Newly built units purchased for public rental must pass through multiple stages after a private developer applies: review, a purchase agreement, land acquisition, construction start, completion, purchase and move-in. Applications covered 288,317 units last year, but only 14,195 units actually broke ground, according to data submitted by the ministry and the Korea Land & Housing Corporation to Rep. Boo Seung-chan of the Democratic Party of Korea, a member of the National Assembly's Land, Infrastructure and Transport Committee. Applications poured in, but they did little to ease the shortage in the rental market.
Financing Support Aims to Unblock Supply
The government has acknowledged the bottleneck and is overhauling its support framework this year. It raised LH's land acquisition support to as much as 80% of land costs and strengthened project financing guarantees from the Korea Housing & Urban Guaranty Corporation, cutting the initial capital developers must raise themselves to about 10% of land costs. After construction begins, purchase payments are made every three months based on progress, and sites delayed by construction cost verification can start work before verification is completed. Regulatory easing is also under way to improve the viability of non-apartment projects. Through these steps, the ministry aims to supply 41,000 non-apartment homes in the greater Seoul area this year and next, and 110,000 units by 2030.
Experts advise reflecting location and quality in supply criteria and strengthening financing support so that the programs do not mass-produce homes that renters avoid. Restarting stalled inner-city projects and turning vacant rental units into homes people want to live in could ease the rental crunch to some degree, they say. "Non-apartment homes have become hard to sell and hard to lease, and with land and construction costs up, building new ones in Seoul is not easy," said Kim In-man, head of the Kim In-man Real Estate Economic Research Institute. "The priority is improving both financing and regulation to create an environment where the private sector can take on projects again."
Shifting Private Supply Toward Corporate Long-Term Rentals
Because public purchases alone cannot resolve the structural shortage in the rental market, analysts say policy must also turn the private rental market itself into a stable source of housing. In particular, they argue for giving predictable tax and financing benefits to operators who lease for a set minimum period and meet obligations such as rent limits and the return of deposits, so that multiple-home owners can function as reliable rental housing providers. "Supply support measures such as expanded purchases of rental units are being put in place, but there are not enough incentives to draw private participation, including reform of the registered rental operator system," said Shin Bo-yeon, a professor of real estate AI convergence at Sejong University. "The tax framework needs to be redesigned so that it does not discourage private rental supply."
Corporate long-term rental housing also needs to expand to stabilize the lease market. If real estate investment trusts and institutional investors hold homes for long periods and lease them out, it would ease the problem of listings shrinking abruptly depending on whether individual landlords renew contracts or sell. The government has set out new types of long-term private rental housing and stable rental operations through REITs as policy goals, but has yet to get them off the ground. "The private rental supply structure should be reorganized from an individual-centered model to one centered on corporate long-term rentals, while building a stable supply base that meets public-interest requirements such as housing stability for tenants through limits on rent increases," said Park Jin-baek, an associate research fellow at the Korea Research Institute for Human Settlements.
