Korea youth housing policy needs a path to homeownership

Columns Youth housing policy should help renters build equity for a first home, not merely reduce their monthly costs. Apartment complexes across Seoul are seen from Seoul Sky, the observation deck at Lotte World Tower in Songpa District, southern Seoul. YONHAP Lee Sang-gun The author is a professor of real estate at Sogang University Graduate School and a member of the Reset Korea Real Estate Committee. It is time to rethink the direction of housing policy for young people. The central and local governments have introduced measures including monthly rent subsidies, jeonse (lump-sum deposit) loans and public rental housing. These policies are clearly necessary because they ease immediate housing costs. But there are limits to treating the housing problem simply as a question of how cheaply young people can live. Policy must go a step further. Support should be designed so that young people receiving assistance today can buy homes five or 10 years from now. One of the biggest barriers to homeownership is initial equity, or seed money. The median price of an apartment in Seoul is about 1.29 billion won ($955,000). Even considering loan limits for first-time buyers, a purchaser needs roughly 690 million won ($511,000) in equity. Even if the home price is lowered to 600 million won, buyers must still raise about 180 million won themselves. For young people who have only recently entered the work force, that is an extraordinarily high first hurdle. As a result, the size of one's nest egg increasingly determines whether one can enter the housing market. Empirical studies in Korea and abroad show that parental financial support and net worth are closely associated with young people's transition into homeownership. Family transfers can reduce the burden of the initial funds needed for a purchase and bring forward the timing of a first home. Young people earning the same income therefore begin from different starting lines depending on whether their parents can provide seed money. Differences in intergenerational wealth transfers are becoming entrenched as housing inequality. That distinction matters because housing policy shapes more than monthly expenses. Homeownership is also a channel through which households accumulate assets. If young adults remain renters while housing values rise, those without family wealth can fall behind even when their earnings are comparable to those of their peers. A policy focused only on lowering today's housing costs can therefore ease hardship without addressing the widening gap in opportunities to build wealth tomorrow. Policy must therefore ask a different question: not 'How much more can we lend young people?' but 'How can we help them build initial equity without parental assistance?' One option worth considering is a first-home matching program. If young people save for a specified period toward purchasing their first home, the government would contribute a certain proportion. Unlike a simple cash handout, the program would require participants to save themselves. It could also be linked to existing asset-building programs such as the Youth Leap Account. Matching-savings experiments overseas have shown that assistance earmarked for home purchases can accelerate first-time homeownership. For young people facing larger equity gaps, another option is a shared-equity first home. Buyers would initially purchase a share they can afford, while the public sector holds the remainder. As their income and assets grow, they could gradually buy out the public share and move toward full ownership. Britain's Shared Ownership program offers a model for creating a path from renting to partial ownership and eventually full ownership. We need to move beyond the assumption that someone must purchase an entire home at once to become a homeowner. Urban redevelopment and reconstruction projects could also be linked to asset building for young people. The public sector could acquire homes in designated renewal areas and rent them to young residents. As redevelopment proceeds, rental deposits could be converted into equity that ultimately helps them acquire newly built apartments. Instead of bearing the enormous cost of a home upfront, young people could use their income, savings and time to move gradually toward ownership. Providing purchase funds alone, however, weill not solve the problem. In areas where housing supply is constrained, increasing demand-side assistance can cause part of the subsidy to be capitalized into higher home prices. Research abroad has also found that in places with severe supply constraints, financial assistance may push up prices rather than increase new housing supply. Policies that strengthen young people's purchasing power must therefore be accompanied by increased urban housing supply through reconstruction, redevlopment and other measures. What young people need is not rental housing that leaves them dependent on support indefinitely. They need the hope that while today's policies reduce their rent burden, today's savings can become tomorrow's equity and eventually lead to a home of their own. When evaluating youth housing policy, we should no longer ask only, 'How many housing units were supplied?' or 'How many people received how much assistance?' We must add another question: Will the young people who received that support be able to buy their own homes next? Only when policy can answer that question can youth housing measures truly move beyond temporary support and offer something more lasting: a credible path toward independence, asset building and the hope of eventually owning a home. This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.