[Viewpoint] Reviewing Redevelopment Projects <1> The Housing Improvement Effect of Supplying Redeveloped Apartments

A Broader Perspective on Redevelopment Projects
The Housing Filtering Process and Its Impact on Low-Income Households

Professor Changmoo Lee, Department of Urban Engineering, Hanyang University

These days, there is heated controversy surrounding the revitalization of public-led redevelopment projects. Whether led by the public or private sector, there seems to be an important shift in perception recognizing that redevelopment projects, which have been undervalued until now, are an unavoidable choice for supplying new housing in urban areas. The rapid shift to urban regeneration projects, initiated by Seoul Mayor Park Won-soon and expanded during the Moon Jae-in administration, stemmed from the problem awareness that affordable housing for low-income residents disappears as it is replaced by middle-class apartments through demolition-type redevelopment projects. But is that really the case? It is necessary to look at the issue from a broader perspective.

In the field of urban economics, there is an important theory called the ‘housing filtering process.’ This theory states that when new housing for the middle class is supplied, middle-class households moving into the new housing leave behind their used homes, which are then occupied by lower-middle-class households who move into larger spaces. Subsequently, low-income households living in old and substandard housing move into the smaller used homes left behind by the lower-middle-class households, creating a chain of residential moves. Ultimately, the supply of new housing for the middle class can gradually improve the housing consumption levels of all income groups, including low-income households.

I have a close connection to this ‘housing filtering process’ theory because one of its proponents, Professor Grisby of the University of Pennsylvania, was my doctoral advisor. He had a strong connection to Korea, having been dispatched to the Korea Research Institute for Human Settlements in the 1980s, and he used Korean-made Monami ballpoint pens. I remember thinking he liked Monami pens, so I found one?which was becoming harder to find?and gave it to him as a gift. However, his expression was not very bright when he received it. Later, I learned that he did not use them because he liked them but because he had received so many that he could not throw them away. On top of that, I had added to his collection.

In fact, empirical studies confirming the filtering process are surprisingly hard to find. Therefore, I had a desire to conduct such empirical research someday, and about ten years ago, I had the opportunity to study residents of Gajaeul New Town. The research involved identifying the previous addresses of current resident households, visiting those addresses to find out the previous addresses of those households, and then visiting those addresses again to conduct surveys. The survey faced difficulties from the start. The proportion of identifiable previous residence addresses was extremely low, and even after painstaking verification, the locations to visit for household interviews were spread throughout the entire Seoul metropolitan area. It took two years to produce a statistically valid sample size for the third chain of residential moves.

As a result of this painstaking research, we confirmed a strong housing filtering effect from new apartments supplied through redevelopment projects. To provide more detailed results, the third chain process led to an average 20% improvement in housing consumption levels for households with lower incomes. The chain of residential moves occurred approximately once every 1.2 months, resulting in about ten chains per year. However, about 15% of the chains were cut off each time due to household division or housing demolition. Ultimately, the supply of 100 new apartments results in adjustments and average improvements in the housing consumption levels of about 400 households within one year.

The existence of such a housing filtering process means that the supply of new apartments through redevelopment projects contributes not only to the middle class but also to improving the housing standards of low-income households living in existing redevelopment areas or nearby neighborhoods. This suggests that instead of criticizing redevelopment for eliminating affordable housing, a choice should be made to pursue the expanded positive effect of improving the overall housing consumption level of society.