[In-Depth Review] Housing Policy Direction Must Consider the Public's High Awareness of Homeownership

Senior Research Fellow Kim Deok-rye, Korea Housing Institute

Kim Deok-rye, Research Fellow at the Korea Institute of Housing and Urban Research

The proportion of households who believe they should own their own home was surveyed at 87.7%. This means that 9 out of 10 households in Korea think they should have a house. This is a very high level of homeownership awareness. It is a point that should not be overlooked when formulating housing policies.

Homeownership awareness dropped to 79.1% in 2014 during the financial crisis but has steadily increased since then, consistently exceeding 80%. In 2019, it rose to 84.1%. The awareness, which had been increasing by about 1-2% annually, surged by as much as 3.6 percentage points in 2020 alone. The proportion of people thinking they need to own a home doubled last year. What is the reason? It seems to be the result of anxiety caused by the rapid rise in housing prices, making it harder to secure a home.

There is little regional difference in homeownership awareness. It is 87.4% in the Seoul metropolitan area, 87.6% in metropolitan cities, and 88.2% in provincial areas. Whether living in Seoul or in the provinces, there is little difference in the belief that one should own a home. However, there are slight differences depending on income, type of occupancy, and age of the household head. Among higher-income groups, 93.7% believe they should own a home. In contrast, only 82.3% of lower-income groups think so, a difference of 11.4 percentage points. Among homeowners, 96.2% believe they should own a home, but only 82% of jeonse (long-term deposit lease) tenants and 67.4% of monthly rent tenants without deposits think so. Homeownership awareness varies according to income and current housing type. For household heads under 40, the awareness is 82%. For those in their 40s, it is 88.9%, 88.5% for those in their 50s, and 90.9% for those aged 60 and above. It shows that the older people get, the stronger their belief that they should own a home.

According to the Housing Conditions Survey, the biggest reason people think they should own a home is residential stability. Residential stability accounts for 86.7%, asset accumulation 8.4%, and preparation for retirement living expenses 4.4%. This is why policy focus is needed on how to support homeownership, which forms the foundation of residential stability.

The desire to own a home and the actual situation of owning one are completely different. The desire to own a home can vary depending on circumstances. It may decrease somewhat during a housing market downturn. When housing prices are soaring, as they are now, the desire to own a home naturally grows stronger. As of 2020, 60.6% of households actually own a home (ownership rate). Compared to the 87.7% who believe they should own a home (ownership awareness), there is a 27.1 percentage point gap. The largest gaps between ownership awareness and ownership rate are in Seoul (39.8 percentage points) and Gyeonggi-do (31.9 percentage points). These gaps are ultimately acting as factors of instability in the Seoul metropolitan housing market.

When the difference between homeownership awareness and ownership rate is converted into the number of households, it amounts to about 5.68 million households. In other words, nationwide, 5.58 million households living in jeonse or monthly rent want to own a home. In Seoul alone, 1.58 million households want to own a home; in the Seoul metropolitan area including Seoul, 3.52 million households; in metropolitan cities, about 200,000 to 300,000 households; and in provincial areas, about 100,000 to 150,000 households want to own a home. If a policy goal were simply to provide homes to all these people, the supply volume of 2 to 2.5 million houses promised by the government or presidential candidates might be insufficient.

It is realistically difficult to create a policy that allows everyone who wants a home to have one. Nevertheless, the state must continuously develop policies that consider what people want to achieve a better life for its citizens. That is the most fundamental duty of the state. When efforts to fulfill the people's wishes accumulate into achievements, trust in the state can be restored. Let us look carefully at what people want and reestablish the basics of housing policy based on that.