Impacts of recent housing policies on the rental housing market in Korea

This research is concerned with the effects of housing policy on rental housing market in Korea, in particular, the informal housing finance mechanism known as the chonse. In spite of many studies on chonse rental housing market, the relationship between government intervention in the housing market and chonse price has not been fully investigated. Most studies emphasize a role of chonse as an informal source of housing finance and none of them pay attention to the relationship between chonse price and government housing policies such as price control for new dwellings and rent regulation. Without a proper housing finance system in Korea, chonse deposit plays an important role in household tenure choice decision. Yet, many studies on chonse rental housings do not show clearly how it works. Furthermore, the interaction of price control and household tenure choice decision has never been a subject of study in Korea. The purpose of my study is, therefore, to contribute toward filling a gap in current knowledge about Korean housing market and to increase understanding of policy impacts on rental housing market in Korea.; Current housing policy formation is discussed with an emphasis on the role of the government as a mediator between renters and homeowners. To examine policy effects on the rental housing market in Korea, microeconomic approach is adopted. Then, based on housing investment model as a forward market transaction, a model of the user cost of owning and renting is formulated to investigate the policy impacts. The model is empirically validated based on time series design using ARIMA models proposed by Box and Tiao (1975).; Chonse to price ratios were shown to be different with the size of dwelling unit and tests indicated how housing policy works. Emergency measures and artificial alleviation of housing demand for new dwelling such as roll-over regulation for the second new housing unit, were partly successful. New town development nearby Seoul metropolitan area was supposed to bestow favors on renters and low-income families in Seoul but renters witnessed the rise of the rent. Their anticipated windfall gains from new dwellings and the increased chonse price canceled each other out. Rent regulation revised in the interests of renters had an adverse effect on rental rates. Instead of stabilizing rent, it produced a skyrocketing increase. Particular institutional features of housing markets in Korea such as price control, tax systems, and chonse rental arrangements were shown to have bestowed favors on homeowners, making renters bear the burdens. The thesis shows particular institutional features of housing market in Korea, such as taxation, price control, chonse rental arrangement, are not seperable when a new housing policy is formulated.