A study on small-sized rental housing market for single or two-person households and strategies to enhance the supply in Korea

Abstract

Since 2000, the population structure has been rapidly changing in Korea. Especially, with the trends of delayed marriage, low fertility rate, high divorce rate, separated family due to jobs and education, and the growth of the senior population, the number of single or two-person households is expected to increase despite the decline in population. The government has recognized the importance of the small-sized rental housing market, and it introduced various policies to satisfy the increased demand. However, the supply market has not yet been boosted, because many big companies hesitated to execute their business concerning their profitability, and small companies and individuals suffered from lack of expertise while operating and managing their land and properties. In this situation, this study develops some strategies to increase the supply of small-sized rental housing and to improve the quality of living environments by reviewing the diverse cases and business models in Korea and in other countries. To understand the characteristics and needs of single and two-person households, they can be classified into 4 groups. This classification will be a base for developers and construction companies when they supply housing units and when the government provides subsidies and tax benefits. The biggest problem with the supply is the lack of land because of its high price. To solve this problem, a sub-lease business model is suggested, and using existing multi-family and multiplex housing is another way. With the sub-lease business model, the introduction of professional lease management services will help satisfy all the needs of landowners, tenants, developers and construction companies. For development projects, project financing is a common method to raise funds in Korea. As in the United States, various funding sources, such as asset-backed securities, Real Estate Investment Trusts, and a portfolio, are required. For construction, the modular method can be an option to save construction cost and time.