[Reportage] The dire living situation of young Koreans

Posted on : 2019-11-24 20:03 KST Modified on : 2019-11-24 20:03 KST
Many people in their 20s and 30s have to move around frequently and take out housing loans
An alleyway full of the low-rise studios that young people tend to rent due to their lower costs. (Park Seung-hwa, staff photographer)
An alleyway full of the low-rise studios that young people tend to rent due to their lower costs. (Park Seung-hwa, staff photographer)

Lee Seung-hui (pseudonym) is a 25-year-old woman who lives by herself in Seoul. The low-rise apartment where she lives is four years older than she is, and it already seems to be on its last legs. The metal sashes on her windows open reluctantly, with a creak, and don’t keep out the draft; there are gashes on the floor, which was hurriedly patched up after the hot water heater was repaired at some point.

As a result, there are a lot of things that Seung-hui has had to give up. She’s stopped airing out the house because, when she opens her door, she can look right into the living room in the next flat over. She also doesn’t have the option of washing her face at the bathroom sink, since she doesn’t have one. Whenever she looks at the bizarre layout of her flat, she remembers hearing a rumor that the previous landlord broke up a single flat into several studio apartments and sold them separately. Seung-hui nods her head: it’s a plausible story.

56.0% of young people’s houses are smaller than 40 square meters

The chilly winter months are actually when Seung-hui’s house is most livable, however. “In the spring and summer, I have to share the house with awful bugs, like camel crickets and cockroaches, and that really stresses me out,” Seung-hui says. She’s not quite sure whether the camel crickets are the interlopers in her house, or whether she is.

According to a 2018 residential survey by the Ministry of Land, Infrastructure, and Transport, 14% of people in youth households are dissatisfied with their residential environment, just like Seung-hui. Even so, at least this is a second-floor flat, with 300,000 won (US$257.66) a month in rent and a 20 million won (US$17,177) deposit. The first place that Seung-hui stayed when she moved to Seoul to attend university was a rooftop unit, at 250,000 won (US$214.72) a month and a 2 million won (US$1,717) deposit. She’s recalls it being “even hotter in the hot months and even colder in the cold months.”

Seung-hui managed to move into her current place after “saving up 10 million won [US$8,590] by really hustling at part-time jobs while going to college and getting 10 million won from my parents.”

Next January, Seung-hui will finally be moving to an apartment with a bathroom sink. Her older sister will be coming up to Seoul from the countryside to live with her, so they’ve been able to put together a bigger housing deposit. Her sister, who is looking for a job, has gotten a government-subsidized loan of 70 million won (US$60,130). Combined with Seung-hui’s housing deposit, this makes it possible to move into a low-rise apartment with a rent of 200,000 won (US$171.80) and a deposit of 90 million won (US$77,311).

Seung-hui and her sister are happy to have found a place with at least one bathroom sink. Now that her sister is sharing the rent, Seung-hui won’t have to “get calls from my landlord bugging me to pay three months of rent.” But they did have to make one sacrifice: “We chose a clean house and gave up the sunlight.” The sisters settled on a semi-basement unit.

Seung-hui and her sister’s experience is representative of the residential environment of the majority of 20- and 30-somethings who live apart from their parents. “Young people move again less than a year after putting down a deposit to rent a studio on the ground floor of a detached house” — that’s a rough generalization of the residential experience of young people, drawing upon the most common responses of young people between the ages of 20 and 34 in the Ministry of Land, Infrastructure, and Transport’s 2018 household survey. National statistics show that, of 14,440,000 people in their 20s and 30s (including a tiny number of people younger than twenty), only 14.1% (2,050,000) own a house or a low-rise apartment unit and only 10.7% (1,550,000) own a unit in a high-rise apartment unit. It’s also estimated that only one in 10 of those apartment owners live in Seoul, where apartments are most expensive.

Among young people, 56.0% of them live in units that are smaller than 40 square meters. Kim Hyeong-min (pseudonym), aged 29, falls in that category. Hyeong-min’s first apartment rented under Korea’s unique key money system was a studio in a detached house in Seoul’s Gangnam District. This tiny studio – 26 square meters, including the bathroom – is still the largest place he’d lived in during his 20s. Hyeong-min’s studio is subsidized by the Korea Land and Housing Corporation (LH) through a program targeted at youth. Hyeong-min lined up the apartment in December 2018 with help from LH, which put down 69 million won (US$59,271), the whole deposit aside from 1 million won (US$859) that Hyeong-min put down. Beneficiaries of this system are able to receive up to 90 million won (US$77,309) in loans for key money. But because the tenant is still responsible for rent, which amounts to yearly interest of 1-3% on the key money, Hyeong-min opted for a lower deposit. The bigger the government loan, the more interest he’d have to pay.

Applicants for government assistance must find apartments on their own and determine whether aid is available

The average monthly cost for Hyeong-min’s first key money apartment is 60,000 won (US$51.54) for the maintenance fee and 118,000 won (US$101.36) in monthly rent. That’s cheaper than the 260,000 won (US$223.34) he was paying in monthly rent at his former residence, a gosiwon, or student-oriented boarding house, in Gangnam District. Prior to this, he’d flitted from one temporary abode to another, like some kind of modern nomad — a dorm room at his university; a studio apartment in a low-rise; a “mini studio,” bigger than a gosiwon but still smaller than a studio apartment; a share house; and then the gosiwon. He kept moving to places with cheaper rent, sometimes leaving after as little as two months at a given residence.

It wasn’t easy for Hyeong-min to find his current government-subsidized key money apartment. Over three months, he visited more than 10 realtors in Gangnam District, where he works. Before applying for the key money loan, he had to find the property himself and confirm whether aid was available. But some low-rise apartments he visited didn’t qualify because the owners had split up units in order to inflate their rental income, which violated the building code. At other apartments that did qualify, the landlords refused to approve the application, reluctant to give out their personal information.

While LH runs a program called “Happy Homes” in which public housing is provided at less than the market rate to university students, young people, couples in their first seven years of marriage, and people on the verge of marriage, this entails a heavier financial burden. Since Hyeong-min only started working in November 2017, he has little in the way of income or assets. As a result, it was basically impossible for him to cover rent through the Happy Homes program, which would be between 60-80% of the market price. The Happy Homes deposit available for young people this year ranged from 8,359,000 won (US$7,180) in Yongang Village, Yeongam County, South Jeolla Province, to 85,285,000 won (US$73,257) at Mapo Xai No. 3 in Seoul, the most expensive apartment in the program.

But after Hyeong-min went to so much trouble to find his key money apartment, he’s only guaranteed two years there. “I’m already anxious that I’ll have to move when my rental period is up. The program allows a contract to be renewed twice, but if the landlord doesn’t want to re-sign, I’ll have no choice but to leave,” Hyeong-min told the Hankyoreh during a telephone interview. The uncertainty of the period of stay exacerbates the overall weakness of the residential environment.

Four out of 10 young Koreans live in detached houses. That doesn’t mean they have the whole house to themselves, however: the houses are usually divided into separate units. The house where Park Seon-hui, 29, lives with a friend in Seoul’s Gwanak District is a detached house, just like Hyeong-min’s. While the house was marketed as a three-story, it’s actually two stories: there’s the “ground level” (higher than a basement and lower than a regular first floor), the first floor, and the second floor, where Seon-hui lives. While there are a living room and three “bedrooms” in this unit of 40 square meters, only one of the three bedrooms is actually big enough to sleep in. Seon-hui’s apartment is 550,000 won (US$472.43) a month in rent, with a 5 million won (US$4,294) deposit.

Seon-hui’s first key money apartment wasn’t the second floor unit, but rather a unit on the “ground floor” of the same house. That was the apartment that she and a friend had found after she quit her office job at a conglomerate in July 2018 and started graduate school, with each of them contributing 200,000 won (US$171.81) in monthly rent. But Korea’s monsoon season arrived shortly after they moved in, and the house began leaking, with rainwater forming puddles. The walls were soon caked with mold. “It would be depressing to say we got lucky. I guess the silver lining is that we moved to a unit on the second floor of the same house,” Seon-hui said.

In their new unit, there are no leaks, puddles, or mold. After living in a semi-basement unit (regarded as one of the three worst living arrangements in Korea, along with rooftop units and gosiwon) Seon-hui and her friend were finally able to score a decent above-ground apartment, though this entailed them raising their monthly rent by 150,000 won (US$128.86).

Saving up for a house takes 18 years longer for low-income than high-income earners

Seon-hui is still in her 20s, but she can already perceive the residential disparity forming between members of her own generation. Some of her former coworkers at the conglomerate who are a couple years older than her bought apartments in Seoul in their early 30s The value of those apartments was bound to rise long term because of their great location, among other reasons. But her friends at smaller companies had trouble saving 1 million won (US$859.07) a month. After spending two or three years to pay off their student debt, they could barely save 10 million won (US$8,590a) a year of their salaries — and it would take them over 10 years to buy a house at that rate. According to one study, it takes members of low income-earning households an average of 18 years longer to buy their own house than high income-earning households. That study, carried out by the Ministry of Land, Infrastructure and Transport, examined the price-to-income ratio (PIR) of apartments across different income groups in 2016-2019.

Housing prices are even tougher for newlyweds who are just starting a family. Park Jeong-eun (29, pseudonym) and Kim Su-hyeon (37, pseudonym) got married in November 2018, but they still maintain separate apartments. They spend weekdays at Jeong-eun’s unit in a low-rise apartment, with a key money deposit of 60 million won (US$51,544); and they spend the weekend at Su-hyeon’s “officetel” (a residential unit in a mixed-used building), with a key money deposit of 290 million won (US$249,130).

When outstanding loans taken out to cover their key money deposits are accounted for, Jeong-eun and Su-hyeon only have 100 million won (US$85,906) to call their own. Since Jeong-eun’s job is a personal trainer, she needs to live in Seoul, but considering the average housing price in the city, key money would cost 350 million won (US$300,674) for a 80 square meter apartment and 210 million won (US$180,412) for a 60 square meter officetel. The two have looked into public housing and subsidized loans for newlyweds, but they’re not eligible for most programs because their combined yearly income comes to a little over 70 million won (US$60,137). The couple has just started looking for a house, and they’re already getting depressed.

When asked what residential policies might help, Hyeong-min and Seon-hui, speaking for the youth, called for a bigger supply of public housing units that charge less rent and guarantee tenants a longer stay. Jeong-eun and Su-hyeon, as newlyweds, would like to see more government support for key money loans. This echoes a survey that asked youth households what kind of residential support programs they need: 32.2% said support for key money loans, 24.3% said support for mortgage loans, and 16.4% said support for rental deposits. Mortgage loan assistance tended to be favored by young people and newlyweds with higher income, key money loan assistance by those in the middle, and rental subsidies by those with lower income.

But the approach that the government has taken to subsidized public housing has been the exact opposite of what young people have hoped for. According to financial reports for the fiscal years 2017 and 2018 and approved expenditures from the reserve fund that the Ministry of Land, Infrastructure and Transport submitted to the National Assembly, the money that the Korea Land and Housing Corporation has been paying into the National Housing Fund on behalf of a program called “National Rental Housing” decreased from 319.6 billion won (US$274.54 million) in 2013 to zero in 2017. Over the same period, the money spent on permanent housing for the lowest level of income earners plunged by three quarters, from 151.2 billion won (US$129.9 million) to 35.6 billion won (US$30.59 million). Meanwhile, funding for the Happy Homes program, which makes housing available for 60-80% of the market price, multiplied nearly 400-fold, from 2 billion won (US$1.72 million) to 793.5 billion won (US$681.73 million).

Although total funding for public housing has increased under the Moon administration, that funding has largely focused on programs where tenants must still shoulder a considerable rent burden. As a result, these programs have done little to mitigate housing costs for young people and newlyweds, the very people who are facing a poor residential environment. This policy approach has been repeatedly criticized by the Board of Audit and Inspection of Korea for isolating residentially vulnerable groups.

More higher-rent units going up in public housing

Kwon Ji-ung, director of Institute for a New Society, offered the following insights in a phone interview with the Hankyoreh 21. “The total volume of public housing for young people and newlyweds has increased, but those programs don’t serve the public interest as much as they used to. Though the Happy Homes program and the Transit-Friendly Youth Homes program were ostensibly created to provide more housing for young people, those public housing projects charge high rent, with the practical effect of reducing the number of homes available for low income-earning young people. Rather than merely increasing the number of public housing intended for young people, society needs to reach a consensus about what the income level should be of the young people who are actually moving into that housing.”

By Joh Yun-yeong, staff reporter

Please direct comments or questions to [english@hani.co.kr]

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