Public rental expansion may boomerang on LH as per-unit debt hits W290m

Korea Land and Housing Corporation incurs 290 million won ($212,000) in debt for every integrated public rental housing unit it supplies, raising concerns that the state developer's financial burden will grow heavier as the government plans to expand public rental housing supply to 172,000 units next year.

According to data that People Power Party lawmaker Kang Dae-sik of the National Assembly's Land, Infrastructure and Transport Committee obtained from LH, the debt generated per integrated public rental unit last year stood at 288 million won — up 60.9 percent from 179 million won in 2021, a jump of 61 percent in four years.

LH calculates the debt figure by subtracting government equity contributions from the actual project cost of a rental unit, with the remainder funded through external borrowing such as Housing and Urban Fund loans and corporate bond issuances.

Integrated public rental housing consolidates permanent, national and happy housing programs into a single framework, supplying units to low-income households and young people with a mandatory rental period of 30 years. Rent is set at 35 to 90 percent of market price on a sliding scale based on income level.

Project costs are also rising faster than government support, compounding the financial strain. The actual project cost per integrated public rental unit climbed 61.5 percent, from 226 million won in 2021 to 365 million won last year, while the government subsidy per unit rose only 40.7 percent, from 150 million won to 211 million won over the same period.

Easing the financial burden will be difficult given the government's commitment to expanding public rental supply. Under the Ministry of Land, Infrastructure and Transport's budget proposal for next year, the government plans to supply 218,000 public housing units — more than 12 percent above this year's 194,000. Of those, 172,000 will be public rental units, with 6.2 trillion won in new funding earmarked for a universal rental housing program incorporating transit-oriented locations and mid-sized floor plans.

The Housing and Urban Fund's loan budget for integrated public rental housing will also rise 70.8 percent, from 823.6 billion won this year to 1.41 trillion won next year, while the equity investment budget for integrated public rental housing will increase 4.8 percent, from 1.48 trillion won to 1.55 trillion won.

Against this backdrop, LH's debt ratio is expected to climb as rental housing supply grows. Under LH's medium- to long-term financial management plan for 2025–2029, the debt ratio is projected to rise from 239.0 percent this year to 250.5 percent next year and 262.1 percent in 2028. Total interest expenses are estimated to increase from 2.89 trillion won this year to 3.6 trillion won in 2029.

The government's push to expand LH's direct project implementation adds further financial risk beyond those projections. The financial outlook through 2029 does not yet reflect the impact of the expanded direct-implementation policy announced in last year's Sept. 7 measures.

"Rather than simply pushing ahead with the policy direction of expanding public rental housing, the government must also examine the financial soundness of LH, which is the entity that actually has to carry it out," Kang said. "The debt burden per rental unit has already grown substantially, and the expanded direct implementation by LH has not been factored into the existing financial projections — the government must clearly spell out the financial burden that housing supply will impose and what measures it plans to take."

Despite these concerns, LH intends to press ahead with its housing supply push. The corporation said Wednesday it would deploy an additional 344 land compensation staff to accelerate ground-breaking timelines at Greater Seoul housing supply sites. The figure combines redeployed experienced personnel from LH's headquarters and non-metropolitan offices with 250 specialist workers to be hired this month.

For newly launched compensation districts, LH also plans to cut the compensation period from ground designation to construction ground-breaking by 20 months — from 44 months to 24 months.