A Simulation Analysis of Financing Public Housing Provision

Abstract

This study aims to examine the feasibility of financing the provision of public housing with National Housing and Urban Fund in Korea, in order to increase the ratio of public rental housing to the level of 9% of the total housing stock which is the EU average. Total 27 scenarios from 1) three proportions of investment and loan of 20% and 40%, 20% and 60%, and 20% and 75%, 2) three rates of reduction of the fund to support to the projects other than public housing in the fund, and 3) three additional transfers of capital gain tax to the fund are used in simulation analyses. In the analyses to provide total 1.11 million housing units from 2022 to 2028, it was found that the fund can cover the total cost of the plan in the case of 20% and 40% proportion of investment and loan from the fund. In case of 20% and 60% proportion of investment and loan from the fund, the fund also can cover the total cost when the reduction rate is 5 or 10%. In other cases, a transfer of 2~34% of capital gain tax property pro rata to the fund makes the plan feasible. Despite various assumptions and operational scenarios this attempt can provide useful information about the financing of public housing that is the most critical issue in increasing them.