South Korea’s housing crisis explained

Recently, I took a trip to Seoul, South Korea and Tokyo, Japan. While both cities are magical, I was struck by just how much the housing situation in South Korea has degraded, particularly for young people and the friends I first made when I went to Korea in 2016.

South Korea is one of the richest countries in the world, sitting between Brunei and Japan when ranked by GDP per capita. It is due to tech giants like Samsung, LG, and Hyundai, to name a few. This culminates in sleek cities, most notably Seoul, with, by many accounts, an enviable standard of living. But for millions of South Koreans, one thing is getting harder and harder to afford: a place to live.

A crisis beneath the surface

South Korea’s housing market is vulnerable, maybe more so than most people realise. House prices have skyrocketed, particularly in urban areas like Seoul, where factors like speculation and restrictive regulations in desirable locations have collided with shifting. For our readers in the anglosphere, this is a familiar tale.

The average single-person household now spends a third of its income on rent. That’s much higher than for larger households. This group of households is only growing. Between 2010 and 2017, one-person households nearly doubled. By 2045, they’re expected to make up over a third of the country.

Jeonse vs. regular rent

One unique feature of Korea’s housing market is jeonse. It’s a lease system where tenants pay a massive upfront deposit, sometimes 60 to 80% of the property’s value, and then live rent-free for a couple of years. It worked during times of high interest rates and housing shortages—landlords could invest that lump sum and earn a return. But today, with lower interest rates and falling returns, jeonse is falling out of favour. Landlords want monthly rent. Tenants still want jeonse. The system is caught in a standoff.

How did we get here?

To understand why prices have surged so much, we can turn to a real estate model used by economists: the DiPasquale-Wheaton model. It shows that housing prices are shaped by a feedback loop between demand, supply, and expectations. In Korea’s case, low interest rates, high demand—especially from small households—and limited supply have fueled price rises. And while prices usually trigger new housing construction, Korea’s strict regulations on redevelopment in cities mean that it hasn’t happened fast enough. In fact, Korea’s Floor Area Ratio (how much you’re allowed to build on a given lot) is lower in cities than in the suburbs. That’s the opposite of what you’d expect in a country pushing for compact, transit-oriented development. New towns are being built outside cities, but they’re not enough. The demand is still clustered around urban cores, where jobs and universities are located. Meanwhile, policy efforts to “cool down” prices, like taxing multi-property owners, haven’t worked: they’ve just made buying a home even harder for first-timers. The same economist who cites the DiPasquale-Wheaton model likens it to the following scenario: if one has cancer, you don’t treat it with indigestion medicine.

All of this hits young people the hardest. Youth unemployment is high. Job insecurity is rising. And now, renting, let alone buying, is out of reach. And with fewer people marrying or having children, South Korea’s already record-low birth rate continues to plummet. It’s a feedback loop: expensive housing makes it hard to form families, and a lack of families makes future housing policy harder to plan.

The government has promised more supply, like 170,000 new public housing units a year, with 70,000 coming from urban regeneration schemes. But delivery lags behind promises. The public housing system is also fragmented. Each administration adds its own flavour of housing programs, creating a maze of poorly integrated schemes. Meanwhile, Korea Land and Housing Corporation (LH), which builds half of all public rental homes, is constrained by rigid rules, like fixed rent-setting formulas that limit responsiveness to market needs.

What’s next?

I’d be remiss not to write some kind of reference to Korea’s other cultural exports, including Parasite and Squid Game, which captured the world’s attention for their portrayal of inequality. They reflect a deeper truth in that housing in South Korea has become unattainable. Debt is soaring. Insecurity is rising. And even those who do own property often don’t live in it, preferring to rent near workplaces in the city.

There’s no easy fix to South Korea’s housing crisis. But many experts agree on one thing: real reform will require increasing urban housing supply, relaxing outdated redevelopment rules, and aligning policy across generations. Until then, the dream of a stable home, which is central to Korea’s social contract, will remain out of reach for many.