*Review* **Can Malaysia's National Affordable Housing Policy Guarantee Housing Affordability of Low-Income Households?**

**Jian Liu and Huay Ying Ong \***

School of Architecture, Tsinghua University, Haidian District, Beijing 100084, China; liujian@mail.tsinghua.edu.cn **\*** Correspondence: wenghy19@mails.tsinghua.edu.cn

**Abstract:** Housing affordability is a long-held issue in Malaysia, and housing policies have been implemented for low-income households over the years. However, there is a contradiction that housing affordability of low-income households has not been met, while the bulk of affordable housing is still vacant. In 2019, Malaysia enacted the *National Affordable Housing Policy (DRMM)* which was intended to improve housing affordability for low-income groups. This paper aims to answer why Malaysia's long-term implementation of affordable housing policies cannot guarantee housing affordability, and whether the *DRMM* can effectively improve housing affordability as expected, by comparing the empirical factors of housing affordability. A literature review and a comparative analysis are adopted in the research. The paper concludes that low household income, high land price, construction cost and compliance cost, mismatch of supply and demand in terms of quantity, the instability of the national economy, low home financing ability, and incomprehensive housing planning have caused low housing affordability of low-income groups in Malaysia. The *DRMM* as anticipated can improve housing affordability by supplying affordable housing more precisely, lowering housing costs, and improving home financing ability. However, the exclusion of household income and economic factors may cause the ineffectiveness of the *DRMM* in improving housing affordability for low-income households.

**Keywords:** housing affordability; housing policy; affordable housing; Malaysia

#### **1. Introduction**

In 2019, Malaysia can be defined as a developing country comprised of 32.6 million people, 7.3 million households, and a total supply of 6.02 million homes, with its average household size decreasing to 3.9 persons from 4.1 persons in 2016 [1]. Shrinking household size, population growth, and urban migration have created an increasing demand for affordable housing. According to UN-Habitat [2], affordable housing is broadly defined as housing which is adequate in quality, location, and pricing that can sustain other basic living expenses. The term "affordable housing" is also often used to describe a housing unit that is affordable for those whose income is lower than the median household income in a place. The term "housing affordability" is often used to determine whether housing is affordable for households. There are three approaches commonly used to measure housing affordability, namely Median Multiple, Housing Cost Burden, and Residual Income [3]. In Malaysia, the Median Multiple method is used to evaluate the housing market and housing is considered affordable when the median price for the housing market is not more than three times the annual median household gross income [3–5]. Based on the 2019 Household Income and Basic Amenities survey [6], the Malaysian annual median household gross income was MYR 70,476; thus, affordable housing should have a market median price of MYR 211,428. As household income levels reveal a variance among states, the price of affordable housing is in two ranges; either less than MYR 150,000 or between MYR 150,001–MYR 300,000 [7]. In this paper, affordable housing refers to a housing with a selling price that does not exceed MYR 300,000.

**Citation:** Liu, J.; Ong, H.Y. Can Malaysia's National Affordable Housing Policy Guarantee Housing Affordability of Low-Income Households? *Sustainability* **2021**, *13*, 8841. https://doi.org/10.3390/ su13168841

Academic Editors: Grazia Napoli and Maria Rosa Trovato

Received: 18 May 2021 Accepted: 3 August 2021 Published: 7 August 2021

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**Copyright:** © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

Over the years, long-term affordable housing policies for the low-income groups have been implemented in Malaysia. However, based on a report from Khazanah Research Institute [4], Malaysian housing affordability has not improved significantly between 2002 and 2016. Over this period, housing was considered "seriously unaffordable" with the median multiple varying between four and five. In 2019, the average price for a Malaysian home, as measured by the Malaysian House Price Index, was MYR 426,155, while the average per capita income was MYR 45,034. According to the research issued by *The Edge Malaysia* [1], within a timeframe of almost 30 years from 1990 to 2019, the average housing prices have increased 5.6 times while the real income measured by GDP per capita has only grown 2.8 times. It means that the growth in housing prices has surpassed real income by two times since 1990.

The National Property Information Centre (NAPIC) [8] showed that 30,664 units of new residential property were unsold in 2019, among which 32.4% was affordable housing. This reflects the contradiction that whilst the housing affordability of low-income households cannot be met, the bulk of affordable housing is still vacant. In 2019, Malaysia enacted the *National Affordable Housing Policy (DRMM)* which was intended to solve this contradiction and to improve the housing affordability for low-income groups to own a house. In such circumstances, this paper attempts to find the reasons why low-income households have low housing affordability and whether the *DRMM* can guarantee housing affordability of low-income groups.

Drawing on a series of studies that have been completed, there are few that have reviewed the evolution of Malaysia's affordable housing policy to deal with the issue of housing affordability. Shuid [9] divided the evolution of Malaysia housing provision system from 1971 to 2011 into four phases to analyse the key players in housing provision. Masram and Misnan [10] used the housing provision framework to analyse the key affordable housing policies of Malaysia. There are even fewer that have evaluated the effect of the long-term policy implementation to address housing affordability. International experiences have proved that housing affordability can be solved by increasing the quantity of affordable housing and lowering housing costs. Malaysia has implemented both strategies, but the housing affordability issue has never been solved. This real scenario is that whilst housing affordability of low-income groups is not achieved, the majority of affordable housing supplied for low-income households remains unsold. What caused this scenario to happen in Malaysia is an interesting question to ask and the answer to this question will be an academic contribution that can help to enhance the strategy to improve the housing affordability issue effectively. Moreover, up to now, no researcher has attempted to explore whether the *DRMM* could guarantee the housing affordability of low-income groups. This is the first study that draws attention to *DRMM* strategies in improving the housing affordability of low-income groups. The findings have important implications for the revising of the *DRMM* strategies to improve the housing affordability of low-income groups. The results will also influence future housing policies in Malaysia.

This paper begins with the definition of housing affordability and its influencing factors based on the international literature. Then, the paper subsequently reviews the evolution of Malaysia's affordable housing policy since its independence in 1957, analyses the reasons for the low housing affordability of low-income households in Malaysia and evaluates the effectiveness of the strategies proposed in the *DRMM* by comparing them with the influencing factors of housing affordability. Lastly, the paper concludes with a discussion on the results of analysis and evaluation, as well as the suggestions for revising the *DRMM* strategies and drafting future housing policies to improve the housing affordability of low-income groups.

#### **2. Housing Affordability and Its Influencing Factors**

Housing affordability is a global issue which many countries have attempted to overcome. It is not an inherent attribute of a housing unit, but rather a relationship between housing and people [11], depending on one's ability to pay for a housing unit. Housing

affordability is often related to "affordable housing" for low-income groups, but it is a problem regardless of whether people are rich or poor. As mentioned earlier, the Median Multiple method is used to assess the Malaysian housing market. Based on the concept, in this paper housing affordability is defined as the ability of Malaysian low-income households (B40) to own a house, with the housing price-to-income ratio not exceeding three. Low-income households include poor households with a monthly income of less than the poverty line income (PLI). The analysis of housing affordability in this paper is limited to home buyers due to the insufficient data on rental housing.

A deep understanding of the influencing factors of housing affordability is crucial to determine the reasons for low housing affordability. The international literature indicates that housing affordability is generally affected by four dimensions, i.e., household income, housing price, home financing ability, and housing planning. However, there are many factors that impact housing prices [12]. According to Mostafa [13], housing prices vary along with the changes in regional economics. The development cost which consists of land cost, hard costs (construction costs), and soft costs (consultant fees and processing costs) can also alter housing prices [14]. Meanwhile, housing obtains its price due to the factors surrounding supply and demand, which can be proved in the cases of the US [15] and Australia [16]. In those countries, the disparity between housing supply and demand has led to either an increase or decrease in housing prices. Thus, the influencing factors of housing prices are interpreted in this paper in terms of land cost, construction cost, compliance cost, supply and demand, and economic factors. Based on international experience, the following eight factors are identified as the most significant in view of their influences on Malaysia's housing affordability.

#### *2.1. Household Income*

Low household income is recognised by many countries/regions as the key factor of the shelter–cost burden, such as in the UK [17], mainland China [18], Hong Kong China [13], Canada [12], Australia [19], Kenya [20], and Nigeria [21], which can significantly influence housing affordability from the perspective of housing accessibility and purchasing power [22]. Housing affordability suffers when housing prices go too much ahead of household income [15,23]. This can be further supported by Duan [18] who argued that household income impacts housing demand because it is a benchmark for one's purchasing power that could affect an individual's ability to obtain a mortgage loan.

#### *2.2. Land Cost*

Limited space and scarce land resources cause high land prices which are ultimately reflected in housing prices [24]. According to the *New Straits Times* [25] and the *Daily Express* [26], land scarcity is a key influential factor affecting the increase in housing prices, especially in the urban areas of big cities such as Kuala Lumpur. Meanwhile, the increase in land prices is a major factor that influences housing affordability. The conversion of land into residential use incurs a land cost [23], which consequently burdens home buyers. That is the reason why the UN-HABITAT [2] outlines the total land cost as one of the factors affecting housing affordability.

#### *2.3. Construction Cost*

Construction costs, such as infrastructure, building materials, and labour are also known as hard costs in total housing development costs. A household's ability to purchase a home becomes worse when the construction costs and housing prices become higher [2,14,16,19,26].

#### *2.4. Compliance Cost*

Compliance cost is incurred from the payment of land conversion, processing fees, and statutory contribution charges to utility companies. When compliance costs from local regulations are involved, housing development becomes riskier, longer, and more

expensive, which in turn impacts housing affordability [27]. For example, in the U.S., the Dept. of HUD uses the compliance cost that is associated with effluent regulation to measure the change in housing affordability [28].

#### *2.5. Relation between Supply and Demand in Terms of Quantity*

It is widely believed that housing affordability can reflect housing market conditions [29,30]. The housing affordability issue may become urgent as the demand for affordable housing continues unabated and can be further intensified by an inadequate supply of affordable housing [16,24]. The failure of housing supply to meet with a proportionate demand along with population growth may raise the pressure on housing prices and housing affordability [15]. According to Yap and Ng [23], the residential real estate market in high population density cities is always active with routine transactions, thus housing prices are increased, which influences housing affordability.

#### *2.6. Situation of National Economy*

Economic changes could impact construction costs and inflate housing prices, as housing prices depend on the economic conditions including either inflation or deflation [31]. In the case study of Hong Kong, a regression analysis over time was taken to evaluate the impact of economic factors on the housing affordability of low-income households in terms of GDP, the inflation rate, and the unemployment rate [13]. The result showed that economic growth did not significantly affect the housing affordability of low-income groups while inflation and unemployment rates negatively did. Worthington and Higgs (2013) also found that economic growth is a short-term issue for housing affordability while the taxation imposed on housing will affect housing affordability in the long run.

#### *2.7. Capability of Home Financing*

A good financial plan is needed for home buyers to achieve long-term affordable homeownership. Finance for housing is a fundamental factor used in determining housing affordability [16,32] which is represented by two financing abilities, i.e., the ability of financing for purchase through a down payment and the ability of a financial service to pay the housing loan and interest rates after cutting non-housing expenditure [2]. A tight lending environment further exacerbates the issue of securing home financing from private banks [23]. In general, saving capacity [19,29], household expenditure [21,33], and monthly instalments [20,33,34] are the basic financial costs that influence housing affordability.

#### *2.8. Housing Planning Justified by Data Analysis*

International experience has showed that a scientific and reasonable housing plan based on housing market analysis is essential for affordable housing delivery and housing affordability [16]. Insufficient analysis on household data in housing plans often causes an inaccurate estimation of market demand and discrepancy in views between households and developers. Consequently, product mismatch [4] will appear which may lead to the rise of vacant affordable houses that cannot meet expectations and cannot benefit the people [34]. In other words, many people would not find suitable and affordable housing where developers fail to provide the right types of properties at the right location [35].

#### **3. Policy Initiatives of Malaysia's Affordable Housing Development**

In Malaysia, before the *National Housing Policy* was issued in 2012, housing policy evolved through the country's five-year development plans. Low-cost housing was considered as affordable housing when it was subsidised and was allocated only to low-income people with several eligibilities set by the government [36]. This section reviews the evolution of Malaysia's affordable housing policy from 1957 in chronological order. Table 1 shows the government's initiatives of affordable housing development with different policies in different periods.


**Table 1.** Policy initiatives of Malaysian government in affordable housing development since 1957.


#### **Table 1.** *Cont.*

Source: Tabulated by the authors according to relative documents [37–54].

#### *3.1. Low-Cost Housing Development after Independence: 1957–1970*

After Malaysia gained its independence in 1957, the government started looking into squatter and overcrowding problems within housing developments caused by rural–urban migration. A small amount of the national budget was allocated for low-cost housing development under the *First Development Plan for Malaysia* and the *Second Five Year Plan (1956–1965)*. Housing development was not the priority of the government but housing provision for civil servants was [36]. This resulted in the construction of 23,236 government quarters and 8938 low-cost homes for civil employees and low-income groups, respectively, by the government [37].

From 1966 to 1970, squatter and slum problems gained more attention. According to Yusoff [37], laws were enacted for squatter clearance, such as *The Emergency (Essential* *Powers) Clearance of Squatters Regulation* (Laws of Malaysia 1969), *Kuala Lumpur Federal Capital (Clearance of Squatters) Bylaw* (Kuala Lumpur City Hall 1963), and *Section 425 of the National Land Code* (Laws of Malaysia 1965). The *First Malaysia Plan (1966–1970)* stated the goal of improving the well-being of low-income groups, making the construction of lowcost housing a milestone in achieving the goal. In 1967, the "Housing Crash Programme" was implemented as the initiative of government to provide low-cost housing and 32 to 50 low-cost houses were constructed in the areas without low-cost housing [38]. During this period, a total of 21,790 units were constructed, meeting 73% of the target, as one of the great endeavours of the government in promoting the well-being of low-income groups.

#### *3.2. Housing the Poor: 1971–1985*

After the race riots tragedy of 13 May 1969 due to income and social inequality, the *New Economic Policy (NEP)* was launched in 1971 to address the socio-economic gaps. Many housing programs were carried out to achieve one of the *NEP*'s objectives [39], i.e., to reduce and to eradicate poverty in Bumiputera (Malays and indigenous people of Malaysia). The quota system was introduced in housing development to make it mandatory for developers to include 30% of low-cost housing in most residential projects [40]. The "Core Housing" concept was unveiled under the *Second Malaysia Plan (1971–1975)* which was designed to provide low-income groups with very basic accommodation, allowing them to expand and improve their housing according to their economic conditions [37]. In the *Third Malaysia Plan (1976–1980)*, several initiatives were implemented to control the housing cost, such as increasing the building density, decreasing the unit floor-area, reducing the front porch, and lowering the infrastructure facility standard. To accelerate low-cost housing construction, the government provided funding and extended the loan repayment period from 20 to 25 years for developers [41]. During the *Fourth Malaysia Plan (1981–1985)*, the "Low-Cost Housing" concept was implemented which stressed the production of low-cost housing in urban areas [36]. In 1981, the government enforced that 30–50% of private housing projects should be low-cost housing with a maximum cost of MYR 25,000 per unit, forcing the involvement of the private sector in low-cost housing development [39]. Since then, low-cost housing development has been one of the goals in every five-year national development plan.

In terms of performance, the low-cost housing development increased from 1971 to 1985. Under the *Second Malaysia Plan (1971–1975)*, 13,244 units were completed, achieving 50.5% of the target. Housing rose to 26,000 units under the *Third Malaysia Plan (1976–1980)*. However, it only achieved 35% of the target due to the reduced role and the lack of manpower of the reshuffled housing ministry [42]. Under the *Fourth Malaysia Plan (1981–1985)*, the public and private sectors contributed 71,310 (40.4% of the target) and 19,170 (21.9% of the target) low-cost houses, respectively [37].

#### *3.3. Housing Market Reform: 1986–1997*

From 1986 to 1987, Malaysia's economy was in recession due to the global financial crisis, resulting in a reduction in the government's budget for housing development in the *Fifth Malaysia Plan (1986–1990)* and the *Sixth Malaysia Plan (1991–1995)*. The housing policy then was stipulated in line with the goal of international institutions, such as the World Bank and the International Monetary Fund, to promote an open market and to reduce government involvement in business affairs [39]. Under the *Fifth Malaysia Plan*, the institution of the One Stop Agency was established to facilitate the approval of housing project applications and to help developers obtain bank loans, and the Recovery Fund for Abandoned Housing Project was initiated to help developers complete their abandoned projects. Under the *Sixth Malaysia Plan*, while the concept of "Human Settlement" was implemented in housing schemes to take into consideration the need for social facilities, housing types, and financial accessibility for low-income groups [36], the cross-subsidies method was implemented to allow developers to cover the loss from low-cost housing

with a gain from ordinary housing by charging higher prices. Funding was established to speed up the provision of low-cost housing.

During this period, the total low-cost housing production increased to hundreds of thousands of homes, with the majority being supplied by the private sector. Under the *Fifth Malaysia Plan*, the private and the public sectors completed 88,880 (24% of the target) and 74,330 units (61% of the target) of low-cost housing, respectively [43]. Under the *Sixth Malaysia Plan*, the low-cost housing production reached its peak of 261,386 units, with 82.2%, i.e., 214,889 units from the private sector and 46,497 units from the public sector [44].

#### *3.4. Slum Clearance: 1998–2011*

In the Asian Financial Crisis of 1998, the challenges of economic turmoil urged the Malaysian government to establish the Economic Action Council to improve economic growth and to address the squatter problem. In 1998, the Malaysian government launched a special low-cost housing program, i.e., the Integrated People's Housing Program, to relocate the squatters in urban areas, especially those in Kuala Lumpur, by raising the maximum low-cost housing price from MYR 25,000 to MYR 42,000 per unit in view of the non-profitability caused by high land, infrastructure, and development costs in CBD areas [39]. By allowing developers to gain more competitive profits, this readjustment showed the government's initiative in encouraging the greater involvement of both public and private developers in low-cost housing development. In 2002, the *Housing Development Act on Control and Licencing 1966* was amended to improve the effectiveness of housing development [45]. At the same time, the Computerised Open Registration System was implemented as part of the screening process of eligible buyers.

In terms of policy performance, under the *Seventh Malaysia Plan (1996–2000)*, 95.3% of the target of 190,597 units was achieved, among which the private sector contributed 129,598 units [46]. Under the *Eighth Malaysia Plan (2001–2005)*, the public sector completed 113,235 units and achieved 54.4% of the target, while the private sector completed 97,294 units and achieved more than double the target, respectively. During the period of the *Ninth Malaysia Plan (2006–2010)*, housing development continued to focus on the provision of adequate, affordable, and quality houses for all Malaysians, with a greater emphasis on appropriate locations and conducive living environments [47]. As the housing market was led by the private sector and supported by the public sector, the private sector contributed more in high-cost housing, with its contribution to low-cost housing gradually decreasing.

#### *3.5. First Affordable Housing Initiative: 2011–2015*

The *National Transformation Policy* was introduced in 2010. Under the *Government Transformation Programme*, seven National Key Results Areas were identified as being in urgent need for drastic actions from the government. Among them, two areas, i.e., "raising living standard of low-income households" and "improving rural basic infrastructure", were correlated to housing development. Over the years the housing policies stated in the Malaysia plans had emphasised the objective of delivering affordable and sufficient housing to low-income groups and the growing number of the middle-income segment had also led to the increasing demand for affordable housing. In 2012, the *National Housing Policy* was issued, which became the direction for all relevant parties involved in housing development. It stated six thrusts and twenty policy directions to provide sufficient housing for low- and middle-income groups. In 2013, the government set up the target of building 1.1 million affordable homes in five years to meet the market demand [48] and stated that housing projects should include 20% low-cost and 20% medium-cost housing units in 2014 [49]. In the same period, the Build-Then-Sell concept was implemented, apart from the One Stop Centre system established in 2007, to shorten the approval process.

During this period, both the public and the private sectors, as well as the joint ventures between them, offered affordable housing to increase the accessibility of owning or renting a house. A total of 102,201 affordable houses were completed under the *Tenth Malaysia* *Plan (2011–2015)* within the framework of various programmes designed to fulfil the needs of different target groups, such as Program Bantuan Rumah, Program Perumahan Rakyat, Rumah Mesra Rakyat 1Malaysia, and the Rent-to-Own Programme for low-income households, and the Perumahan Rakyat 1 Malaysia (PR1MA), 1Malaysia Civil Servants Housing (PPA1M) and Rumah Wilayah Persekutuan (RUMAWIP) for middle-income households. New financing schemes were offered, such as the My First Home Scheme, the Youth Housing Scheme, and the Private Affordable Ownership Housing Scheme (My Home), to provide financial assistance to home buyers. To maintain the condition of affordable housing, the government also implemented the Housing Maintenance Program, the 1Malaysia Maintenance Fund, and the My Beautiful Malaysia programme for public low-cost housing, private low- and medium-cost housing, and government quarters, respectively [50].

#### *3.6. Continued Affordable Housing Development: 2016 Till Now*

In 2017, the Central Bank of Malaysia declared that residential property in Malaysia had reached its peak in a decade but nearly half of the total PR1MA homes (25,132 units) were unsold as recorded on 15 November 2017, showing the mismatch between supply and demand by price [51]. The provision of PRIMA homes was priced from MYR 100,000 to MYR 400,000, where housing priced above MYR 250,000 was considered unaffordable for the target groups. Based on the Housing Cost Burden approach, the National Bank estimated in 2016 that the maximum affordable housing price should be MYR 282,000. However, the actual median housing price was MYR 313,000 [52].

In 2018, the *National Housing Policy (2018–2025)* was enacted to provide adequate and affordable housing for the needy. As a sub-policy, the *National Affordable Housing Policy*, i.e., the *DRMM*, was issued in 2019 to further address the problems of affordable housing for low- and middle-income households. Both policies outlined a set of guidelines for all parties involved in affordable housing delivery, such as the determination of price range for each state and the establishment of housing standards to be fulfilled by developers. They also described the government's initiatives in reducing affordable housing costs in terms of land price, development charge, and compliance cost, developing an integrated housing system and setting up a platform of education and advice on financial matters.

The *DRMM* created a unified policy framework for developers to build affordable and cost-saving housing for the target groups of low- and middle-income households. As a result, 458 public affordable housing projects were constructed on the waqf land through the cooperation between the Department of Waqf, Zakat dan Haj (JAWHAR), and other institutions, such as state Islamic religious councils, state governments, and local authorities. The National Housing Department developed the National Housing Data Banking System as an integrated housing information system that allowed data sharing among agencies and state governments to facilitate the coordination to determine the suitable locations of affordable housing [39]. Several financing initiatives were also provided to improve the housing affordability of low- and middle-income households, such as the Rent-to-Own financing scheme. In 2019, the Home Ownership Campaign was launched to promote Malaysian homeownership and to overcome the issue of unsold properties [53]. By the mid-term of the *Eleventh Malaysia Plan (2016–2020)*, 139,329 units and 30.9% of the target had been completed for low- and middle-income households [50], while the homeownership of low- and middle-income households was increased through various affordable housing programs. However, there was still a shortage of affordable housing in urban areas.

#### **4. Why Do Low-Income Households Have Low Housing Affordability in Malaysia**

The previous policy review shows that whilst Malaysia has made long-term efforts to overcome the housing affordability issue by implementing a series of affordable housing policies, housing affordability in Malaysia is still at low levels. To find out the reasons for that paradox, the current housing affordability condition of low-income groups was analysed by comparing them with the eight identified influencing factors.

#### *4.1. Low Household Income*

Based on the Household Income and Basic Amenities survey in 2019 [6], the average Malaysian earns MYR 5873 per month with an annual median household income of MYR 70,476. Hence, an affordable housing price should not exceed MYR 211,428 based on three times the median multiple. However, the median housing price at MYR 426,155 makes residential houses seriously unaffordable for many Malaysians [1]. The 2019 Household Income and Basic Amenities survey showed that low-income groups (16% of Malaysia's households) were earning MYR 3166 and below and that half of the total households in Malaysia were not earning more than the median household income of MYR 5873 [6]. Data from the Employees Provident Fund (EPF) showed that 89% of Malaysian employees had a monthly salary of less than MYR 5000 and the majority of low-income households barely had enough funds after their retirements [54]. It means that the low household income makes the majority of Malaysians unable to afford and own a house.

#### *4.2. High Land Cost*

In Malaysia, the cost of land accounts for 20% of the total housing development costs and is considered as one of the largest proportions of property development expenses [14]. Therefore, the high land cost is critical to the viability of affordable housing for all Malaysians.

#### *4.3. High Construction Cost*

In Malaysia, the costs for infrastructure, building materials, and labour potentially influence housing affordability when the economy changes [23,24]. Many developers face challenges of skilled worker shortages on construction projects. According to Ramli et al. [55], 80% of the Malaysian governments' projects fall behind schedule as a consequence of poorly qualified contracted technical staff. Delays in construction projects then exert extra pressure on total construction costs. In consequence, developers launch higher housing prices after considering all the construction costs to boost profit margins.

#### *4.4. High Compliance Cost*

In Malaysia, high compliance costs from various governmental regulations, such as title application, land conversion, and project approval further increase housing prices, leading to low housing affordability [23,26]. Three factors contribute to the high compliance cost, i.e., the inefficiency of the housing delivery process and system, the corrupt bureaucrats, and the distinction of power that discourages cooperation between federal and state governments [24]. The development approval process consists of various permits that involves many government agencies from both federal and local levels which have different bureaucratic processes, which often leads to developers choosing to undertake unnecessary transactions to speed up the approval process. This may acquire extra processing charges and can increase the developer's final selling price. Based on the Real Estate and Housing Developers' Association of Malaysia (REHDA) survey, compliance costs can range from 2.8% to 19.9% of the Gross Development Value (GDV) for high-rise developments. It can range from 9.5% to 35.1% of the GDV for land development [56]. These costs are inevitably and ultimately reflected in the increase in housing prices.

#### *4.5. Mismatch between Supply and Demand in Terms of Quantity*

In Malaysia, the construction of affordable housing has fallen behind the target provision for years, which means that the supply of affordable housing can only partially respond to the cyclical changes in demand. Yet, the demand for affordable housing from low-income households continues to grow due to high population density and rapid popu-

lation growth. An insufficient housing supply ultimately leads to an increase in housing prices, consequently affecting housing affordability.

#### *4.6. Instability of National Economy*

Indeed, in Malaysia, economic growth does not help improve affordability, while the affordability is affected by the unstable economy in terms of a weak currency, the depreciated value of the Malaysian Ringgit, and inflation [23]. So far, taxation is not an issue for Malaysian housing affordability as there is a property tax exemption for low-cost housing and affordable housing as well [57].

#### *4.7. Low Capability of Home Financing*

In Malaysia, housing loans are becoming more difficult to obtain while the loan approval process is getting longer. Housing loans with high interest rates imposed by banks cause high monthly installments, making housing units pricey and unaffordable for households [15,18]. Besides monthly instalments, households have to pay for monthly maintenance fees, causing further financial burdens for already low-income households [58].

#### *4.8. Incomprehensive Housing Planning Due to Information Insufficiency*

In 2013/2014, Malaysia experienced a high rise in housing prices. Locations and sizes were also mismatched with the market demand due to the insufficient analysis on household data. Inaccurate data contributed to false perceptions by developers on market demand that consequently resulted in vacant housing and impacted housing affordability [59]. The *National Housing Policy* is not well implemented due to a faulty market analysis and insufficient information. Hence, the long-term implementation of housing plans has not significantly improved Malaysian housing affordability as expected.

#### **5. Can the** *DRMM* **Guarantee Housing Affordability of Low-Income Households**

As a sub-policy prepared by the MHLG through the National Housing Department, the *DRMM* aims to overcome five identified challenges of affordable housing development in Malaysia more comprehensively, i.e., unaffordable housing price; imbalanced housing supply and demand; housing product mismatch; insufficient coordination; and failure of financial support, with regard to which six objectives are targeted including ensuring housing affordability. To achieve the objectives, a number of strategies are prescribed in accordance with the criteria of affordable housing and government's initiatives. The following discusses the results of the evaluation of the *DRMM* strategies to overcome housing affordability with reference to the eight influential factors affecting Malaysia's housing affordability analyzed in the previous section.

#### *5.1. Strategy 1: Centralise Affordable Housing Authority*

According to the *DRMM*, the Malaysian government aims to build one million affordable homes for low-income households within 10 years, commencing in 2019, to raise their homeownership [60]. However, it is quite challenging because there are more than 20 agencies at both federal and state levels that are involved in affordable housing development. They are neither integrated nor coordinated, and due to that, the housing that is supplied often does not match well with the actual demand. Thus, the DRMM strategy for centralised housing authority is mandated to improve housing affordability. To coordinate the fragmented federal and state governments' agencies, the Malaysian government has empowered the MHLG to act as the central housing agency and authority that coordinates all affordable housing projects. It is hoped that, by centralising the housing agencies and authorities, more comprehensive housing planning and urban development frameworks will be set up to strengthen the effectiveness of housing policies.

#### *5.2. Strategy 2: Create a Unified Housing Database*

Currently, Malaysia does not have a unified database on the housing market that provides necessary information on households. The information insufficiency makes it difficult to supply housing effectively to meet the actual demand, resulting in many unsold residential properties, including affordable housing. The data issued by the National Property Information Centre in 2020 showed that the sum of unsold units in Malaysia increased almost three times over a five-year period, from 10,897 units in 2015 to 30,664 units in 2019 [34]. Regarding this matter, the *DRMM* mandates that an integrated housing database is developed that is beneficial for future affordable housing planning. The database will gather household data including economic status, family composition, and housing preferences through nationwide housing surveys. This will enable governments and developers to make more accurate estimations on the shortage of affordable housing and allocate affordable housing more precisely by identifying the potential and eligible buyers. Of course, the cooperation of all parties is needed in developing this integrated housing database.

#### *5.3. Strategy 3: Strengthen Development Control*

Development control is an integral part of planning practice and is essential to manage and regulate property development. Good development control can boost the effectiveness of housing provision, can help reach market equilibrium, and can eventually overcome the housing affordability issue [61]. In Malaysia, the administration of development control is within the exclusive power of the State Government and is subject to the consideration of the State Government Council. Therefore, the guidelines of the *DRMM* prescribe that the State Government Council is responsible for making comprehensive reviews on property market, conducting demand and supply studies, and providing strong justifications if there are any exceptions to the conditions such as changes in the percentage of affordable housing provision, conversion, and the relocation of land. Developers are subjected to penalties if they do not obey the government plans in delivering affordable housing. A quota system is stipulated to encourage the balance of housing development and to increase the supply of affordable housing, i.e., at least 30% of the total development project must be affordable housing and no less than 30% of affordable housing must be allocated to bumiputera. Each state government determines the quota based on the States' Guidelines on Bumiputera Quotas from Real Estate and Housing Developers' Association of Malaysia Institute (REHDA).

#### *5.4. Strategy 4: Control Affordable Housing Price*

As mentioned earlier, it is common sense that high housing prices are affecting Malaysia's housing affordability, especially for low-income groups. An adjustment of the housing price through the Median Multiple approach is required to ensure housing supply and to meet the market demand in terms of quantity, as well as to improve Malaysian housing affordability. Based on the median multiple measurement, the *DRMM* fixes the affordable housing prices for urban and rural areas in each state by determining the median household income from the Investigation Report of Household Income and Basic Facilities in 2016. Specifically, Kuala Lumpur will have the highest affordable housing price of MYR 326,628, followed by Putrajaya (MYR 297,900), and Selangor (MYR 267,948). By taking the average median household income of these three states (MYR 8191), the maximum affordable housing price is fixed at MYR 300,000. For the states that are less developed, such as Kelantan, Kedah, Perlis, and Perak, the maximum affordable housing price is fixed at MYR 150,000. In short, the *DRMM* fixes the affordable housing prices in two categories, i.e., below MYR 150,000 and between maximum MYR 300,000. Both price categories are considered affordable. Developers are mandated to provide affordable housing within the price range, so as to prevent them from adjusting housing profit margins as they wish.

#### *5.5. Strategy 5: Prepare Land for Affordable Housing*

Continuous urbanization has increased housing demand in Malaysian cities, leading to an increase in housing prices and an effect on housing affordability. High land price is one of the factors increasing housing prices. In Malaysia, the land price usually depends on housing demand and market price. To reduce housing prices, the government plans to develop affordable housing on government lands. The MHLG and State Governments play a vital role in land preparation. In view of the expensive land price and scarcity of land in Malaysia, particularly in its urban areas, the *DRMM* highlights their role in preparing land for affordable housing as follows:


Therefore, by offering affordable housing land for free or for nominal fees, the government can reduce the land price in the housing market and improve housing affordability.

#### *5.6. Strategy 6: Reduce Construction Cost*

Generally, construction cost accounts for the majority of new housing price in Malaysia. To improve the efficiency and effectiveness of delivering affordable housing projects and to reduce the construction cost while assuring construction safety, the *DRMM* mandates developers to adopt the Industrialised Building System (IBS) and encourages them to use Building Information Modelling (BIM) technology in affordable housing construction. The government also provides incentives and tax exemption on machines and tools for affordable housing construction to support the implementation of IBS. Obviously, the reduction in construction cost can help to reduce housing prices and then improve housing affordability.

#### *5.7. Strategy 7: Reduce Compliance Cost*

A high compliance cost is a burden on developers in Malaysian housing projects that impacts housing price and housing affordability. The *DRMM* promotes the state and local governments to reduce or exclude development and compliance costs. For instance:


With the exception and reduction in compliance costs, housing prices will decrease, and the government can supply more affordable housing, particularly in urban areas and strategic locations.

#### *5.8. Strategy 8: Ensure Appropriate Dwelling Conditions*

Inaccurate information delivered by the government meant that developers failed to construct suitable housing types and sizes, which led to the mismatch between market demand and supply of liveable affordable housing. Therefore, it is necessary for the government to include the criteria of appropriate dwelling conditions for affordable housing in the housing policy. The *DRMM* specifies several criteria as the guidelines for all parties

involved in affordable housing projects to deliver affordable housing with conducive and appropriate dwelling conditions, such as building design, unit floor area, housing density, and facilities. These criteria of appropriate dwelling conditions are expected to make affordable housing projects more adaptable to household expectations and market demands.

#### *5.9. Strategy 9: Improve Household Financial Literacy*

Financial literacy is vital to avoid household debt. According to the Central Bank of Malaysia's Financial Capability and Inclusion Demand Side Survey 2018, one in three Malaysians deems that they have little financial knowledge, especially those in low-income households [62]. Poor financial management generally stems from a lack of financial knowledge and the capability to make good financial decisions, weakening their housing affordability when they come across a home that they can potentially purchase. Therefore, the *DRMM* mandates the Central Bank of Malaysia and its management agency AKPK to establish the Credit Counselling system to educate and advice the public on financial matters. This will improve an individual's financing ability and assist them in their home purchasing journey and ensure housing affordability.

#### *5.10. Strategy 10: Launch Various Housing Financing Schemes*

The *DRMM* encourages the government to launch various housing financing schemes for low- and middle-income groups in order to raise their homeownership. For instance, the Housing Loan Scheme, My Home, Financing under Syarikat Perumahan Negara Berhad Funding, My First Home Scheme, Depositku, PR1MA-Rent-To-Own, Government Housing Loan Scheme, EPF Partial Withdrawal for house purchase, and Rent-to-own for People Housing Program, etc. These financing schemes assist households who are not eligible for financing to purchase a house through relaxed lending criteria by lowering interest rates for borrowing. Through the 2019 Budget, six available housing financing initiatives have been promoted, i.e., the Flexi Financial Financing Scheme (middle-income group), the Subsidy Financing Scheme (low-income group), Extension of LPPSA Financing Period, Cagamas Berhad, MyHome Fund (Crowd Funding) and Plus Discount (zero deposit). Various housing financing schemes can help the potential buyers of affordable housing to reduce their financial burdens and to ensure their housing affordability.

#### *5.11. Summary*

Based on the above evaluation, Figure 1 shows the ten strategies prescribed in the *DRMM* in correlation to the key factors affecting housing affordability. Four strategies, i.e., centralising affordable housing authority, creating a unified housing database, strengthening development control, and ensuring appropriate dwelling conditions are prescribed to comprehend housing planning in Malaysia. Strengthening development control and controlling housing prices are vital to balance housing supply and demand in terms of quantity. Strategies of land preparation for affordable housing and a reduction in compliance costs and construction costs are correlated with the factor of high housing costs that influences housing affordability. The strategies of improving household financial literacy and launching various housing financing schemes can help improve home financing ability. In short, the *DRMM* strategies are anticipated to effectively improve housing affordability by supplying more precisely affordable housing, lowering housing costs, and improving home financing ability. However, household income and economic factors are excluded in the *DRMM*. In fact, they are the most critical factors as money always comes first when dealing with homeownership. As mentioned earlier, housing affordability is highly dependent on household income. To guarantee housing affordability, household income should be steadily increased, particularly in view of its relevance to housing prices. This, of course, depends on the strength of the national economy, which affects not only government's ability to deliver enough affordable housing but also the job opportunities and wage levels for households. Thus, the *DRMM* strategies could not guarantee housing affordability of low-income households without any consideration of these two factors. To further improve

the anticipated effectiveness of housing affordability, due attention should be paid to the two factors in future decision-making, while the current affordable housing policies that prove to be effective should be continuously enforced, and the existing affordable housing stocks should be more efficiently utilised. two factors. To further improve the anticipated effectiveness of housing affordability, due attention should be paid to the two factors in future decision-making, while the current affordable housing policies that prove to be effective should be continuously enforced, and the existing affordable housing stocks should be more efficiently utilised.

*Sustainability* **2021**, *13*, x FOR PEER REVIEW 15 of 19

costs that influences housing affordability. The strategies of improving household financial literacy and launching various housing financing schemes can help improve home financing ability. In short, the *DRMM* strategies are anticipated to effectively improve housing affordability by supplying more precisely affordable housing, lowering housing costs, and improving home financing ability. However, household income and economic factors are excluded in the *DRMM*. In fact, they are the most critical factors as money always comes first when dealing with homeownership. As mentioned earlier, housing affordability is highly dependent on household income. To guarantee housing affordability, household income should be steadily increased, particularly in view of its relevance to housing prices. This, of course, depends on the strength of the national economy, which affects not only government's ability to deliver enough affordable housing but also the job opportunities and wage levels for households. Thus, the *DRMM* strategies could not guarantee housing affordability of low-income households without any consideration of these

**Figure 1.** Results between the *DRMM* strategies and the factors affecting housing affordability. **Figure 1.** Results between the *DRMM* strategies and the factors affecting housing affordability.

#### **6. Conclusions 6. Conclusions**

In Malaysia, low-cost housing has been injected into its affordable housing policy and has evolved through the Malaysian five-year plans since its independence until 2012, when a formal housing policy was established as a *National Housing Policy*. Through this evolution, the government realised the necessity of managing affordable housing development more effectively and introduced the *National Affordable Housing Policy* in 2019. Over the decades, the government has taken different initiatives and focused on different target groups in affordable housing development. In the early period, the principle of affordable housing development was to provide low-cost housing for low-income groups. When the time passed and the demand of M40 for affordable housing increased, the government began to develop median-cost affordable housing for M40. This led to a scenario where more parties had the opportunity to be involved in affordable housing projects. Consequently, the housing development projects were changed from public sector-led to private sector-led and then were turned into joint ventures between the public and private sectors. Housing affordability has become the main concern of Malaysia's housing policy after efforts for decades, leading to the formulation of a specific housing policy to strengthen the government's initiatives in overcoming the housing affordability issue. The In Malaysia, low-cost housing has been injected into its affordable housing policy and has evolved through the Malaysian five-year plans since its independence until 2012, when a formal housing policy was established as a *National Housing Policy*. Through this evolution, the government realised the necessity of managing affordable housing development more effectively and introduced the *National Affordable Housing Policy* in 2019. Over the decades, the government has taken different initiatives and focused on different target groups in affordable housing development. In the early period, the principle of affordable housing development was to provide low-cost housing for low-income groups. When the time passed and the demand of M40 for affordable housing increased, the government began to develop median-cost affordable housing for M40. This led to a scenario where more parties had the opportunity to be involved in affordable housing projects. Consequently, the housing development projects were changed from public sectorled to private sector-led and then were turned into joint ventures between the public and private sectors. Housing affordability has become the main concern of Malaysia's housing policy after efforts for decades, leading to the formulation of a specific housing policy to strengthen the government's initiatives in overcoming the housing affordability issue. The policy review shows that the housing affordability of low-income groups is still not guaranteed though Malaysia has long implemented affordable housing policies to improve housing affordability.

The reasons that cause low housing affordability among low-income groups are low household income, high land cost, construction cost, compliance cost, mismatch of supply and demand in terms of quantity, instability of national economy, low home financing ability, and incomprehensive housing planning due to information insufficiency. They also explain why the long-term implementation of housing policies cannot significantly guarantee Malaysian housing affordability as expected. In particular, insufficient analysis on household data that delivered inaccurate statistics to developers has caused a mismatch of housing supply and demand in terms of type of properties and location, resulting in a high vacancy rate of affordable housing and low housing affordability. The *DRMM* was anticipated to effectively improve the housing affordability of low-income groups in three aspects: (1) supply affordable housing more precisely by implementing the strategy of centralised affordable housing authority, creating a unified housing database, strengthening development control and ensuring appropriate dwelling condition; (2) reduce housing costs

by preparing land for affordable housing and reducing compliance cost and construction cost; and (3) improve home financing ability by improving financial literacy and offering various housing schemes. However, the exclusion of household income and economic factors may cause the ineffectiveness of the *DRMM* and, as a result, housing affordability of low-income households cannot be guaranteed.

Moreover, according to international experiences [63], income mixture and sustained rehabilitation are currently two trends of affordable housing development for low-income households, both of which have a positive effect on creating job opportunities for lowincome households, so as to increase their household income and ensure their economic self-sufficiency [64–66]. Taking that into consideration, some recommendations are put forward here for the prospects of future Malaysian affordable housing development, which are divided into two perspectives, i.e., new affordable housing and abandoned or vacant affordable housing.

On the one hand, to effectively supply new affordable housing, the government should pay attention to the core problem, i.e., the mismatch of housing supply and demand in terms of housing price, type, and location. The five strategies that have been prescribed in the *DRMM* should be enforced to combat this situation, (1) centralise the affordable housing authority to develop more comprehensive housing planning and urban development framework; (2) create a unified housing database to produce a more accurate analysis of housing demand and supply; (3) strengthen development control to deliver adequate affordable housing and meet the market demand; (4) ensure appropriate dwelling conditions to meet household expectations; and (5) control affordable housing prices to ensure that they are within the range of household affordability. Besides the enforcement of those five strategies, international experiences such as in the U.S. [63] and in France [67] provided good lessons that new affordable housing should be encouraged along with mixed-income developments to promote social integration and to avoid a large concentration of low-income households that can lead to social problems in residential areas.

On the other hand, based on international experiences, abandoned or vacant affordable housing in Malaysia could be addressed through rehabilitation in view of their actual deficiencies. According to the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS), unsold housing is due to indiscriminate building by developers. Usually, the dwelling conditions such as housing size and facilities do not meet the national housing standards, consequently affecting the quality of life of residents. Unsold housing is also caused by the large concentration of lowincome groups, the poor management of building facilities, and inadequate maintenance, resulting in poor living environments [68]. Hence, to effectively rehabilitate the abandoned or vacant housing, affordable housing should be redesigned and rehabilitated in line with the market demand, and facilities and services should be strengthened, thereby ensuring a better quality of life for residents, and improving the quality of their living environment. Spirit Quarters in England is one of the successful rehabilitation schemes that transformed the vacant housing into a new residential area with 1400 housing through the improvement of community facilities, environment, employment, and education measures [69]. A case study of urban revitalization in West Philadelphia showed that a higher employment rate and a higher education level helped to increase the average household income [64]. Moreover, it is important to ensure that rehabilitation programmes are supported with enough financial supports and the building of mixed-income communities is emphasised. For instance, the EU Structural Fund was established to promote urban regeneration and social inclusion in European countries [70]. In short, rehabilitation does not merely address the issue of vacant affordable housing, but it also fosters the rise of mixed-income communities and long-term community revitalisation by improving their living environment and economic status. Although rehabilitation is neglected in the *DRMM*, it could be a new initiative in future policy making.

**Author Contributions:** Conceptualization, J.L. and H.Y.O.; methodology, H.Y.O.; validation, J.L. and H.Y.O.; formal analysis, J.L. and H.Y.O.; resources, H.Y.O.; writing—original draft preparation, H.Y.O.; writing—review and editing, J.L. and H.Y.O.; visualization, H.Y.O.; supervision, J.L. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research received no external funding.

**Institutional Review Board Statement:** Not applicable.

**Informed Consent Statement:** Not applicable.

**Conflicts of Interest:** The authors declare no conflict of interest. The funders had no role in the design of the study; in the collection, analyses, or interpretation of data; in the writing of the manuscript, or in the decision to publish the results.

#### **References**


**Hyun-Jeong Lee <sup>1</sup> and Yoon-Seo Hwang 2,\***


**Abstract:** In Korea, the housing issues faced by young renters negatively impact both their parents and themselves. This study aimed at exploring young renters' situations whereby they receive financial support from their parents in order to pay current housing expenses, and their perception of housing cost burdens. Additionally, this study examined the influences on the reception of parental support and their perceived housing cost burdens. In February and March of 2021, an online questionnaire survey was conducted amongst young renters living independently from their parents and 385 responses from Jeonse renters and monthly renters with deposits in private rental housing units were analyzed. The major findings are as follows: (1) among the subjects, 43.4% had experienced receiving parental support in order to pay for housing expenses since their first instance of independent living, and 35.6% were still receiving parental support. (2) A discriminant model with a linear combination of the variables of age, income, residential location and rental deposit was found effective in predicting the receipt of parental support with 66.5% accuracy. (3) A linear combination of the variables of gender, rental deposit and monthly cash housing expenses was found to explain 5.8% of the total variance of perceived housing cost burdens. The results imply the necessity to expand the provision of public housing and housing subsidies to alleviate the financial burdens of young renters and their parents.

**Keywords:** young adults; renters; housing costs; parental supports; discriminant analysis; regression analysis; independent living; housing affordability

#### **1. Introduction**

Achieving residential independence from the parental home has been considered as an important goal for most young adults. However, since the advent of the global financial crisis, the severity of the housing problem of young people has intensified more than ever before in many countries. In particular, the housing problems of young people have further manifested due to common factors such as increased youth unemployment worldwide, longer education periods, higher student loans which must be repaid, a lack of available housing in the market and increased rent burdens overall [1]. While the proportion of young people living in their parents' homes for longer than was typical in the past continues to increase, more severe pessimism about life is prevailing among the younger generation, who had enjoyed their free lives with a higher level of education than their parents' generation. This is in addition to experiencing social imbalance and unfairness amid the fierce competition stemming from a scarcity of employment opportunities and housing shortages. In fact, it was found that the quality of life of young people was in fact worse when compared to that of their parents' generation, and high housing prices have often been pointed to as the main reason for this [1–4].

The excessive burden of housing costs for independent adult children can even cause them to return to their parents' homes in certain situations [5–9]. Concerns are growing

**Citation:** Lee, H.-J.; Hwang, Y.-S. Housing Cost Burdens and Parental Support for Young Renters in South Korea. *Sustainability* **2021**, *13*, 11105. https://doi.org/10.3390/ su131911105

Academic Editors: Grazia Napoli, Maria Rosa Trovato and Miguel Amado

Received: 26 August 2021 Accepted: 6 October 2021 Published: 8 October 2021

**Publisher's Note:** MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations.

**Copyright:** © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

over the housing problems of young people in many countries, given that the problem of prolonged periods during which adult children are not completely financially and physically independent from their parents is often linked to delayed marriage and childbirth, making it difficult for them to move onto the next stage of life and to form new families [2,10–13].

The housing problem of young people in South Korea is manifested in various aspects, such as the increase in the number of adult children who are not yet independent from their parents [9,14], as well as the burden of housing costs for independent young people and the overall quality of available housing [13,15–20]. The severity of the housing problems of young people is significant in that it is not merely a one-dimensional problem of housing, but it easily evolves into various social problems. In addition, due to the sentiments of Korea, whether the housing cost of independent adult children is passed onto their parents and interferes with parents' preparation for retirement, and the degree to which parents can financially support their children can affect the possibility of independence and the level of independent housing of adult children, leading to social conflicts [21–23].

In South Korea, the problems of young people have been excluded from the accessibility of social welfare under the perception that such problems should rather be solved by their parents and their families, leading to the lack of policy being the main reason for the worsening of the housing issue, and thereby making housing and financial independence even more difficult [13,24]. In the past, poor living conditions were temporary and transitional, but now education, employment, income and housing inequality are more likely to become fixed at a certain level as they become more structured over time. Additionally, parental support was also part of this in the past, but now social inequality is likely to be reproduced in the housing sector as the gap has continued to widen depending on whether parents are able to provide support. In addition, the transition to the life stages of marriage, childbirth and child parenting, which had continued despite difficult housing conditions in the past, is now leading to higher rates of non-marriage, late marriage, delayed childbirth and abandonment, thereby undermining social vitality and halting sustainable development [13,25]. In addition, given the global impact of the COVID-19 pandemic and low economic growth, South Korean young people are also concerned about various other deteriorating circumstances, such as a lack of stable jobs, instability in entering the housing market, limited funding capabilities and deepening dependence on their parents [13,14,19,26].

Accordingly, the South Korean government is considering various measures for housing support policies for young people, such as an extended supply of public rental housing for young people and the general easing of housing costs. However, given the somewhat special life cycle stages of young people, which are temporary and transitional, this falls short of meeting the housing needs expected [13,26,27].

Against this background, in this study, we conducted a questionnaire survey of young renter households living independently from their parents. The purpose of this study was to empirically identify the current status of housing cost support from parents of young renter households, their perception of the burden of housing costs, and factors influencing them and to suggest policy application points. As housing affordability is strongly related to social stability and sustainability, results from this paper are expected to ultimately contribute to the enhancement of social sustainability.

The subsequent part of this paper consists of five sections as follows. Section 2 provides background information on the rental system, regional classification, young renters' housing issues and housing support programs for young renters in South Korea for a better understanding of the study. Section 3 describes the research methodology. Section 4 reports detailed findings from a series of statistical analyses. Section 5 provides summaries of findings and implications. Finally, Section 6 concludes this study.

#### **2. Literature Review**

#### *2.1. Rental System in South Korea*

The most frequent rental types in Korea consist of Jeonse and monthly rentals with deposits. These two types differ from each other in terms of the composition of the rental costs. A Jeonse renter pays a lump sum deposit when their lease begins, and does not pay monthly cash rent. A monthly renter with a deposit pays both the lump sum deposit, which is relatively lower than that of Jeonse renters, in addition to a monthly cash rent. Regardless of the tenure types, the rental deposit is fully refundable when the lease is terminated. According to the Korea Housing Survey 2019 [28], 19.7% of households were monthly renters with deposits, and 15.1% were Jeonse renters (Table 1). Other rental types consist of monthly rentals without deposits, yearly, weekly or daily rentals, and so on, which are generally associated with indecent housing or poor neighborhood quality.

**Table 1.** Housing tenure types in Korea (2019).


Source: Korea Housing Survey 2019: Research report (general households), p.64, Table III-16 (reorganization of the table) [28]. <sup>1</sup> Including monthly renters without deposit, yearly, weekly and daily renters.

As Jeonse renters do not have to pay monthly cash rent, which allows for a greater chance to amass higher savings for a future home purchase, Jeonse is the most preferred rental type. However, as the Jeonse deposit is extremely high, at around 60 to 70 percent (or sometimes even higher) of the sales price of the properties in most areas, not all renters can achieve the capital to participate in Jeonse rental. In June 2021, the ratio of Jeonse deposit amounts to sales prices measured at 64.7% nationwide, and 61.4% in Seoul [29]. In extreme cases, the Jeonse deposit could be even higher than the sale price in an area where people are reluctant to purchase a home due to the instability of the housing market.

According to the rental housing statistics provided by MOLIT [30] and the Korea Housing Survey 2019 [28], there were 1,570,242 public housing units in 2018 which were presumed to comprise around 18.9% of the total rental housing stocks of that year.

#### *2.2. Classification of Regions in South Korea*

Seoul is the capital of Korea. In addition to Seoul, there are six metropolitan cities (Incheon, Busan, Daegu, Gwangju, Daejeon, Ulsan) and nine "Do" areas (provinces) in Korea. In housing research studies and government reports, it is typical to classify the regions into the capital region (CR), non-CR metropolitan cities and other areas. CR includes Seoul, Incheon metropolitan city and Gyeonggi-do. Other areas are Sejong City and eight "Do" areas excluding Gyeonggi-do. CR can be further classified into Seoul, and Incheon and Gyeonggi-do (Table 2). The study areas of this paper are limited to CR and five non-CR metropolitan cities.

#### *2.3. The Housing Issues of Young Renters in South Korea*

#### 2.3.1. High Costs of Housing and Improper Housing Quality

In South Korea, there are a large number of single-person households (59.2%), the majority of young people live in rented housing units (77.4%) and the proportion of monthly rental households (64.9%) is higher than that of Jeonse households (35.1%) [28]. As explained earlier, the Jeonse rental type has the advantage of allowing the renter to accumulate assets without paying monthly rent, but it is not easy for young people without initial assets to afford the lease deposit on their own, as they have to pay a large deposit of more than 60% of the sales price at the time of the start of the lease. At the same time, this


**Table 2.** Regional classification of Korea.

monthly rental fee has been growing over time [20,31].

According to a survey by KRIHS, among young single-person renter households, 30.8% were found to be experiencing excessive housing costs, with the RIR (rent-to-income ratio) exceeding 30%. In addition, the proportion of households that do not meet the minimum housing standards was shown to be at 11.4%, indicating that they are living in poor housing conditions [20]. To ease the burden of high housing costs, many young people have no choice but to give up the quality of their own housing and choose poor living conditions that do not meet the minimum housing standards, rooftop houses, basement houses or cheap lodging towns, which are relatively more affordable [19].

trend towards living with monthly rent with a smaller deposit than Jeonse and a higher

The proportion of young households experiencing such an excessive burden of housing expenses stands out among low-income single-person households, persons with lower current income and those living in metropolitan areas [32,33]. In addition, as the disparity in the proportion of rental expenses spent by poor young households compared to nonpoor young households has increased by about double [18], young households who have difficulty in accumulating stable assets due to being unable to find a job or an unstable employment status are in a serious situation where they will continue to find it difficult to pay rental expenses and will continue to face poor housing conditions.

Based on a questionnaire survey distributed amongst early-career young renters in CR, Lee [21] reported that young renters' housing cost burdens tended to decrease as time passes after they first enter the workforce. The researchers interpreted that the results were due to the increase in the income level according to the increase in years in the workforce. This suggests that young renters' housing problems are likely to be easily overcome if young people would be able to receive adequate housing support in the early stages of their independence, thereby leading to their independent housing problems being solved.

#### 2.3.2. Financial Dependence on Parents

As the excessive burden of housing costs is a factor which greatly influences life planning and decision-making, the housing cost must be at a level where assets can be adequately accumulated to prepare for the future [34]. Generally, in foreign countries, if the housing cost exceeds 25 to 30% of the individual's income, they are subject to policy benefits, but at present, in South Korea, there is currently no state subsidy system for housing expenses when the ratio of an individual's housing expenses to income exceeds a certain level, as in most developed countries. In a situation where the problem of overburdening housing costs for young households in South Korea is excluded from policy, these individuals' housing costs will ultimately be borne by their parents [8].

According to a survey of young renters in Seoul [8], among young rental householders living with their parents, the percentage of parents paying rent accounted for 94.5%, and even if they are living independently from their parents, 49.4% of parents pay the full rent, indicating that young household renters are very dependent on their parents for housing costs (Table 3). The study reported that the reality of support for young rental households by parents was irrelevant of the employment status of young people.

**Table 3.** Young renters' source of rental costs according to whether or not they live with parents (Unit: %).


Source: Measures to improve youth housing poverty in Seoul by activating social and economic actors. Seoul, Korea: Seoul Metropolitan Council, p. 22 [8].

As economic independence and stable housing become the top priorities for young people, the stage of marriage and childbirth will receive lower priority in the progression of their life cycles. Furthermore, if the housing cost falls outside the affordable level, young people will be forced to give up both marriage and childbirth, as well as the purchasing of a home [25,26]. For these reasons, while there is a marked tendency for adult children to more naturally recognize and accept their parents' financial support [35,36], parents continue to support their children for as long as their children need it, regardless of their employment status, marital status, age or timing, in order to ensure that their children's implementation of a life cycle can be successfully realized for as long as they can afford it [37,38]. Because the increase in housing costs is accelerating faster than the rate at which young people's economic conditions are improving [39], adult children may not be able to return all or part of the housing expenses bestowed by their parents in the early stages of independence and will use them as seed money when they renew their lease or move to their next residence [40].

As the chances of young people solving stable independence and housing problems themselves without parental support remain slim and their income has a great impact on their changes, social conflicts such as "the inheritance of wealth" which refers to inheriting or giving property to their children even through expediency and "the theory of the silver spoon and wooden spoon," have begun to emerge more [23]. In addition, the excessive burden of housing expenses weighted on young people acts as a heavy burden not only on young people themselves, but also on their families, particularly their parents, and further dissolves the necessary assets set aside for the parents' retirement, resulting in a threat to the older population's economic welfare after retirement [40,41]. Therefore, when dealing with the housing issue of youth households, it is not only the qualitative level of housing that is of concern, but also the burden of housing costs and the financial burden of the parents and families of young people, which should be considered in a nuanced manner. Institutional measures need to be taken to help adult children lead independent housing lives rather than continually relying on parental support, and the housing support for such young households is also closely related to social stability and sustainability.

In previous studies, it was reported that among young renters living independently from their parents, Jeonse renters showed the greatest tendency to receive financial support from their parents, when compared to monthly renters [13,17,22,35]. In addition, the receiving of parental support was found to be influenced by diverse demographic and housing characteristics. From an analysis of microdata drawn from the Korea Housing Survey 2014, Park and Lee [17] revealed that young renters' reception of parental support could be predicted with a linear combination of age, marital status, working status, tenure type, structure type, residential location and rental deposit with 77.2% accuracy. Lee [21] also found that as time passed since the young renters' first entry into the workforce, their financial dependence on their parents decreased.

Young renters' reception of parental support was found to have influenced not only the reduction of current housing problems, but also on the formation of their first household, in addition to their expectations for an improved housing situation in their next move. Using microdata from the Korea Housing Survey 2017, Lee and Kim [42] concluded that financial support from parents had a positive influence on alleviating young renter households' housing cost burdens and housing quality issues. Based on an analysis of the Korea Housing Survey 2014 microdata, Moon and Lee [36] explored that parental support showed a significant relationship with their adult children's likelihood of forming a new household independently from their parents, and that young renters receiving parental supports showed a stronger tendency to expect upward filtering of their tenure types and/or an upscaling of their house at the next move, compared to those who did not receive any financial support from their parents.

#### *2.4. Housing Support Programs Targeting Young Renters*

It is only recently that young people have been highlighted as a target within Korea's housing welfare policy. Since 2015, Haeng-bok House, public rental housing which is mainly targeted at young people, has begun to be supplied, and housing support policies for young households have been gradually developed and implemented after the government's Housing Welfare Roadmap 2017 [43] was announced.

#### 2.4.1. Public Rental Housing

Haeng-bok House is a type of public rental housing that receives a low rental fee at 60–80% of the market price, and 80% of the supply is intensively supplied to young people, such as college students, those newly entering the workforce and society and newlyweds. Since Haeng-bok House was first introduced in 2015, the development of a total of 191,933 units was approved nationwide by 2019, and a total of 63,355 units were supplied as of 2019 [44,45]. Since Haeng-bok House has only recently been introduced, the supply is still very short when compared to the demand. In addition, like other public rental housing, the supply has not been speeding up in growth due to opposition from local residents who are concerned about the decline in real estate values and the possible downgrading effects of the area.

#### 2.4.2. Financial Programs

After the government announced the Housing Welfare Roadmap 2017 [43], as a followup to this program announcement, from 2018, various financial products aimed only at young people have been developed using the Housing and Urban Fund. Such financial products are for young people with income levels below a certain level and are meant to cover rental deposits, monthly cash rent and home purchases with loan conditions and interest rates that are relatively favorable to young people.

From 2021, if unmarried children (aged 19–29 years old) from households receiving the housing benefits of the National Basic Living Security Program live independently from their parents, the children can also receive the housing benefits separately from their parents [45]. In addition, programs are being implemented locally with direct financial support for young people such as financial youth subsidies by some local governments.

#### *2.5. Definition of Young Person*

In previous literature in Korea, there are various ways to define a young person (or a youth, a young adult). In most studies, a young person is defined by his/her age. Depending on the studies, a young person's age can be 19 to 39 years [14,20,22,31,42], 20 to 34 years [34,36,46], 20 to 39 years [33,47–52], 25 to 39 years [27] and so on.

Considering that the most frequently used age range of young persons in Korean literature is 20–39 years and that the age range used in the Korea Housing Survey 2019 is 20–34 years [46], young persons in this study were defined as persons aged 20 to 39 years old. Adult children in this study had the same age ranges as young persons.

#### **3. Methods**

#### *3.1. Instruments*

A questionnaire was developed by the researchers based on the Korea Housing Survey [28] in addition to previous studies related to young adults' housing situation in Korea [16,40,47]. The initial questionnaire was reviewed by two housing professionals in colleges located in Seoul and Busan in order to assure content validity, and was then revised accordingly. The final questionnaire was built to fit an online survey format by a survey company.

#### *3.2. Sampling*

The targets of the survey were young renters aged between 20 and 39 years who were living independently from their family or relatives. The original sample size was 500 and the specific sampling conditions were as follows:


In 2020, residents with foreign nationality comprised of only 3.3% of the total population in Korea [53]. In this study, young residents with foreign nationality were excluded from this study's target population in order to minimize the complexity stemming from different cultural and housing backgrounds and their level of understanding of the Korean language. Married individuals and students were also excluded from this study's target population, as their financial situation may differ from unmarried individuals and/or non-student young adults [17].

As this study focused on the housing cost burdens of young renters, the residential locations were limited to the CR (Seoul, Incheon, Gyeonggi-do), and the five non-CR metropolitan cities (Busan, Daegu, Gwangju, Daejeon, Ulsan) which were known to have a greater proportion of young adults compared to the rest of the area's population and higher rental costs than other non-CR "Do" areas [15,46]. According to the Population Census of Korea 2020, the population aged between 20 and 39 years with Korea nationality measured at 13,243,592, and 73.1% of them lived in the area of study: the CR and non-CR metropolitan cities (Table 4). The number of young adults aged between 20 and 39 years and living in the study areas measured at 9,677,985, and 29.2% of them were in Seoul, 44.6% in Incheon and Gyeonggi-do and 26.2% in non-CR metropolitan cities. Considering the census distribution, this study's sampling was designed to be concentrated at 30% in Seoul, 40% in Incheon and Gyeonggi-do and 30% in non-CR metropolitan cities. Figure 1 shows a map of the study areas.


**Table 4.** Population aged between 20 and 39 years old with Korean nationality by area (2019).

Source: Calculated from the Population Census of Korea 2020 (population section, complete enumeration part) data obtained from Korean Statistical Information System (KOSIS) [53] <sup>1</sup> Busan, Daegu, Gwangju, Daejeon, Ulsan.

**Figure 1.** Study areas in South Korea.

#### *3.3. Data Collection and Analysis*

The data were collected from February 25 to March 8, 2021, using the company's own panel dataset. When respondents first accessed the on-line survey, they were provided with a page with an informed consent statement including survey purpose; voluntariness, benefits and risks of participation; and confidentiality of the data collection. Only respondents agreeing to the consent statement could proceed to participate in the survey.

As a result, 500 valid responses were collected as planned. In terms of the frequency of tenure and rental types, only 2.4% (12 cases) had housing types other than Jeonse or monthly rentals with deposit, and 20.6% (103 cases) lived in public rental housing (Table 5). As this study focused on housing expenses, it was decided to exclude the 115 cases who had tenure types other than Jeonse or monthly rentals with deposit or who lived in public rental housing from further data analysis, mainly in order to minimize complication. As a result, the responses from 385 Jeonse renters and monthly renters with deposit living in private rental units were analyzed.

**Table 5.** Tenure and housing type of all respondents.


<sup>1</sup> Monthly renter without deposit, yearly, weekly and daily renter, etc.

The data analysis focused on (1) situations of parental support to pay adult children's housing costs, (2) influences on parental support for current housing expenses, (3) young renters' perception of housing cost burdens and (4) influences on the perceived housing cost burdens. For the data analysis, descriptive statistics, a discriminant analysis and regression analyses were used. A discriminant analysis, similar to a logistic regression analysis, is a statistical technique used to predict group membership of each subject when the dependent variable is nonmetric (two or more groups) and the independent variables are metric [54]. A regression analysis is a technique to examine the relationship between a single dependent variable and a combination of independent variables [54]. IBM SPSS 25.0 was used throughout the entire data analysis.

#### **4. Findings**

#### *4.1. Overview of Subjects*

4.1.1. Socio-Demographic and Housing Characteristics

Among the 385 subjects, 52.7% were males and 74.5% were in their 30s, and the average age was 32.5 years. Over 90% reported having full- or part-time jobs, and 91.2% had college degrees or higher educational attainments. More than 90% were found to live alone (Tables 6–8).

Average monthly income was approximately 2,788,800 Korean Wons (KRWs), excluding the four subjects who reported having zero (0) income. When applying a currency exchange rate where 1 USD is equal to approximately 1150 KRW, 2,788,800 KRW can be converted into approximately 2425 USD. In the research report from the Korea Housing Survey 2019 [28], monthly household income was categorized into three levels: (1) "Lower level" referring to the bottom 40% income level (under 2,500,000 KRW/month); (2) "mid-level" referring to income in the fifth to seventh income deciles (2,500,000 to 4,649,000 KRW/month); and (3) "higher level" referring to the top 20% income level (4,650,000 KRW/month or over). The income used in the research report of Korea Housing Survey 2019 looked at household income, whereas this study surveyed personal income. However, as 90.9% of the subjects were single-person households, it was acceptable to adopt the income level categories from the Korea Housing Survey 2019 report in this study. As a result, it was

found that 40.4% of the subjects were classified to have a lower level income, and 54.0% had a mid-level income.

**Table 6.** Socio-demographic characteristics.


**Table 7.** Age and monthly income.


**Table 8.** Income levels.


Note. Income level follows the income level categories used in research report of the Korea Housing Survey 2019 (p. 52, Table III-3) [28].

#### 4.1.2. Housing Characteristics

As for current tenure types, 51.7% of the respondents were monthly renters with deposits and 48.3% were Jeonse renters (Table 9). The average rental deposit of current housing units was 81,439,500 KRW, widely ranging from 500,000 to 500,000,000 KRW. The average of monthly cash expenses, including monthly cash rent for monthly renters, monthly loan repayment for rental expenses and other housing expenses such as maintenance fees or utility bills was around 307,2000 KRW. Housing costs by tenure types were summarized in Table 10. Jeonse renters paid much higher amounts for rental deposits and smaller amounts for monthly cash expenses than monthly renters since they do not have monthly cash rent. On average, the Jeonse deposit was 4.2 times the subject's annual income, and the deposit of monthly renters was 1.3 times the subject's annual income. Among monthly renters, there were subjects whose monthly cash housing expenses were 255% of their monthly income. These results suggest that many young adults actually cannot afford to pay for their own rental expenses by preparing a deposit on their own or through their income alone without any external help including supports from their parents.

#### **Table 9.** Tenure types.


#### 4.1.3. Housing Experiences

As for the experience of independent living, 41.8% reported that it had been five years or more since respondents first moved out from their parents' home (Table 11). The most frequently cited reason for choosing to live independently from their parents was due to the distance from their school or work or preparation for their job (63.6%), followed by a personal preference for independent living (26.5%). More than 95% of the respondents experienced residential moves since their first independent residences, and 44.1% were found to have moved three times or more.

#### *4.2. Parental Supports*

#### 4.2.1. The Experience of Parental Support since First Independent Living Situation

Among the subjects, 167 respondents (43.4%) had experienced receiving financial support from their parents to pay for their housing costs since their first independent living situation. The most frequent purpose of receiving parental support was to pay the lump sum deposit (Tables 12 and 13). Among those who received parental support, nearly 40% received parental support for two years or more, and more than one third received 30,000,000 KRW or more in total accumulation (Table 14). Furthermore, 27.6% reported that they expected additional support from parents for a longer period of time (Table 15).


#### **Table 10.** Housing costs by tenure types.

<sup>1</sup> Monthly cash rent, monthly loan repayment for rental expenses, other housing expenses (maintenance fees, utility bills, etc.). <sup>2</sup> Statistics excluding respondents with zero (0) income.

**Table 11.** Characteristics of the experience of independent living.



**Table 12.** The purposes of parental support since first independent living situation.

Note: Percentages presented are the valid percentages out of the 167 respondents who had received parental support to pay off their housing costs since their first independent living situation. As respondents were allowed to select all that applied, the sum of percentages exceeds 100.0.

**Table 13.** Top five combinations of parental support purposes since first independent living situation.


Note: Percentages presented are the valid percentages out of the 167 respondents who had received parental supports to pay off their housing costs since their first independent living.



**Table 15.** Expectations of additional parental support for housing expenses.


4.2.2. Parental Support for Current Housing Expenses

One hundred thirty-seven subjects (35.6%) were currently receiving financial support from their parents or using the funds that parents had already supplied in the past in order to pay their current housing expenses, including 13 subjects who relied on their parents for their entire housing expenses (Table 16). The average proportion of parental support out of current housing expenses among the 137 subjects who were using parental funds measured at around 43.7% (SD = 30.27).


**Table 16.** Proportion of parental support among current housing expenses.

4.2.3. Influences on Parental Support

To explore the influences on whether young renters received parental support to pay current housing expenses, a discriminant analysis (stepwise method) was adopted. The dependent variable was the "receipt of parental support (not received = 0, received = 1)" and the independent variables were socio-demographic characteristics (gender, age, educational attainments, monthly income, residential location) and housing characteristics (tenure type, rental deposit, monthly cash housing expenses). Table 17 contains further details on the independent variables used.


**Table 17.** Independent variables used in discriminant analysis.

For the results, a linear combination of age, monthly income, residential location (Seoul, Incheon and Gyeonggi-do) and rental deposit amount could predict whether a young renter had received parental support to pay for current housing expenses with 66.5% accuracy (Tables 18 and 19). To see the standardized discriminant coefficients of the discriminant function and group centroids, younger subjects, subjects with lower income, subjects living in Seoul, Incheon/Gyeonggi-do and subjects with a greater rental deposit showed a greater tendency to have received parental support to pay for their current housing expenses. Among the independent variables included in the final-stage discriminant model, living in Seoul and the rental deposit size were found to be the most influential when looking at the standardized discriminant coefficients. Although this discriminant model showed 66.5% classification accuracy, this model was less effective

in predicting young renters who received parental support (30.7%) than those received parental support (86.3%). Figure 2 summarizes the final-step discriminant model.



Note: Only the results of the final-step model of a stepwise method are presented.

#### **Table 19.** Final-step discriminant model: Coefficients.


Note: The dependent variable was the receiving of parental support to pay current housing expenses (not received, received). Refer to Table 17 for the description of the independent variables. Only the results of the final-step model using the stepwise method are presented.

**Figure 2.** Summary of final-step discriminant model.

#### *4.3. Perceived Housing Cost Burdens*

#### 4.3.1. Perception of Burdens

The perception of current housing cost burdens was measured on a 6-point scale ranging from "not burdensome at all (1)" to "very burdensome (6)". As a result, the average perceived housing cost burden score measured at 4.36 (SD = 1.23), which indicated that subjects perceived their current housing costs to be burdensome on average.

#### 4.3.2. Influences on Perceived Housing Cost Burdens

The influence of socio-demographic and housing characteristics on perceived housing cost burdens were examined using a multiple regression analysis with a stepwise method. The dependent variable was perceived housing cost burden measured on a 6-point scale (not burdensome at all (1)—very burdensome (6)), and the independent variables were the same as those used in previous discriminant analyses (refer to Table 17). As a result, a linear combination of monthly cash rental expenses, gender and rental deposit was found to explain 5.8% of the total variance of the perceived housing cost burdens of young renters (Tables 20 and 21). When looking at the standardized coefficients, the amount of monthly cash housing expenses showed the strongest influence on perceived housing cost burdens. No collinearity problems were observed when looking at the tolerances and VIFs of the variables used in the final-stage regression model. The final-step regression model is summarized in Figure 3.

**Table 20.** Final-step regression model: Model fit.


Note: Only results of final-step model of a stepwise method are presented.

**Table 21.** Final-step regression model: Coefficients.


Note: The dependent variable was perceived housing cost burdens measured on a 6-point scale: "Not burdensome at all (1)" to "very burdensome (6)". Refer to Table 17 for descriptions of the independent variables. Only the results of the final-step model using a stepwise method are presented.

**Figure 3.** Summary of the final-step regression model.

#### 4.3.3. Influence of Parental Support on Perceived Housing Cost Burdens

Using a hierarchical regression analysis, the influence of parental support (not received, received) on perceived housing costs burdens was examined with seven variables. These were found to have a significant influence on either the perceived housing cost burdens or the receiving of parental support through a previous discriminant analysis and linear regression analysis (gender: female, age, monthly income, location: Seoul, location: Incheon and Gyeonggi-do, rental deposit, monthly cash housing expenses controlled). As a result, the receiving of parental support did not show any significant influence on perceived housing cost burden at the *p* < 0.05 level when gender, age, residential location and housing costs were controlled for (*p* of F-change= 0.132).

#### **5. Discussion**

This study explored parental support and the perceived housing cost burdens of young renters residing in private rental housing independent from their parents through an online questionnaire survey. The major findings and implications are as follows.

Firstly, in terms of housing expenses, many young renters were found to be financially dependent on their parents. More than 40% of the subjects had experienced receiving financial support from their parents in order to pay housing expenses since their first independent living experience, and more than one third were still receiving parental support in order to pay current housing expenses. There were subjects whose parents paid the entire sum of housing expenses for their current housing. Furthermore, more than one third of the subjects who had experiences of parental support since their first independent living situation showed an expectation for additional parental support in the future. In terms of the ratio of housing costs to income as discussed above, it would be desirable to interpret such economic dependence not only as the parent-dependent propensity of young people, but also as an inevitable phenomenon due to the reality of the rental housing market in South Korea. This reality requires a level of deposit and rent that young people cannot pay on their own, and includes the current difficult economic situation of young people due to the economic recession and consistent job shortages.

Secondly, through a series of discriminant analyses and regression analyses, the amount of rental deposit was found to have a significant influence on both the receiving of parental support and perceived housing cost burdens, while monthly housing expenses, including monthly cash rent, showed a significant influence only on perceived housing cost burdens. In detail, the most influential feature of the receiving of parental support were the rental deposit that renters pay at the beginning of the lease, while the monthly cash housing expenses were the most influential on the perception of housing cost burdens. This is because young people who have fewer opportunities to accumulate assets than the older generation were more likely to receive support from their parents, as it is difficult to pay a large deposit on their own; however, housing costs, such as monthly rental expenses and management costs, which are typically paid every month, rather than the deposit they pay for their lease contracts, can be interpreted as having a more practical impact on their level of awareness of the housing cost burden.

Thirdly, older subjects or subjects with a higher income were found to be less dependent on their parents to pay current housing expenses. The results of this study can be interpreted in relation to the results of previous studies that reported that the dependence on parents for housing expenses of the rental households of freshmen in society decreased as time elapsed after entering society [21]. This is because young people who are relatively old or earn more income can be seen as having more robust economic strength as more time elapsed since they first began working. These results suggest that unlike housing welfare support for the elderly and disabled, which are difficult to improve over time, if the economic burden on young people and their parents can be reduced through adequate housing support in the early days of their independence, it is possible for them to easily get out of this supply as time passes and their economic strength is reinforced.

Finally, it was found that parents' support when adjusting for socio-demographic and residential characteristics had no significant impact on the renter's perception of their housing cost burden. Taken together with the previous results, the financial support of parents for adult children may play a role in enabling Jeonse and monthly rental contracts themselves, but the actual role of easing the burden of housing expenses for young renters can be interpreted as insignificant overall.

#### **6. Conclusions**

The problem of housing costs for young people not only places a financial burden on young people themselves, but also affects their parents, hindering their preparation for retirement and causing various social conflicts for both the short and long run. To summarize the above research results, the supply of rental housing with low deposits must be further expanded in order to reduce the burden of housing costs and parental support for their children, and to ultimately ensure social stability and sustainability. However, it is difficult to expect housing stability for young people in the housing market as deposits in the current general housing market are steadily increasing over time, and this trend shows no sign of reversing. Therefore, it is necessary to discuss ways to supplement the housing welfare system, such as expanding the supply of low-cost public rental housing such as the Haeng-bok House or expanding support for the housing expenses for young households. Currently, the government's support policies to solve the housing problems of young people, such as the expansion of public rental housing and the development of financial products only for young people, are gradually expanding over time, but there are many cases where young people cannot use them properly due to a lack of supply or insufficient promotion of the system. Therefore, it is necessary to respond more actively to young people's housing problems by strengthening the customized education and promotion programs for young people, along with the expansion of young renters' housing support policies in the future.

**Author Contributions:** Methodology, data curation, data analysis, writing—original draft, H.-J.L.; Conceptualization, methodology, writing—review and editing, Y.-S.H. All authors have read and agreed to the published version of the manuscript.

**Funding:** This work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korea government (MSIT) (No. 2019R1A2C1005122).

**Institutional Review Board Statement:** Not applicable.

**Informed Consent Statement:** You are invited to participate in the survey titled "Housing Situation of Young Renters." The purpose of this survey is to obtain information for policy and program development to improve young adults' housing situation. When completing the survey, you will be given point incentives from the survey company. There are no foreseeable risks involved in participating in this study. All responses will be collected confidentially without collecting any personal information to identify you, and data will be kept securely by the researchers and used for research purpose only. By clicking "I agree" button below, you are assumed to agree to participate in the survey.

**Data Availability Statement:** The data presented in this study are available on request from the corresponding author. The data are not publicly available due to the sensitivity of the data.

**Conflicts of Interest:** The authors declare no conflict of interest. The National Research Foundation of Korea, the funding agency, had no role in the design of the study, in the collection, analyses, or interpretation of data, in the writing of the manuscript, or in the decision to publish the results.

#### **References**

