The Market Impact of Housing Size-limit Regulations in the Capital Region of South Korea

Jang Kyoung-Seok; 허윤경; 김형민

doi:10.15793/kspr.2010.65..001

Over the last three decades South Korea has attempted to ensure the affordability of housing through a policy of housing size-limit regulations. The regulations require that a specified portion of housing development projects undertaken by developers be limited to 85㎡. However, little is known about the direct effects of such regulations on the actual affordability of housing. This study analyses the differences in per meter squared prices of small and large sized housing in order to investigate the market effect of housing size-limit regulations. This study is based on the Fischel's market effect model in the land use regulation (1985). The data for this study is the quarterly basis ‘housing supply record,’ 2000 to 2009 (38 quarters) in the capital region. The results of the analysis show that, since 2000, there has been a growing per meter squared price differential between small and larger sized housing. The differentials reflect regional conditions with Seoul, Kyeonggi and Incheon respectively showing the first, second and third largest price differences. On the other hand, the price differentials per ㎡ in the capital region are increasing as the price change differences between the stocks of small housing, the supplies of small housing and housing size are getting larger and lager. This finding thus implies that, contrary to the policy objective that improves the affordability of housing, the size-limit regulation has brought about adverse effects that have increased the gap in prices between small and larger sized housing.

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