Seoul's social investment fund makes housing more affordable

Green Friends Seongsan in Mapo-gu, Seoul /Courtesy of Green Friends

By Kim Se-jeong

Social enterprise Green Friends builds homes in the middle of Seoul and rents them cheaply to those who cannot afford the market prices for similar homes.

Rates are 70 percent cheaper and tenants can stay for up to 10 years.

Its first project, Green Friends Seongsan in Mapo district, opened earlier this year, providing homes to 11 households. The second project, Green Friends Changcheon in Seodaemun district, has 11 flats and tenants are now moving in.

This is how Green Friends’ business works.

The Seoul city government owns the land and Green Friends leases it for 40 years. For construction, Green Friends needed 1 billion won, of which 700 million won was borrowed from the city government’s social investment fund. The remaining 300 million won was borrowed from the construction company.

Green Friends repaid some of the borrowed money from down payments collected from the tenants when they moved in. Monthly rent will cover interest for the next five years and other administrative expenses.

“It was a big help,” Green Friends CEO Kim Jong-sik told The Korea Times. “If I had to borrow the money from banks, it would not have been possible.”

The city’s social investment fund was begun in January 2013 to nurture companies that are social value-oriented.

“The fund was born to support social enterprises that would work to solve social problems such as the environment and housing,” Kang Seon-seop, the director of the city government’s social economic division, said. “We believe what we are doing is meaningful change and we’ll continue to do so.”

Green Friends speaks volumes about the housing issues facing Seoul. Skyrocketing rents and jeonse, a type of contract that involves paying a big amount up front instead of rent, hit people hard. High living expenses also trigger other economic and social issues.

The social investment fund has 70.2 billion won and funds 263 companies ― 52.6 billion won is from the city’s pool and 17.6 billion won is private-sector investments. Green Friends is one of 21 companies that run housing projects. Other recipients conduct business in culture education, healthcare, social welfare and the environment. The city used to outsource the running of the fund but took it back this year.

CEO Kim believes the social investment fund is crucial to building the community in the city and making Seoul more inclusive.

“Housing companies like Green Friends are so meaningful because they create a sense of community among people and this eventually improves the quality of life for the residents,” Kim said.