Working Paper Series No. 01

Working Paper Series No. 01 The Changing Shape of the East Asian Housing Model Richard Ronald and John Doling

Centre for Urban Studies Working Paper September 2013 www.urbanstudies.uva.nl/workingpapers

CUS Working Paper Series – WPS-No. 01

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Editorial Committee CUS Working Paper Series Prof. Jan Nijman Dr. Wouter van Gent Dr. Rivke Jaffe Dr. Richard Ronald Dr. Darshan Vigneswaran

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The Changing Shape of the East Asian Housing Model Richard Ronald and John Doling Abstract While patterns of housing policy, production and occupation are quite diverse, housing interventions in developed East Asian economies have historically focused on high volume housing output targeted at economically productive, male-headed family households. This focus has been associated with the demands of ‘developmental’ states and ‘productivist’ welfare regimes characteristic of the region. Volume and speed of housing construction has been exceptional compared to Europe and North American societies reflecting the abilities of development orientated governments to appropriate land and mobilize the resources of public agencies and private corporations in the supply of new housing. Nonetheless, in recent years there has been evidence of significant reorientations in housing approaches in some contexts, often in harmony with welfare regime shifts and, in some cases, in line with the emergence of a ‘postdevelopmental state’. The objectives of this article are twofold. In the first half we elaborate on various modes of housing found among East Asian nations as a means to assess the viability of a particular model that can be considered characteristic to the region and distinct from those found in advanced Western economies. The objective of the second half is to identify recent developments that have begun to challenge the East Asian housing model. Indeed, the severity of economic cycles, demographic trends - particularly declining marriage and fertility, and increased social ageing - and the manifestation of ‘new social risks’ have begun to test both the viability and sustainability of established housing and policy frameworks.

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Introduction

Notwithstanding detailed differences, the major East Asian economies can be seen as sharing a common housing model, distinctly different from those of western economies. In East Asia, housing interventions historically focused on the high volume production of apartments for working, male breadwinner households. Rates of housing output have been phenomenal with the rapid expansion of construction programs reflecting the abilities of development orientated East Asian governments to appropriate land and mobilize the resources of public agencies and private corporations in the supply of new housing. The main priority was to sustain the express pace of modernization, urbanization and economic expansion. State plans sought to clear slum housing, increase land values and promote high-speed growth. Individual housing needs were not irrelevant, although political and economic logic usually dictated that economically productive households were prioritized rather than the poor or vulnerable. Approaches thus reflected the features of both developmental states (see Johnson, 1982, Wade 1990) and productivist welfare regimes (Holliday, 2000; Kwon, 2005; Holliday and Kwon 2007). For reasons explored throughout this book, 3



home ownership became strongly embedded in this East Asian model. Based on the primacy of national economic growth objectives, home ownership was promoted as a means of, on the one hand, contributing directly to economic growth through the motor of the construction industry, and, on the other, supporting a low-taxation, low-publicexpenditure economy with minimal social protection measures through the support of the family (Lee, Forrest and Tam, 2003; Ronald 2007, 2008; Ronald and Doling, 2010, 2012).

In recent years however, with the undermining of traditional developmental logic and the growing volatility of housing markets generated by intensified globalisation, the traditional housing model has been challenged. In the last decade or so (since the 1997-1998 Asian Financial Crisis in particular), private real estate interests locally, and neo-liberal prerogatives more globally, have asserted a firmer grip on policy agendas (Hill, Park and Saito, 2011). At the same time, social housing has also come to the fore while public welfare spending and cover has expanded (see Ronald and Chiu, 2010). In South Korea for example, public rental housing units have dominated urban housing production since 2002 (see Hyunjeong Lee, this volume). Meanwhile, in a rather different context, after more than two decades of intensive housing privatisation, in 2010 the Chinese government announced one of the largest social housing construction programmes in the world with an initial target of around 36 million units by 2015 (see Wang and Shao, this volume). A debate has thus begun about whether there is an emergent post-developmental state.

Apart from, but related to political changes, the housing pillar of developmental regimes is facing new social, economic as well as demographic, stresses. Among the latter is population ageing, which is threatening to destabilize the balance between working and retired populations that sustained these economies during the high growth era. Changes in families, with increasing numbers of women in paid employment and declining marriage and fertility rates are also reinforcing the ageing trend (Jones, 2007). The undermining of the male-breadwinner model and the family base of welfare is bringing pressure to bear on the state to improve social rights and public welfare provision. Socioeconomic stresses, meanwhile, not only include greater economic volatility and slower growth rates, but also a higher propensity for unemployment effecting not only public resources, but also eroding the capacity of households to sustain stable life-course and owner-occupied housing careers. There have also been political stresses as democratic contestation has deepened in what 4



have traditionally been authoritarian states. In a context of improved aggregate wealth following decades of economic growth, combined with declines in social equality and family welfare capacity, social issues have become central to party manifestos and policy programmes (Hwang, 2011). Housing, which straddles the economic and social, has been central among these.

This article has two main objectives. The first is to elaborate the East Asian context and modes of housing, exploring evidence of the existence of a particular model characteristic of the region, and distinct from models characteristic of western advanced economies. This is developed in the first of the two main sections of the article. The second objective, developed in the second of the two main sections, is to identify developments that have begun to challenge East Asian housing systems: what we refer to as the seeds of change. While home ownership is still by far the largest single housing tenure and an aspiration that remains undiminished, the severity of economic cycles, demographic trends and ‘new social risks’ have begun to test both the viability and sustainability of established housing and policy frameworks. This article thus provides not only a context for understanding housing approaches in the region but also the importance of this domain for considering socioeconomic and political changes in East Asia more generally.

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Housing and the East Asian Model

East Asia has provided a marked contrast to the dominant occidental focused social and economic theories of development. Most countries in the region underwent a rapid industrialisation in the second half of the twentieth century and in many cases caught up with – and even surpassed in the cases of Japan and South Korea (hereafter, Korea), both OECD member nations – their developed western counterparts. These countries have not, however travelled the same routes towards social, technological and economic advancement found elsewhere in the developed world. They have not followed laissez faire free market models of growth, but rather (especially in the early stages) state-planned, bureaucratically-coordinated models of strategic development focused on nurturing particular industries and relying on manufacturing and export orientated expansion (see Johnson, 1982). Indeed, ‘developmental states’, as they are often known, represent a brand of economic nationalism within which corporate, political and bureaucratic elites have formed powerful and successful alliances aimed at driving economic growth. At the same 5



time, democratic freedoms and rights of citizenship have been restrained in order to maximise stability and economic productivity. Similarly, the domain of housing has been subject, if not central to, the objectives of development-orientated economies. Before we consider the place of housing, however, it is necessary to explore the specificities of the East Asian region.

The Economic Context Looking at East Asia in broad terms, a number of similarities in economies and urbanization processes can be laid out. Firstly, with the exception of Japan (an old rather than new developed country i), the speed and relative timing of economic development has been distinctive. This has been seen over the last half century in very high average Gross Domestic Product (GDP) growth rates, far exceeding rates in advanced western economies. It can also be measured by the urbanisation rate since urbanisation reflects the switch from agricultural-based to manufacturing-based economies (Table One). With the exception of the city-states of Hong Kong and Singapore, which, by definition, are urbanised, the general pattern – contrasting with the longer-established urbanisation of western economies - is of urbanisation proceeding very rapidly in recent decades, exerting a continuing and large demand for additional urban housing. Although Korea (at 82 per cent) and Malaysia (71 per cent) have now achieved urbanisation rates consistent with those of western countries, it seems likely that strong growth will continue in China, Indonesia and Thailand. In general, the East Asian countries have therefore been characterised by high growth capacities (Wade 1998).

Notwithstanding these commonalities, the East Asian region is diverse and may be considered in terms of social and economic development in a number of parts or regions. First are the newest of the newly industrialising societies, or Cub economies (in relation to the more established Tigers). These are generally located in South East Asia, have a lower GDP per capita and a less developed urban framework. In this volume they are represented by Indonesia, Malaysia and Thailand. In all, their agricultural sectors are still significant accounting for at least 10 per cent of total GDP and their manufacturing sectors accounting for between 40 and 50 per cent (Table Two). Of this group Malaysia has by far the highest GDP per capita. China in some ways resembles these developmental late starters, but may be considered a class in itself. It is not only larger than the rest of the 6



region put together in terms of area and population, the controlling Communist Party and its reorientation towards market led growth since 1978, has ploughed a very different furrow in terms of accelerated urbanisation and economic growth. In 2011 it overtook Japan to become the second largest economy in the world. Meanwhile, economic activities in the rest of the region have become increasingly dependent on the sustained growth of China, which in 2012 achieved a growth rate of around eight per cent of GDP.

Table 1.1 Urban population as % of total population Source: World Bank World Development Indicators 1981

1996

2009

20

31

44

Hong Kong 92

100

100

Indonesia

23

36

53

Japan

60

65

67

Korea

58

78

82

Malaysia

43

56

71

Singapore

100

100

100

Taiwan

*

*

*

Thailand

27

30

34

Australia

86

86

89

Canada

76

78

81

France

73

75

78

Germany

73

73

74

Italy

67

67

68

UK

88

89

90

USA

74

77

82

China

Note: * = data not available from this source.

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Table 1.2 GDP per capita and by sector 2010 Sources: CIA The World Factbook (www.cia.gov/library/publications/the-worldfactbook/fields/2010.html) accessed 31.08.2011 GDP per % GDP % GDP capita from from (ppp) agriculture manufacturing US $ China

% GDP from services

7600

10.2

46.9

43.0

45900

0.1

7.4

92.5

4200

15.3

47.0

37.6

Japan

34000

1.4

24.9

73.8

Korea

30000

2.6

39.3

58.2

Malaysia

14700

10.5

41.4

46.2

Singapore

62100

0.0

28.3

71.7

Taiwan

35700

1.4

31.1

67.5

Thailand

8700

12.4

44.7

42.5

Australia

41000

3.9

25.6

70.5

Canada

39400

2.2

26.3

71.7

France

33100

2.0

18.5

79.5

Germany

35700

0.9

27.6

71.3

Italy

30500

1.9

25.3

72.8

UK

34800

0.7

21.8

77.5

USA

47200

1.1

22.1

76.8

Hong Kong Indonesia

Note: ppp = purchasing power parity

Hong Kong, Japan, Korea, Singapore and Taiwan, on the other hand, have economies that more closely resemble those of the advanced western countries. Their level of GDP per capita, which is especially high in the case of Singapore, and the balance between agriculture, manufacturing and services place them firmly as post-industrial societies in which service activities predominate (Table Two). This is especially the case with Hong Kong and Singapore, both small, city states with little undeveloped land and agricultural sectors accounting for 0.1 per cent or less of GDP. These two countries can also be considered a category apart as they have, for reasons explored throughout this volume, largely managed to resist the democratic transformations that Japan, Korea and Taiwan

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have undergone in recent years, and have thus been more successful at sustaining lower levels of public welfare spending. South Korea, Japan and Taiwan have quite distinct development pathways, but have all achieved very similar levels of GDP per capita. They have increasingly been linked together, not only because of they are well developed, but also because there has been some departure in recent years in terms of social policy transformations (Holliday and Kwon, 2007, Hwang, 2011; Peng and Wong, 2010). There is a level of conformity in these societies in that all have seen changes in government subsequent to the 1997 financial crisis and have consequently endured greater democratic tensions that have shaped approaches to, and support of, developmentalism.

Welfare Regimes Other than being successful, growth orientated economies that rapidly industrialised in the second half of the twentieth century, what also sets East Asian countries collectively apart is a particular orientation to, and development of, welfare frameworks. Building on the seminal work of Esping Andersen (1990) a large body of literature has tried to explain differences in the logics of welfare states and comparative differences in social insurance provision. Whereas such studies provided insights into western countries, they have been less successful in explaining the dynamics of welfare provision in industrialised East Asian ones (Abrahamson, 2011). Since the late-1990s, however, a growing number of approaches have attempted to identify a pattern across this group of societies that have, on the one hand, experienced rapid economic growth, while, on the other, supported both constrained expenditure on social welfare and relatively stable political hegemonies.

In response to criticism of his initial categorisation of Japan within a Western welfare framework, Esping-Anderson (1997) recast developed East Asian societies as hybrids featuring corporate social policies with strong reliance on the market and the family. For Kwon and Holliday (2007), however, East Asia represents a distinct fourth regime type, compared to the Esping Andersen’s three western groupings, articulated by their productive rather than protective intent. Goodin argues that all welfare regimes are productivist to the extent that they are concerned with ensuring ‘a smooth supply of labour to the productive sectors of the formal economy and they are all anxious that the welfare state not get too badly in the way of that’ (2001, p 14). Nonetheless, the ‘growth at all costs’ strategies that characterised East Asian economies in the late twentieth century resulted, for Holliday, in a 9



deeply productivist approach in which social protection measures were subordinated ‘to the overriding policy objective of economic growth’ (2000, p708).

In the productivist welfare regime, social policy has largely been de-linked from concepts of citizenship and social rights. Rather than a mechanism for achieving vertical redistributions of income or wealth, or equalising opportunity, the concern was economic expansion. The role of social policy was to reinforce productive elements in society and state-market-family relationships directed towards growth. In this model there was a limited social protection role for the state with members of society held responsible for themselves. Public welfare dependence has thus been deeply stigmatized with expectations that the family, company and community play major welfare roles (see White and Goodman, 1998). While the major task for governments was to set the path for growth and employment opportunities, the associated role of their populations was to work hard and through that protect themselves. In supporting the individual, the state has promoted, or structured, reliance on the family as the basic unit of society through which individual welfare needs are met (Croissant, 2004).

Measures of welfare regimes have largely been designed with European contexts in mind and focused on indexing ‘de-commodification’ (or how welfare systems make individuals more or less dependent on the labour market in meeting their needs), with few quantifiable systematic indicators of how much, comparatively, social policy is subjugated to the interests of production and economic growth. The welfare regime debate has thus centred on differences in the varying strength of protective rights, with Esping Andersen revisions never really engaging with the productive intent of social policy (Hudson and Kühner, 2011). Consequently there has been little common frame of reference for either understanding the nature and components of East Asian welfare systems or for comparing them with their non-Asian counterparts.

In regard to this welfare model, two questions have been increasingly raised: does East Asia, considering the diversity of policy constellations, really constitute a unified type, and if so is this really that different from that found, for example, in Mediterranean Europe, where family welfare is also emphasized in context of a small state? For Abrahamson (2011), among others (see Ramesh, 2004; Jacobs, 1998) the answer is, respectively, yes and no: 10



… despite considerable variation across the region, there are enough commonalities to warrant the assumption that they belong to the same overall welfare regime. However, it is not particular to East Asia. Instead it is shared with Southern Europe and Latin America. For lack of a better term it is called the informal care regime (p16). In recent years however, there have been marked changes in East Asia’s fourth world of welfare that illustrate greater differences with logics, patterns and processes of welfare provision between East Asia and other, similar regimes. In particular, despite several decades of neglect and the advocacy of private and market oriented policies, social insurance programmes have begun to be considered as desirable policy initiatives and are increasingly being rolled out (see Peng and Wong, 2010; Weiss 2003). This is not to suggest that states are simply conforming more to western norms, but rather that developmental states are undergoing transformations in response to significant socioeconomic and demographic changes in the region, as will be explored later.

In understanding the development of a productivist welfare regime and its relationship to the operation of and transformation in developmental states, the role of housing policy has largely been ignored (Ronald and Doling, 2010). Indeed, as Kim (2010) points out, conceptualizations of welfare have not included public expenditure on housing (and education) as a measure that addresses social protection. Housing, within the East Asian context has primarily been discussed in terms of urban growth objectives and economic policy. However, it has become increasingly clear that East Asian approaches to housing, while often diverse and growth orientated on the surface, are deeply embedded with developmentalism and the logic of productivism. Furthermore, compared to other policy spheres, developmental states have been very active in the housing sphere and have directed substantial resources into this domain. As we argue in the following, this is important not only for understanding productivist forms of welfare, but also what distinguishes them from other societies where the family bears the primary responsibility for welfare and the family home forms a pillar of household provision. While housing was not initially embedded in analyses of western welfare states either (Fahey and Norris, 2010; Hoekstra, 2003), there has been a growing realisation that housing has major welfare outcomes not just within the welfare state but also privately as a family good (Groves et al, 2007).

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Housing Systems and Approaches While there are distinct starting points and expansion periods, there are arguably two common features among East Asian countries in their approach to housing that, combined, distinguish them from other developed economies. The first is the top-down nature of planning and state-led coordination. Housing provision has featured large public corporations such as the Hong Kong Housing Authority (HKHA), The Japan Housing Corporation ii , the Korean National Housing Corporation iii and the Singapore Housing Development Board (HDB), facilitating mass housing construction on an unparalleled speed and scale (Ronald, 2014; Lee and Ronald, 2012). Indeed, many of these organizations are the largest – and in some cases, some of the richest – public corporations in the world. The second is, in contrast to intensive state planning and the large-scale mobilization of public resources, the orientation towards commodified forms of housing production and consumption (Lee, Forrest and Tam, 2003; Ronald and Doling, 2010).

Doling (1999) has consequently suggested that these societies represent a specific model of housing provision with core similarities in dimensions of state-market and privatecollective. While policies have been differentiated between countries, the nature of ‘housing provision chains’ (HPC) – concerning the life cycle of housing from construction through to consumption – have been largely consistent. In western liberal economies, (for example, the USA), markets generally rule at each stage of the HPC unfettered by the state. Housing is seen as a private good and sold or leased according to the ability to pay. Meanwhile, in many North European countries (like Sweden), development, historically at least, is often coordinated by public organisations, constructed by private companies, but with allocation and price often subject to social objectives. In East Asia however, the state first orchestrates planning, setting out measurable goals, and also plays a role in steering economic factors that affect speed, location and nature of development. Meanwhile, construction is often carried out by private companies and housing sold as a market good in terms of ability to pay.

State-coordinated housing development has, on the one hand, served the interests of developmentalism, with large scale building projects increasing urbanization rates, the expansion of industry (especially construction) and the provision of homes for workers nearby economic activity. East Asian governments became deeply involved in the housing 12



sector during the period of high-speed economic growth between the 1960s and late-1990s. Rates of GDP growth derived from construction have often exceeded eight to ten per cent (Yau, 2011). Meanwhile, sharp increases in land and house-price also became a feature of growth, transforming the contribution to economic growth into household asset wealth – particularly among urban (owner-occupier) middle-classes – and stimulating further investment, consumption and growth.

On the other hand, the focus, achieved through deep state coordination and subsidization, on commodified housing has been a primary means by which the state has sought to support the family base of welfare. By building and helping family households into housing by various means – from public home ownership schemes in Singapore and Hong Kong to government mortgage schemes in Japan and Taiwan, for example – East Asian governments have managed to drive both the rapid proliferation of owner-occupation and the expansion of a housing market within which family bought properties have turned into substantial equity that can be traded in a market, shared with other family members to provide the basis of reciprocal intergenerational welfare exchanges or inheritance (Izuhara, 2002), or even turned into cash that can be used to buy welfare goods in the market (Doling and Ronald, 2012). State coordinated housing commodification has thus not only sustained the rise of urban economies, but also advanced the development of consumption orientated, middle class societies made up of welfare self-reliant households with access to family owned housing assets (Groves et al., 2007, Ronald 2007, 2008; Ronald and Doling 2010, 2012). Housing has thus constituted, despite the appearance of a primarily economic developmentalist rationale, a productivist welfare strategy

In a nutshell, East Asian governments have looked to housing development as a means to drive urban development and economic growth, and at the same time to stimulate the rise of a property asset holding class of welfare self-reliant home owning households (Ronald, 2007; Doling and Ronald, 2010). Supporting access to and consumption of goods that bolster the economic position of the family has been considered a means to offset the development of onerous welfare states that impede the ability of the state to invest in advancing industrial growth and national economic capacity. Furthermore, delivering public housing as commodified asset goods has helped to resist potential de-commodification that

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would threaten to extend the autonomy of workers and a sense of social rights to public goods.

Singapore and Hong Kong both epitomize deep state intervention in housing in East Asia involving their governments exerting strong control over land and high levels of state provision, with public housing dominant in both systems. Whereas the HKHA provides housing for around 48 percent of Hong Kong’s inhabitants, the Singapore’s HDB has, since the late-1960s, built over 80 percent of the housing stock. In Singapore the focus became leasehold, public owner-occupied flats, with the state controlling supply, finance and regulating the vast majority of the market for new and used housing (see James Lee, this volume). Hong Kong, for its part, began to develop a large public rented housing sector from the 1960s, but shifted toward home ownership in the 1980s and 1990s through home ownership scheme housing and public rental sell-offs (see Ngai Ming Yip, this volume). These states also illustrate, moreover, key differences to western contexts in approaches to government sponsored housing provision. Public housing in Europe is largely equated with social housing (de-commodified) in which units owned by social landlords are provided at below market price and allocated by need rather than ability to pay (Oxley, 2000). Public housing (state coordinated) in East Asia, in contrast, is financed, constructed and managed on the basis of entirely different criteria. Housing programs ostensibly aim to improve urban infrastructure and enhance household self-reliance rather than cultivate expectations of rights to state services. …public housing has not acted to de-commodify the housing market, but rather sustain its growth and development. Homes produced by state agencies are often sold to households as a form of owner-occupied housing, or, where produced as subsidized rental dwellings, have not been allocated to the neediest, but rather to productive categories of worker in order to support economic development objectives (Lee and Ronald, 2012, p498). East Asian governments do not exclusively support the provision of owner-occupied dwellings, and public rental sectors accommodating low-income households at sub-market rents do exists in many contexts. The HKHA is in fact one of the largest, public landlords in the world. Nonetheless, even this type of provision, while serving many social goals, also follows the logic of productivism. In this case, the provision of cheap rental dwellings for working households can function as a form of social wages that foster economic development more broadly: workers with low rents can live on less, reducing the labour 14



costs of local industry. Government rental housing programs thus may contribute to economic growth by making local businesses more competitive in the global economy (Castells et al. 1990). Furthermore, public housing has often been provided first for public officials or other professions considered critical to economic growth, ahead of others.

Housing programs have, moreover, been an arena in which governments have sought to demonstrate competency, assert control and achieve electoral success. In Singapore, Chua (1997) argues that the public housing program has helped make citizens ‘clients of the state’. The Singaporean state not only claims legitimacy for its policies based on its achievements in modernizing the housing stock, but also influences the electorate, with neighbourhoods showing weak electoral support for the ruling party often neglected in the allocation of housing improvement subsidies. Housing conditions are particularly important in Singapore as most citizens are dependent on the public housing program not only for shelter, but also in order to realize economic and welfare security. The vast majority of housing in Singapore has been built by the HDB and ‘sold’ to qualifying citizens on a 99year lease basis. The HDB also maintains estates, provides mortgages and sustains a secondary HDB resale housing market. Critically, the main source of social insurance are individual accounts held in the state managed Central Provident Fund (CPF), the largest share of which is typically used by the majority of households to buy a HDB home. HDB housing, in that they increase in value over time, effectively constitute the main form of pension investment and the government’s protection or neglect of these commodities is therefore remarkably influential. James Lee (this volume) argues that the housing system has been central to sustaining a low cost, largely self-funded welfare system and thus fundamental to Singapore’s broader economic successes.

Home ownership levels grew significantly across the region in the last decades of the twentieth century driven by state stimuli, intense urbanisation and high annual GDP growth (see Chiu, 2008). Whereas Table Three indicates national home ownership figures, these hide just how quickly rates increased in many countries. For example, in Singapore, owner-occupation increased from 29 to 92 per cent of the housing stock between 1970 and 2003, while in Hong Kong the ratio rose from 23 to 52 per cent between 1976 and 1997. China’s state-led housing marketization expanded urban home ownership from 17 per cent in 1985 to 82 per cent by 2003, with the national figure reaching 75.7 per cent in 2005.

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The size of housing finance sectors also varies considerably across the nine countries included in this volume. Finance sectors are larger and mortgage providers more active in Singapore, Hong Kong and (to a lesser extent) Japan, compared to their neighbours, although average compared to developed countries as a whole (Table Three). In Malaysia, Taiwan and Korea mortgage sectors have been expanding rapidly in recent years although they remain relatively small compared to western norms. China, Indonesia and Thailand, however, remain underdeveloped. Across East Asia home purchase still relies to varying degrees on household savings and family help to support down-payments and even repayments. In mortgage lending, large deposits and low loan-to-value ratios are typical and, moreover, many countries have initiated government sponsored lending programs in order to fill the gaps between rapidly increasing house prices and limited borrowing capacity among low and middle income households. Table 1.3: Home ownership markets Sources: (1) Figure for China for 2005 relate to urban areas only and are from Chen G (2011); figures for other Asian countries are for early 2000s from Cruz (2006); other figures are for 2004 from Andrews D and Caldera Sanchez A (2011) (2) Warnock V and Warnock F (2008) Markets and Housing finance, Journal of Housing Economics, 17 (3) 239-251. Home ownership rate (%) (1)

Mortgage debt as % GDP Average 2000-2005 (2)

China Hong Kong Indonesia Japan Korea Malaysia Singapore Taiwan Thailand

75.7 57.0 95.9 61.2 54.0 85.0 92.0 86.8 82.1

10.0 41.5 2.1 35.7 20.8 28.3 60.2 28.1 15.5

Australia Canada France Germany Italy UK USA

69.5 68.9 54.8 41.0 67.9 70.7 68.7

61.9 42.9 24.1 47.4 13.1 66.6 67.4

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Housing and the Family The family is crucial to the housing pillar of the East Asian welfare state. As Croissant (2004) emphasizes, across East Asia most welfare functions are assigned to the household and that family loyalty provides a bedrock to social protection. ‘The model of the extended nuclear family, in which most older people [live] with their families and working incomes are pooled into household income, generates income security, provides alternatives to public personal social services, and keeps private social expenditure at low levels’ (p513). In housing policy, home ownership subsidies and public housing schemes have been almost exclusively targeted at family households, with extensions to single-person households only seen in recent years as family household formation has begun to unravel or as the state has sought to sustain demand in the housing market during volatility (for example, see Hirayama, 2011).

In practice, the support played by family housing has taken a number of forms. Often this has included co-residency, which in Korea, for example, has traditionally meant elderly parents living with the oldest son, his wife and, often, the grandchildren iv (Kweon 1998). Co-residency enables housing costs to be shared as well as, on the one hand, facilitating physical and emotional support for older people by their offspring, and on the other with elderly relatives providing childcare assistance for their adult children’s families. Table Four shows that in East Asian societies, at least up until the end of the twentieth century, the norm was for intergenerational living, with the majority of people aged over 60 living with children and/or grandchildren. This contrasts markedly with western countries where, with the major exception of countries bordering the Mediterranean, intergenerational living is much less common, with most older people living alone or with their spouse only.

Table 1.4: Living arrangements of household populations aged over 60 Sources: UN (2005) Living arrangements of older people around the World, Department of Economic and Social Affairs, Population Division, United Nations New York

China

Date of survey

% living alone

1990

8.1

Hong Kong 1996

% living with spouse only

10.8 17

% living with children or grandchildren



Indonesia

1997

7.3

16.9

68.0

Japan

2000

12.7

34.5

48.3

Korea

1988

7.7

13.4

79.7

Malaysia

1991

6.8

10.9

70.4

Singapore

1995

3.3

1991

40.3

6.1

77.7

Canada

1981

24.4

France

1994

28.7

53.4

15.3

Germany

1994

33.6

51.1

13.5

Italy

1994

22.6

40.4

34.6

UK

1994

34.7

48.8

11.4

USA

2000

25.9

46.7

17.8

Taiwan Thailand Australia

In East Asian societies, a common alternative to co-residency is near-residency, where elderly households live in close proximity to their adult children. In Japan this can take an extreme form with nisetai jutaku (two generation houses) – where elderly parents live in selfcontained floors or sections of the family home, adjacent to their adult children and offspring – becoming a standard product in the house building industry. Intergenerational home-loans were also developed in the 1980s to help facilitate this type of multigenerational proximity. The Singapore government has also provided purchase subsidies for parents and their adult children who buy separate homes in the same neighborhood in order to facilitate mutual assistance at the family level.

In addition to co-residency and near-residency, and sometimes independent of it, adult children have also commonly provided financial support for their parents. In the 1990s, adult children in Korea were estimated to have provided an average of between 50 and 60 per cent of the total income of older people (Jacobs, 1998). So, although older people often give money to their children and grandchildren, the net flow of money has traditionally been upstream. In turn, this has been frequently matched by inheritance, in the form of the family house, flowing downstream (Hisam Kim 2010). Indeed, the family-owned home has played a significant part not only in providing shelter, but also in providing some of the 18



glue keeping the family relationship together, or as Ronald and Alexy (2011) refer to it, ‘the bond of property’. As Kim argues, ‘Korean parents have been able to provide a material incentive for the child who takes care of their old-age (mostly the eldest son) using their home as a promising inheritance’ (2010, p243).

Further to these relationships between family, housing and old age, housing and pension systems are more deeply embedded with each other. Indeed, there are reasons to suggest that the development of housing and family welfare in East Asian economies has shaped the (under)development of formal pension programs (see Doling and Ronald, 2012). A general observation about western countries has been that where most people buy homes and eventually become un-mortgaged homeowners, welfare dependence is increasingly offset by growing household property asset wealth: the idea of a trade-off between home ownership and pension provision (Kemeny, 1981). In old age, homeowners receive an income-in-kind form their homes as they have very low housing costs (especially outright owners) and can therefore live on a smaller retirement income. The home as a property asset also functions as an economic reserve or an emergency fund and can be sold or remortgaged to cover a welfare or income shortfall. Table 1.5: Pensions Sources: (1) OECD (2009) ; figures for Malaysia and Singapore for mid 1990s from Palacios and Palleros-Miralles (2000) (2) Figures for mid 1990s from Palacios and Palleros-Miralles (2000) Pension adequacy index (1) China Hong Kong Indonesia Japan Korea Malaysia Singapore Taiwan Thailand

0.15

Public pension expenditure as % GDP (1990s) (2) 2.7

0.03 0.37 0.38 0.18 0.12

6.6 1.4 1.0 1.4

Australia Canada France Germany

0.51 0.52 0.56 0.54

0.12 4.6 5.4 13.3 12.0 19


Italy UK USA

0.69 0.38 0.44


15.0 10.2 7.2

Figure 1.1: Home ownership-pension adequacy trade-off Source: Doling and Omar (2012)

In East Asia, such a trade-off between homeownership and living standards in later-life can be viewed as being particularly salient in how pension systems have been developed vis-àvis housing systems and state interventions. Measured by the pension adequacy index, which is the product of replacement rate and coverage, and public pension expenditure as a proportion of GDP (see Doling and Omar 2012), formal East Asian pension schemes (with some exceptions, notably Japan and Korea) are much less generous than those common in western countries (Table five). Set against this, and as table three shows, home ownership rates are generally higher in the East Asian economies. Brought together in figure One, an apparent home ownership-pension trade-off can be identified across both

20



western and East Asian economies. Housing then can be seen as particularly important to the productivist welfare model, not only in terms of traditional shelter and family based welfare objectives, but also in terms of pension systems and practices.

3

The seeds of change

In the last decade of the last century, then, notwithstanding diversity in policies and programs, there was a notable convergence among developed East Asian nations in regard to housing. What characterised the position of housing, and especially home ownership, was the functional relationship with the overriding economic growth objectives of the East Asian states. The two underlying logics were developmentalism and productivism, which were mutually reinforcing and focused on the means to achieve high speed economic growth. This required a large, plan oriented state – in terms of industry, infrastructure and the economy – playing a small welfare role. How the state managed the real estate sector in the wider economy was quite specific to the region and involved a blurring of public interventions and the private market. Of the strategies commonly applied were, first of all, a particular housing provision chain, in which the state was active in coordinating the production of housing, but with an emphasis of commodified forms of consumption. This allied with an alignment towards welfare in which, rather than as state-provided social rights, families played the central role supported by access to housing goods. But, home ownership has also played a central role in welfare provision, which itself has been organised through the family. In these respects, the East Asian housing model is distinctively different from housing models in western economies.

Until the late 1990s, these housing goods, particularly newer units in urban growth hubs, circulated in the market and increased in value. This in turn provided a property asset that not only represented, as shelter, a use good, but also supported intergenerational solidarity in the production and exchange of other welfare goods and services. Essentially, home ownership boomed along with property values in these economies, sustaining, and sustained by, a pattern of growth and relatively full employment. Towards the end of the millennia, investment in real estate boomed with the more footloose capital generated by the Asian economic revolution increasingly drawn into this sector (Edelstein, 2014). Housing increasingly became a speculative investment, although circuits of mortgage

21



finance were relatively contained and generally not linked in with global networks of securitisation.

Within the last two decades, even before Holliday had set out an understanding of a number of common threads tying many of the East Asian countries together under the label of productivism, the fabric was beginning to unravel. A series of shocks and new socioeconomic developments have combined to challenge the very coherence of the developmental state, and thereby germinated the seeds of change to the existing housing model.

Primary among these, not least because they struck at the very core of the bargain whereby the state would deliver economic growth and full employment, have been two major economic crises: the Asian Financial Crisis (AFC) of 1997/1998 and the Great Financial Crisis (GFC) that followed a decade later. The AFC represented a watershed in the growth trajectories of these economies, fundamentally realigning social, economic and political conditions. The crisis initially impacted on currency and stock market values (the nominal GDP of ASEAN nations fell by 31.7 per cent in 1998 alone), but also on housing markets, which declined sharply and remained weak for a number of years. For example in Hong Kong, one of the hardest hit economies, house prices dropped, by 2001, to less than 50 per cent of 1997 prices. The turn of the twenty first century, then, marked a turnaround in the stability of markets, which have become more prone to peaks and troughs. The capital generated from the economic miracle (especially in China) meanwhile, has increasingly flowed in and out of housing markets, seeking a safe investment.

These economic developments have been accompanied by demographic ageing. In just a few decades all of the East Asian economies have proceeded along the same route as Japan and the more advanced western countries of falling birth rates and increasing life expectancies, leading to population structures that are increasingly skewed toward older people. But, at the same time, the bases of family relations have also been transformed by new social and economic conditions. Increasingly, younger working age people have moved away from their parents and established separate nuclear family units, while increasing female emancipation and participation in the labour market has crowded out their traditional caring role. Shared living and support for older parents has declined. 22



Finally, in some of the East Asian economies there have been major political transformations in shifts from top-down authoritarian to more democratic systems with greater emphasis on the meeting of demands from the population at large. Among other things this has lead to increases in effective demand for improved social protection, for example of pensions, and for improved access and affordability of housing opportunities. Combined, these factors have helped to reshape the political climate, forming the basis of new approaches to developmentalism or even post-developmentalism (see Hill, Park and Saito, 2011; Jessop, 2002).

In this section we expand on the change of direction in East Asian societies and the new shapes that housing systems, policies and practices are starting to adopt. It considers aspects of each of the main developments – economic change, demographic ageing, the erosion of the family model and political democratisation - in turn. It concludes with consideration of some of the main policy shifts that have followed from them.

Economic Crises In the years immediately leading up to the AFC, growth had been positive and in most of our nine countries v at rates generally undreamed of in western countries. With the exception of China, whose growth rate was the highest anyway, and Singapore, the response to the AFC was sharp declines in growth rates (Figures Two and Three). The repercussions felt in the region’s labour markets were such that unemployment rose and long-standing optimism was shaken. In general, the shock was least in the higher GDP countries, where there was an average negative-5 per cent change and the impact on growth was short-lived, with growth rates becoming positive within a year or two. Nevertheless they had a strong effect on the psyche with many seeing, or experiencing personally, economic uncertainty. It marked the end of a long era of continuous aggregate economic growth and expansion in individual prospects. Full employment had been the basis of low public welfare spending, so when conditions reversed, the shortcomings of institutional frameworks were quickly exposed. In Korea, for example, it became very clear soon after the economic crisis that the welfare state could not cope with the sudden rise in unemployment. As Kwon (2005) points out, ‘during the economic crisis, the welfare state that had focused on workers employed in the formal sectors did not help those who lost their jobs. As in Taiwan and Singapore, the public assistance programmes, which were 23



based on a very low level of means-tested criteria, were not available to them in times of need’ (p. 2).

With the region entering a more volatile economic era in which high speed economic growth and full employment was no longer assured, the prevailing housing model came into question. Housing markets began to feature large numbers of homeowners with negative equity and increasing economic inequality between different tenures, types of property and cohorts of renters and owners (see Chiu 2008; Lee, Forrest and Tam, 2003). Meanwhile, balances between housing supply and demand had to adjust to new economic realities. While in some contexts, like Hong Kong and Singapore, housing supply was tightened up, in others including Japan, Taiwan and South Korea, who had in the past relied on housing policy as a measure to drive the economy, governments eventually sought to stimulate output. Figure 1.2: Annual growth of GDP- higher GDP countries 15

10 Singapore 5

Hong Kong Japan Korea

0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 -5

-10

24

Taiwan



Figure 1.3: Annual growth of GDP- lower GDP countries 20 15 10 Indonesia Malaysia

0

China

-5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

5

Thailand

-10 -15

After a relatively short period of uncertainty, by the early 2000s markets had recovered and the region had returned to a pattern of growth, albeit of a more fickle form featuring fluctuations that quickly reflected shifts in economic confidence. While production rates did not quite return to the pre-AFC levels, the general picture was a period of relative prosperity driven by a global economic boom. However, the impact of the GFC in 2008 was remarkable, and growth rates again plummeted with consequent impacts on the demand for labour and housing. Not only did this mean a reduction in the incomes of many households, it also negatively impacted on their wealth, both through the collapse of stock values, but also through house prices (Figure Four). Slumps in house prices were the largest in Singapore and Hong Kong, both of which have large financial markets.

25



Figure 1.4: Changes in average house prices (nominal)

15

10

5

0

-5

-10

-15

2005

2006

2007

2008

China Singapore

Hong Kong South Korea

2009

2010

2011

Japan Taiwan

By the end of 2009 East Asian economies were showing growth again, and appeared to be following a different route through the crisis compared to their developed European and North American counterparts. Domestic demand, as well as stimulus measures and the continued expansion of the Chinese economy, were particularly important to economic revival. From 2009, East Asian housing markets boomed again in many cases. Indeed, while they suffered worse initially, Hong Kong and Singapore responded with upsurges of 15 and 21 per cent respectively. In addition to domestic demand, recovery was also boosted by foreign investment with, for example, cash-rich Chinese buying up properties in Hong Kong, Singapore and Taiwan (GPG, 2009). Another argument has been that low cost East Asian welfare production regimes may have allowed them to be less confrontational to the pressures of market conforming (Hwang, 2011).

26



Demographic developments The populations of the nine countries covered in this volume vary considerably in size, from the goliath of China (approximately 1.35 billion people) to the small city-states of Hong Kong and Singapore with around seven and five million inhabitants respectively (Table Six). Generally, over the last four decades, the experience of East Asian economies, with the major exception of Singapore, has been a reduction in the rate of population growth alongside a restructuring by age composition, this being the outcome of three main processes.

The first of these is the trend in fertility rates. With Japan being an exception (behaving more like western countries), for the seven East Asian countries for which we have data, the general pattern was very high birth rates in the 1950s, which reinforced the formation of different cohorts of baby boomers who are now approaching retirement. By the 1980s, total fertility rates, partly driven by the fertility among the baby-boomers themselves (creating a second boom cohort), were still more than double that of western countries, but began to drop-off, and by 2010 had fallen below western averages (Indonesia and Malaysia with large Moslem populations are exceptions). Essentially, East Asian fertility patterns have not only caught up with, but have surpassed the trend set by western societies. The average number of children born to each woman is now even lower than the average for European low fertility countries at around 1.2 for Korea, 1.3 for Japan, 1.15 in Taiwan, and 1.1 for Hong Kong and Singapore (CIA, 2010). Other East Asian countries look likely to eventually follow suit.

The second transformation is the improvement in life expectancies. The general pattern for East Asian countries was of high mortality (death rates) in the 1950s (mainly the result of poor public and individual health) falling rapidly over subsequent decades to levels below many western countries. Longevity (living longer) has changed the shape of East Asian populations, creating growing numbers of pensioners and shifting the dependency ratios between economically active and economically dependent segments of the population. Japan is a global leader in this regard and whereas life expectancy at birth was about 50.1 years for men and 54 for women in 1947, in 2012 it was as high as 80.5 and 87.4 for men and women respectively. Transformations in the age structure of the population has meant that while the ratio of workers to pensioners was six-to-one in 1990, it was less than four27



to-one by 2000 and is expected to be two-to-one by 2025 (see Retheford and Ogawa, 2009). In the less economically advance nations too, longevity has increased significantly in recent years and in Indonesia, for example, improved by almost four years in a decade, from 67.9 in 2000 to 71.6 in 2012 (CIA, 2012)

The third process is net migration, although this is significant only in Hong Kong and Singapore, in both cases registering large additions to their populations. Indeed, inmigration in countries in countries like Japan, Korea and China have been heavily regulated, resulting in very small pockets (often hidden or marginalised, except in the case of China which includes bigger pockets of diversity) of ethnic difference, reinforcing a social and political sense of socio-cultural homogeneity. In policy terms, this has undermined perceptions that there are socially excluded groups or a need to extend public welfare on this basis. Table 1.6 Demographic indicators Sources: UN (2011) World Population Prospects, 2010 update, Department of Economic and Social Affairs, Population Division, United Nations New York Annual Annual Total Total Total Old age Old age growth growth populati fertility rate fertility rate depend dependen rate rate on ency cy ratio (births per (births per ratio (%) (%) (000s) 1000 1000 women) women) 2010 1975-80 2005-10 2010 1980 1950 2010 China 1.44 0.51 134133 6.11 1.56 10.5 12.7 5 Hong 3.00 0.70 7053 4.44 1.14 10.4 18.4 Kong Indonesi 2.35 1.08 239871 5.49 2.06 8.0 9.5 a Japan 0.90 0.02 126536 3.00 1.42 15.0 38.3 Korea -0.10 0.48 48184 5.05 1.39 7.6 17.1 Malaysia 0.41 1.69 28401 6.23 2.57 7.9 8.6 Singapor 0.02 3.52 5086 6.61 1.37 8.4 13.6 e Thailand 2.27 0.71 69122 6.14 1.53 8.0 14.1 Australia 1.15 Canada 1.15 France 0.45 Germany Italy

1.75 1.05 0,58 -0.58 0.63

22268 34017 62787 82302 60551

3.18 3.65 2.76 2.16 2.36 28

1.95 1.69 1.99 1.46 1.48

17.1 16.2 25.0 27.2 23.7

22.1 22.5 28.5 33.4 33.5



UK 0.60 62036 2.18 USA 0.96 0.90 310384 3.45 Note: Figures for Taiwan are not given in this source.

1.87 2.08

20.8 19.8

27.8 21.0

In short, as a consequence of trends in fertility, mortality and longevity there has been a significant ageing of populations and at particularly intensive rates. Globally, Japan had, by 2010, proceeded furthest along the ageing trajectory with around 28 per cent of the population aged 60 and over by 2011. At the same time there has been a significant contraction in the proportion of young people and by 2011 only 13.3 per cent of the population was aged 15 or under. While the ageing trend is common to developed societies, in East Asia the shift has been far more intensive. While Japan took only 24 years for the ratio of over 65 year-olds to double from 7 per cent to 14 per cent of the population, Korea is expected to achieve this over 19 years (by 2018). This process in France, by way of contrast, took around 115 years. While Korea and Japan are leading the ageing trend, other East Asian economies are moving fast and by 2040 Singapore and Taiwan will have caught up in terms of social ageing, with the rest following soon after. The concern for housing, and social and economic policy is that these countries have little time to adapt to the pace of change in market and welfare demands.

Changing demographic compositions will not only generate greater need for housing types suitable for the elderly. They will also enhance inequalities between generations of older unmortgaged owner-occupiers who accumulated assets during the rapid growth era, and younger people who are less capable – in the post high-speed growth era – of purchasing a home and accruing housing equity by moving up a housing ladder. With declining fertility and family size, the chances of inheritance will increase. However, as the experience of Japan has shown (Hirayama, 2010) in ageing societies, inheritance increasingly flows from the old-old (75+) to the young-old (65-74) where it has least impact on the housing career. Meanwhile, considering the value and distribution of real estate assets currently held by elderly East Asians, economic inequalities derived from housing market position, particularly between renters and owners, are likely to be passed down through the generations. There are also implications for supply and demand, with eventual drops in population reducing demand and undermining values, but with market pressures being unequal as younger people continue to flow to urban centres where prices will remain high, with property values on the periphery suffering most. 29



Erosion of the Family Model Another factor that is exacerbating the impact of demographic changes on housing conditions and welfare demands is the change in family and household structures that have been the mainstay of welfare systems in the region throughout the industrialisation process. According to William Goode’s seminal work on the family, the process of modernisation everywhere leads to a weakening of traditional kinship ties with the independent nuclear family unit becoming the norm (Goode 1963). East Asia has been no exception to the extent that nuclear families have been increasingly the norm for several decades. Nonetheless, filial obligations have persisted in ways that may have, on one hand, facilitated the limited growth of public welfare, and, on the other, been an outcome of small oikonomic welfare states. Different generations in each family have continued to provide assistance for other ones, although expectations of intergenerational co-residence are in decline. In Japan, the forerunner of such change, while only 21.7 per cent of people aged over 65 lived alone or with a spouse in 1975, by 2005 this was 51.2 per cent (MIAC, 2008). In Korea, meanwhile, only 15 per cent of older people lived alone or with a spouse in 1980 compared to 45 per cent in 2000 (Choi and Bae 2005).

There are indications that intergenerational welfare exchanges are also under pressure. On top of declining co-residency, the changing expectations of and by women have been particularly significant. The family model, which underlay the productivist state, was dependent on unpaid female labour as the basis of care. However, economic growth in all our nine countries has resulted in increasing feminisation of the labour market. The bases of male breadwinner households have been further undermined by the casualization of male employment, making a dual income necessary for sustaining family security. The rising cost of home purchase and mortgage indebtedness has also increased the necessity of dual income families (Kennet and Chan, 2011). Women have thus increased their participation in paid work, often as part-time or temporary employees, as regular male employment has been eroded.

Many women have been faced with the double burden of being both a primary care provider for younger and older generations of the family, and a full or part-time employee. In many cases the strains have been too much with women drawing away from the welfare provider role, particularly as the carer of elderly parents – and especially in-laws – with 30



many even actively pursuing independent careers at the expense of marriage and a family life, especially in contexts where improved education and career prospects for women have made female independent living more viable (see Shirahase, 2007). The shifting role of women has not been matched by changes in policy however, and governments have been slow to change policy frameworks that prioritise male heads of household, that administer subjects as members of family households rather than individuals, and ignore single-person and non-conventional household compositions.

While East Asian welfare regimes have emphasised collectivity and solidarity, with public schemes that only filled the gaps between intergenerational family support, the increasing trend towards individualisation and non-traditional households have exposed the inadequacy of existing frameworks. ‘New social risks’ have been increasingly identified resulting from the compressed modernisation that has begun to undermine the basis of the family as the primary agency capable of protecting individuals from risks of poverty or infirmity (Chan, Takahashi and Wang, 2010). Family centred policies are undergoing transformation, but the speed and nature of change reflect the inertia of conservative cultural values and existing institutional capacity, on the one hand, and the pressures of social change involving changing expectations of marriage and family formation, and intergenerational reciprocity, on the other.

The governments of many of our nine countries have made explicit attempts to reinforce the role of the family, for example, by providing tax breaks or other subsidies to children opting to live with, or in close proximity to, their parents. But alongside such moves to maintain the welfare status quo, many of them have also explored different approaches to welfare. As Kim suggests, ‘facing rapid changes in the family structure and the demographic makeup, governments in the region are increasingly taking over what used to be predominantly family responsibilities: childbirth subsidies, family allowances, in home long-term care insurance etc’ (2010, p413). There are distinct differences between groups of countries, with Japan, Korea and Taiwan extending universal provisions in welfare more significantly, and China, Singapore and Hong Kong remaining more conservative although experimenting with public policy alternatives to family based subsidiarity (see Peng and Wong, 2010). Thailand, Malaysia and Indonesia have been more rooted to a family model in context of more limited public welfare resources. 31



In each country the housing welfare pillar is shaping, and being reshaped by changes in the family, which have brought different pressures to bear on the home as a collective good. In some senses changing economic and welfare conditions have reinforced families and family welfare with increases in adult children staying longer in the parental home, or ‘parasite singles’ as this phenomenon was initially labelled in Japan (Yamada, 1999). In other ways, changes in households and family careers are transforming perceptions, uses and demand for homes. At one end of the scale has been a sharp increase in single person households – which increased in Japan, for example, from 15.8 to 31.2 per of all households between 1985 and 2010, and in Korea from 15.5 to 23.9 percent between 2000 and 2010 (IPSS, 2011; NSO, 2011) – intensifying urban housing demand for compact single units and cheap rents. At the other end of the scale, older people, often with the assistance of the state, have been tapping into their housing assets to serve individual welfare and consumption needs. Public reverse mortgage schemes vi have now been established in Japan, Korea, Taiwan and Singapore that allow elderly people to rely on the value of their homes rather than their children when considering life in old age (Doling and Ronald, 2012).

Democratization Shaping the impact of demographic and family change on housing models and public policy have also been transformations in political landscapes. Esping Andersen’s original analysis (1990) was based on the developments of democratic processes through which the interests of working groups could be pursued. This did not always apply well to East Asian countries, where there were authoritarian governments with low rates of unionisation and political representation of workers movements, and in which welfare programmes were consequently state-led rather than politically fought for. In most contexts, however, since the late 1980s the locus of political power has shifted with increasing movement in the direction of democratisation. This trend was enhanced by the AFC in 1997, which exposed gaps in the authoritarian apparatus and developmentalist logic – not to mention the shortcomings of existing welfare provisions – creating opportunities for greater political contestation (see Kwon, 2005; Ramesh, 2004; Weiss, 2003). Central to contestation has been public and social policy concerns as well as housing as an issue of affordability and access, and not just supply.

32



In Japan, Korea and Taiwan, democratisation began to force political realignment in the late 1980s, with the AFC a decade later providing opportunities for change and redirection. Following the AFC new governments came to power in both Taiwan and Korea. In the former, the centre-left Democratic Progressive Party finally deposed the authoritarian Koumintang, after 50 years of rule, in 2000. In the latter, the electoral successes of Kim DaeJung (1998 to 2003) and Roh Moo-Hyun (2003 to 2008) marked a shift to the left and established a number of socially democratic policy objectives. In Japan, meanwhile, social policy had long been the domain of the political conservative LDP (in power since 1955) who often used social policies as means to compensate for the adverse outcomes of industrial and economic policies (Calder, 1988). Social policies had been ad hoc depending on the performance of the national economy. But this all began to shift in the 1990s as the hold of the LDP began to slip. After 1993 the LDP had to engage actively in alignments and coalitions to maintain power, and in 2009 the LDP were ousted entirely by a relatively short lived coalition (until 2012) led by the Democratic Party.

In all three countries there has been an ascendancy of welfare advocacy groups linked to centre-left parties that have redefined the process of social policy making (see Eto, 2001; Kwon, 2005; Wong, 2003). Deeper democratization thus seems to mark an end of traditional developmentalist states, and the beginning of new possibilities in social policy (Hwang, 2011). Political actors have increasingly realigned themselves and cultivated new bases for political support. In light of a scramble for new issues with which to gain political advantage, social welfare has gained prominence. The top down politics of traditional developmentalism has lost salience and there have been increasing demands for better welfare as a right of citizenship. In this context, economy-first appeals have faltered and citizens expect, after decades of high GDP growth, more from their governments by way of social security. New political landscapes that have allowed for welfare state deepening can also be understood in context of structural changes influenced by a combination of demographic pressures and changing norms surrounding the family and gender relations. In context of more elderly people, more working women, less secure employment and reduced family welfare capacity, many are demanding more of the state.

For Peng and Wong (2010) democratic transition has significantly altered ‘the rules of the game and the scope of relevant actors’ (p 74), and while the structural form of policies may 33



often seem consistent, there have been meaningful changes in intended effects and outcomes. There are also some important legacies of the previous era of economic growth that have facilitated change. Firstly, the relatively egalitarian distributions of income have made it easier for policy makers to seriously consider implementing more re-distributive social policies as the economic costs of redistribution are now lower. Secondly, political costs associated with redistributive reform are lower due to the existence of social mainstreams and the sense of collective middle-classness that have created greater sensitivity to socioeconomic inequalities. Consequently, Peng and Wong argue that where one would have expected economic downturn in 1997 to have forced social policy retrenchment, it in fact deepened welfare reform. The extension of social spending and policy cover was not considered an anathema to current global economic realities, but rather, an important buffer to the socio-economic vagaries of globalization.

In Japan, Korea and Taiwan at least, social policy issues appear to have become core ingredients in the governance of the economy. The adaptation of a policy is becoming increasingly determined by who can win in an argument within the political realm and relies far more on the merits of the specific policy proposal rather than economic imperatives. For Hwang (2011), the political logic of social policy making has become much more pluralized, a factor which was almost totally absent when these countries were ‘singlemindedly pursuing the goals of economic growth’ (p6-7).

This pattern of democratisation and social policy reform is not necessarily true of all East Asian economies however. Indeed, in China, Hong Kong and Singapore there has been far less political drama and authoritarian governments remain in place (Peng and Wong 2010). There is still evidence nonetheless, of welfare state extensions, and in Hong Kong, for example, a mandatory provident scheme in addition to welfare programmes based on the idea of public assistance have been set out since 2000. Singapore meanwhile continues to rely on a Central Provident Fund as the basis of welfare provision, but with significant adjustments reflecting changes in social and economic conditions. China has also set out, since 2007, after decades of market reform, to achieve a more ‘Harmonious Society’ with the rolling out of various social policies to achieve this by 2020. Park (2007), suggests that in countries such as Malaysia, Indonesia, Philippines, and Thailand, meanwhile, we are

34



likely to witness more divergence rather than convergence depending on the pace of democratization among other factors.

There has certainly not been a Beveridgean welfare revolution in East Asia resembling that experienced in parts of post-war Europe, but there have been considerable expansions in certain types of cover – in particular old age pensions and health (the first and second most expensive social expenditures) – and these are often universal and stretch to non-working groups of women and elderly who do not directly contribute to productivist goals. Many observers have pointed to a considerable decoupling of work and welfare (Goodin, 2001). There has been a shift from social insurance based provisions that reinforce hierarchies of labour to more universal systems (such as the universalized Korean health care system and, to a lesser extent, benefit reforms in Taiwan) involving a greater pooling of risk and financial redistribution measures. Social insurances have been a preferred type of welfare measure, however, which minimize the government’s financial commitment and still align with ideas of generating economic productivity (Hwang, 2011). Indeed, productivist principles have not disappeared, but the imperative of economic productivity has certainly diminished.

Policy, Developmentalism and Neoliberalization While East Asian welfare regime deepening in recent years has been extraordinary, policy transformations must also be considered in relation to a parallel expansion in neoliberal influences. In the 1990s and 2000s, sensitivity to intensified globalization became more evident in the discourses and dynamics of developmental political relations, with greater neoliberalization taking a hold as a competing logic for reform, especially as a means to recapture the momentum of economic growth. Neoliberalization has, however, not resulted in simple deregulation, marketization and privatization. Considerable pathway dependence has been asserted not only by the legacy of decades of developmental administrative and institutional arrangements, but a combination of pressures being asserted as a result of the ageing of societies, the declining capacity of family welfare support as well as the impact of neoliberalization itself in undermining labour markets and secure employment practices. Policy transformations have thus reflected more complex

35



and dynamic interactions between neoliberal, democratic and socioeconomic pressures, marking a reorientation in the nature of developmentalism.

On the one hand, governments have embraced some deregulation and more market focused policies in response to criticisms of state economic planning and the protection of key industrial sectors. There has been, in many respects, a move away from economic nationalism with more market orientated measures often representing practical means of dealing with emerging system pressures (Jessop, 2002). On the other hand, there have also been shifts in perceptions of risks and the state’s obligations to safeguard not only growth, but also what happens to society if continued growth cannot be sustained. As Gill and Kharas (2009) point out, developmental state management continues, although approaches have changed. In the new version, the state’s role builds on the assumption that market forces must be managed, but not just to generate growth, but also to avert market failure and the consequences of failure. ‘In this view, the changing economic landscape in East Asia is the outcome of states strategically guiding economies by providing an environment in which economies of scale can flourish. States also need to manage the distributional outcomes generated by such an economy’ (p 191).

Changing employment conditions have been a major consideration. Lee (2011) emphasises that East Asian societies have experienced many labour market changes in a very short period of time. On top of more unemployment has been a marked rise in irregular workers resulting from labour market deregulation. Shifting economic conditions have demanded a level of labour market retrenchment that pre-AFC welfare regimes and policy frameworks were simply not capable of dealing with. In Japan, for example, the restructuring of the labour market, specifically contractual conditions for employees (involving amendments to the Dispatched Labour Law in 1999 and 2003), has stimulated a significant rise in flexible employment that has particularly affected younger adults (Genda, 2001). The average rate of non-regular employment overall (part-time, temporary and dispatched employees) rose from 15.8 to 33.0 per cent between 1982 and 2007, while the rate among those aged 20-24 increased from 11.4 to 43.1 per cent (see Hirayama, this volume).

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With declining numbers of younger people flowing into stable employment, household formation and movement through the housing market has been affected. Again this is best illustrated by Japan, where along with changing opportunities in the labour market, marriage rates and entry to home ownership had fallen radically among people in their twenties and thirties (as examined in Hirayama’s article). This is undermining the basis of the traditional welfare trade-off between home ownership and pensions alluded to earlier, which features in the East Asian housing and social policy model. Younger people are increasingly falling to move through an owner-occupied housing career in which assets are built up over the life course, smoothing out welfare consumption, especially in later life. Similarly, unstable house prices are undermining the perception that housing purchase can support asset accumulation. Meanwhile, with increasing numbers of vulnerable in unstable work, housing options have become limited and many governments are having to rethink housing policy or even support more social forms of housing including rental housing (Ronald and Chiu, 2010). On the other side of the demographic coin, restructuring of labour markets has also featured growing numbers of retired and near retirement workers, putting greater pressure on pension funds and emphasising the precariousness of asset-rich income-poor elderly, who often rely on their owner-occupied housing assets to satisfy welfare needs in old age.

Alongside pressures on the state from the citizenry below to expand social policy cover, big players in industry and real estate have also reacted to the weakening of the developmental state, exercising greater power and influence over policy agendas. As demonstrated in this volume, in Taiwan and Hong Kong in particular, big developers have been able to pressure government agendas in their favour, from private contracts for publicly funded megaprojects, to favourable re-regulation, to tax breaks and other subsidies. For Park, Hill & Saito (2012) state developmentalism under neoliberalism continues to emphasize economic nationalism, but rather than following bureaucratic goals for industrial development, market competition has become an important tool of national policy. The state has remained plan orientated but in market rational terms to the extent that it reduces risk and ensures conditions favorable for large companies to accumulate capital.

For Choi (2012) developmental neoliberalism represents more a mixture, or hybrid. The state tends to limit its role to supply side interventions and deregulates employment 37



conditions while rolling out policy on public investment in urban infrastructure (such as public housing). Developmental states have become more neoliberal in that they facilitate competition between firms, corporations, and territorial entities and accept the rules of free trade, but they remain actively interventionist in creating infrastructures necessary for doing business. As Harvey puts it, ‘neoliberalization… opens up possibilities for developmental states to enhance their position in international competition by developing new structures of state intervention…’ (2005, p72).

The discourse of competitive markets now feature in East Asian policy rhetoric, but of a type facilitated by state intervention rather than unfettered market conditions. States have become concerned with their roles as facilitators of global financial flows into Asian urban nodes that are forming the new nexus of neoliberal globalization. Creating cities that are more competitive in the global arena, specifically, has been portrayed as a means for East Asian economies to maintain growth (Waley, 2013). Interventions supporting megaprojects for residential, commercial or industrial redevelopment are thus being promoted across Asian cities. Privatization with government assistance has translated into subsidies for transport and residential infrastructure that is sustaining a convergence in urban reform built around an assumed competition between cities such as Bangkok, Seoul, Shanghai and Tokyo (Goldman, 2011). To this extent, extensions in public policies related to housing and large scale urban (re)development projects (such of those recently elaborated in South Korea, for example) have to be understood alongside East Asian forms of neoliberalization in which policy reforms also contribute to social exclusion and marginalization processes through urban restructuring (clearing slums and low-income neighborhoods and promoting gentrification).

4

Conclusion

The elaboration on housing, policy and socioeconomic transformations in this article aims to provide both an insight to the features and context of housing in the East Asian region and a framework for understanding the articles that follow. Central to the discussion has been a claim, by no means one new in the literature on national housing systems, that the developed and emerging East Asian economies share a common approach to housing that is firmly based in their general approaches to economic growth. In this, housing has made a direct contribution, through investment and employment, to GDP. Moreover, it has also 38



made an indirect but fundamental contribution to the social infrastructure, itself based around the family that has supported the welfare needs of the population. Housing has not been treated, as often in western countries, as part of the package of social rights with degrees of de-commodification appropriate to that.

While the discussion of this model may help readers to understand some of the key aspects of housing in East Asian countries that set them apart from more economically advanced economies elsewhere in the world, it has also revealed the existence of variation. Housing systems in those countries that have not reached the very highest levels of economic development – Malaysia, and especially Indonesia and Thailand – differ from those in the more economically advanced – Singapore, Japan and Taiwan, for example. The differences are in many aspects: in tenure structures, in central direction, in mortgage markets, and in links with welfare provision.

But, most importantly, the article has also argued that whatever the uniformity and diversity existing in this approach to housing that might be labeled the East Asian housing model, recent developments in a number of areas are leading to new approaches. Economic volatility in the form of crises have been part of a wider reshaping of the ability of East Asian states to maintain expanding economies and full employment. This has been accompanied by greater demands from increasingly vocal electorates. Both, in turn, have been accompanied by changes in the form of ageing population structures and the erosion of the traditional family model and household patterns. All have affected not just the housing market supply and demand, but also the shaping of policy approaches.

Acknowledgment Richard Ronald’s work on this article has been supported by the European Research Council [ERC Starting Grant HOUWEL, Grant Agreement No. 283881].

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Japan has been industrialised since the early twentieth century and was the world’s second largest economy between 1968 to 2011 ii Now the Urban Renaissance Agency (UR, since 2003) ii The Korean National Housing Corporation was merged with the Korean National Land corporation in 2009 to form the Korea Land and Housing Corporation (LH)

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ii

This being the arrangement during the mid-1990s for about 20 per cent of older people (aged over 60), with a further 20 per cent living with other children. ii With some exception in Japan, which had suffered from economic stagnation until 2002 after the bursting of ‘the bubble’ in December 1989 ii Equity release schemes (also known as lifetime or reverse mortgages) function by allowing the owneroccupying household to sell a proportion of the home to a finance company in return for a lump sum or annuity, while also remaining in the property for the rest of their lives

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