'Mini Reconstruction' Emerging as an Alternative to Redevelopment Projects

Jangwi New Town Project Accelerates
Advantages of 2-3 Year Duration Compared to 10-Year Reconstruction
Major Construction Companies Join One After Another
Government Increases Benefits to Boost Activation

[Asia Economy Reporter Donghyun Choi] The street housing maintenance project, known as 'mini reconstruction,' is emerging as an alternative to the increasingly stringent redevelopment and reconstruction of aging residential areas. The government is also seeking ways to revitalize small-scale maintenance projects by granting various benefits, which is expected to intensify competition among construction companies for contracts.

According to the maintenance industry on the 9th, recent movements to promote street housing maintenance projects have been gaining momentum in some sites among the Jangwi 8, 9, 11, 12, 13, and 15 districts, which were removed from the maintenance zone in Jangwi New Town, Seongbuk-gu, Seoul. The Jangwi 15-1 district held its second on-site briefing session last December to select a construction company. Hoban Construction has submitted a sole bid for this project, and it is highly likely to be selected as the preferred negotiation partner through a private contract method at the construction company selection general meeting scheduled for next month. Earlier, the Jangwi 11-2 district selected Hyundai Construction as the preferred negotiation partner in December last year. The Jangwi 11-2 district is a small-scale project site of 6,685㎡, where Hyundai Construction plans to build 167 apartment units and more. The project cost is around 35 billion KRW. In nearby small-scale project sites such as Jangwi 8-1, 8-2, 11-1, and 11-6, promotion committees have recently set up offices or hung banners to collect residents' consent forms for establishing street housing maintenance project associations.

The street housing maintenance project involves improving the residential environment on a small scale while maintaining the existing streets (such as roads) in densely populated, aging low-rise residential areas surrounded by roads of 6 meters or more. If there are 10 or more detached houses or a mix of apartments, an association can be established if the total number of households is 20 or more. While redevelopment and reconstruction usually take about 10 years to complete, the street housing maintenance project has a shorter project period of 2 to 3 years.

Hoban Construction and Hyundai Construction, which rank high in construction capability evaluations, have recently entered the street housing maintenance project one after another, which is interpreted as a sign that securing new business opportunities has become more difficult. A construction company official explained, "As the housing business has recently stagnated, fierce competition has also emerged in remodeling and street housing maintenance projects. In the past, there was a strong perception that only small and medium-sized construction companies participated in these projects, but recently, with the active participation of large companies, residents' responses have also improved." Currently, GS Construction has entered the street housing maintenance project through its affiliate Xi S&D, and Daelim Industrial is also engaging in related projects through Korea Development and Samho.

The government is also showing support for the street housing maintenance project. The Ministry of Land, Infrastructure and Transport announced in the December 16 real estate measures that it would expand the street housing maintenance project as part of housing supply. The ministry plans to revise the enforcement decree of the 'Special Act on the Maintenance of Vacant Houses and Small-scale Housing' in the first half of this year to expand the 'district area' and 'project implementation area' for street housing maintenance projects in speculative overheated districts such as Seoul from the current 'under 10,000㎡' to 'under 20,000㎡.' The number of households will increase from the current 250 to 500. If public interest requirements such as constructing 10% rental housing are met, the project will also be excluded from the application of the price ceiling system.

Cases where public enterprises such as Korea Land and Housing Corporation (LH) and Seoul Housing and Communities Corporation (SH Corporation) participate as joint implementers to accelerate the project are also increasing. LH held a groundbreaking ceremony for the Incheon Seokjeong district, the 'first LH-participated street housing maintenance project,' at the end of last year. This area had been pursuing maintenance projects since 2004, but the project was repeatedly canceled due to disagreements among residents over burden charges. However, with LH's participation, the project resumed and received association establishment approval in 2017. LH is currently participating in 15 street housing maintenance project sites. SH Corporation also signed an agreement with Mokhwa Yeonrip in Yeoksam-dong, Gangnam-gu, Seoul, in May last year and is conducting a joint project.

However, experts point out that the street housing maintenance project is not a fundamental solution to the housing supply problem. Professor Daejung Kwon of Myongji University's Department of Real Estate said, "Activating the street housing maintenance project alone will not be able to handle the rapidly increasing housing demand in Seoul and the metropolitan area. There will not be many projects in Seoul where the project area is expanded by meeting public interest requirements and floor restrictions are relaxed to allow buildings up to 15 floors."

This content was produced with the assistance of AI translation services.