[Plaza] Securing Public Rental Housing and Promoting Redevelopment Projects

[Asia Economy]

The government has prepared a 'Housing Welfare Roadmap' to establish a safety net for housing-vulnerable groups, aiming for a rental stock rate of 9% as of 2022.

While the government's efforts for housing welfare continue, apartment transaction prices nationwide have risen by 27% and in Seoul by 77% over about seven years since the housing prices bottomed out in 2012.

In response, the government has shown strong determination to stabilize housing prices by announcing additional real estate regulations on February 20. At the same time, it is also focusing on housing welfare policies for low-income groups alongside housing market stabilization policies.

A recent example of housing welfare projects through redevelopment is the Yeongdeungpo jjokbangchon (rooming house village). This area is concentrated with urban poor and consists of old and deteriorated housing that does not meet minimum housing standards.

The plan is to redevelop the 10,000㎡ Yeongdeungpo jjokbangchon, home to 360 residents, into public housing projects including permanent rental housing, newlywed happiness housing, and private sale housing. Through this project, residents will be able to live in more pleasant spaces at affordable rents. However, there are also various challenges in securing public rental housing.

Although the directions of the two policies?housing market stabilization and housing welfare?seem aligned, they are not always so in certain sectors. Housing market stabilization policies are necessary to alleviate housing costs for the middle class, but they can negatively impact securing rental housing, which is one of the policies for housing-vulnerable groups.

For example, during the housing market downturn, the Seoul Metropolitan Government lifted 393 redevelopment project zones in 2012 as part of an exit strategy for redevelopment projects. This was because various problems arose as the number of new town and redevelopment zones rapidly increased after the introduction of Seoul's New Town project system and the housing market entered a downturn.

At the time, this was an inevitable and necessary measure. Like all policies, side effects also occurred. Due to the lifting of zones, safety accidents occurred and a large number of vacant houses appeared in existing redevelopment zones where infrastructure was poor and aging was severe. Now, housing prices have started to rise again.

However, in areas where business conditions were relatively favorable among the lifted zones, indiscriminate development occurred, and now it is difficult to proceed with redevelopment projects again because they do not meet the requirements. Unlike the period when redevelopment zones were lifted, housing prices have risen, increasing project profitability.

From the perspective of association members, apartment price increases greatly affect profitability, so even if redevelopment zones were lifted during the past housing market downturn, recent business conditions are likely to have improved.

More importantly from a housing welfare perspective, it is actually easier to secure public rental housing through redevelopment projects during periods of rising housing prices. This is because the mandatory rental housing ratio can be up to 30% under redevelopment-related laws.

Seoul set a target to supply an average of 23,431 public rental housing units and 24,048 publicly supported private rental housing units annually from 2018 to 2022. To achieve this goal, redevelopment projects must be promoted in a situation where new land development is limited.

Redevelopment projects are necessary not only for housing improvement but also for housing market stabilization and smooth supply of rental housing. When redevelopment projects proceed, housing prices inevitably rise numerically.

This is because a quality residential environment is created. This is a normal price increase. The rise in housing prices should not be criticized. It is inappropriate to blame efforts to revitalize redevelopment projects for securing public rental housing for low-income groups as the cause of housing price increases.

Professor Ji Gyu-hyun (Department of Digital Architecture and Urban Engineering, Hanyang Cyber University)

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