Redevelopment Associations Face Urgent Crisis Over Increased Rental Housing Quota

Revised Bill Allowing Up to 30% Increase Passes Regulatory Reform Committee
Applying for Project Implementation Plan Approval by Early August Avoids Increase
Plan to Apply ASAP for Bulgwang5, but 'COVID-19' Remains a Variable
Concerns Over Excessive Infringement on Private Property; "Calls Expressing Worries About Business Viability Continue"

[Asia Economy Reporter Onyu Lim] Seoul redevelopment associations preparing for business plan approval are facing urgent challenges. This is because the government plans to revise regulations starting in August to require rental housing, which directly affects project profitability, to be built up to 30%.

According to the maintenance industry on the 14th, the recently passed amendment to the Enforcement Decree of the "Urban and Residential Environment Maintenance Act," which raises the upper limit of mandatory rental housing supply ratio to 20% during redevelopment projects, has passed the Regulatory Reform Committee of the Office for Government Policy Coordination. As a result, redevelopment associations in Seoul at the stage of association establishment approval are experiencing confusion due to concerns over deteriorating project feasibility. The amendment raises the upper limit of rental housing ratio relative to total housing units in metropolitan redevelopment complexes from the current 10-15% in Seoul and 5-15% in Gyeonggi and Incheon to 20%.

In particular, the amendment includes a provision allowing local government heads to increase this ratio by up to an additional 10 percentage points, putting redevelopment promotion zones on high alert. According to the regulation, up to 30% of the total units must be mandatorily built as rental housing. An industry insider said, "In the case of Seoul, it is known that the ordinance will be revised to raise the mandatory rental housing supply ratio to the upper limit of 30% once the enforcement decree is amended."

The revised enforcement decree is expected to take effect in early August. Redevelopment associations that fail to apply for business plan approval by then will be subject to the increased mandatory rental housing supply ratio.

Currently, there are a total of 50 redevelopment associations in Seoul awaiting business plan approval. Seongbuk-gu has the most with 9, followed by Yongsan-gu with 7, Dongdaemun-gu with 6, Seongdong-gu with 5, Dongjak-gu and Yeongdeungpo-gu with 4 each, Gangbuk-gu, Gwanak-gu, and Nowon-gu with 3 each, Eunpyeong-gu with 2, and Jongno-gu, Seodaemun-gu, Songpa-gu, and Jung-gu with 1 each.

Although there are differences by district, it is not easy for each association to apply for business plan approval before August. This is because submitting the application to each district office requires going through various procedures such as land use planning, traffic impact assessment, noise impact assessment, and environmental impact assessment.

The Bulgwang 5 District Association in Bulgwang-dong, Eunpyeong-gu, which received association establishment approval in 2010, plans to apply for business plan approval within August. A representative of the Bulgwang 5 District Association said, "With the redevelopment project profitability already deteriorated due to various measures such as paying housing compensation to tenants, increasing the rental housing ratio will inevitably increase disadvantages for association members," adding, "If possible, we plan to apply for business plan approval to Eunpyeong-gu within the deadline."

The novel coronavirus disease (COVID-19) is also a variable. Currently, Seoul City and local governments are recommending refraining from holding association general meetings to prevent the spread of COVID-19. Holding a general meeting is essential to apply for business plan approval. The association representative said, "Whether it will be possible to apply for business plan approval amid COVID-19 is uncertain." A representative of the Jeongneunggol Association in Seongbuk-gu, redeveloping one of Seoul's last hillside neighborhoods, also said, "We cannot hold the association general meeting due to COVID-19, so we cannot give a definite answer on whether to apply for business plan approval."

Associations that find it difficult to apply for business plan approval have no choice but to accept the deterioration of project feasibility. The Hannam 2 District Association in Bogwang-dong, Yongsan-gu, which received association establishment approval in 2012, realistically sees it difficult to avoid the increase in mandatory rental housing supply ratio considering various procedures. A representative of this association said, "We are receiving a flood of inquiries from association members worried about project profitability deterioration every day," adding, "Since the area will be developed into a large complex, the number of rental housing units could increase by several hundred according to the amendment." He continued, "If the architectural review had been completed, we might consider applying for business plan approval, but currently, it is difficult."

There are also claims that the expansion of the mandatory rental housing supply ratio infringes on association members' private property rights. A representative of a redevelopment association in Seoul said, "If local governments increase the mandatory rental housing supply ratio by 10 percentage points, some associations may give up their projects," adding, "It is excessive to restrict property rights on association members' land, which is not Seoul city land." Some express concerns that with strengthened regulations on redevelopment following reconstruction, housing supply in Seoul will be further constrained.

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