[Q&A] Ministry of Land, Infrastructure and Transport: "Introducing Public Redevelopment Involving LH and SH"... "Setting Sale Prices at Market Levels in Case of Speculation in the Area"

Park Sun-ho, the 1st Vice Minister of the Ministry of Land, Infrastructure and Transport, is making a presentation on the "Measures to Strengthen the Housing Supply Base in the Metropolitan Area" on the afternoon of the 6th at the Government Complex Sejong in Sejong City. [Image source=Yonhap News]

[Asia Economy Reporter Lee Chun-hee] The government has accelerated efforts to supply 300,000 households in the metropolitan area and announced supply measures to solidify the recent stabilization of housing prices, including an additional supply of 70,000 households in Seoul.

On the 6th, the Ministry of Land, Infrastructure and Transport announced the "Plan to Strengthen the Housing Supply Base in the Metropolitan Area," which includes these details. In areas where redevelopment projects are not progressing smoothly, public project implementers such as Korea Land and Housing Corporation (LH) and Seoul Housing and Communities Corporation (SH) will directly participate as developers, and new housing will be supplied on national and public land and idle land within Seoul’s city center, such as the Yongsan maintenance depot and retention basins. Additionally, a "pre-application" system will be introduced in the 3rd new towns, with plans to start accepting applications for 9,000 households as early as next year to accelerate supply from an early stage.

Park Sun-ho, 1st Vice Minister of the Ministry of Land, Infrastructure and Transport, said at a briefing held at the Sejong Government Complex, "Redevelopment projects have often been delayed due to conflicts within associations caused by unclear project management, deterioration of profitability due to economic fluctuations, and complicated project procedures," adding, "The public sector will participate in redevelopment projects to increase transparency, guarantee profitability, and enable swift project implementation," explaining the purpose of introducing the public redevelopment system.

Regarding the possibility of speculation arising during the system introduction process, he emphasized, "In cases where association members acquire residential rights for speculative gains during public redevelopment projects, apartments will later be sold at market prices," and "a joint anti-speculation task force will operate in the project area and nearby regions, and if necessary, designation of land transaction permission zones will be considered," indicating plans to prepare supplementary measures.

Below is a Q&A session with Park Sun-ho, 1st Vice Minister of the Ministry of Land, Infrastructure and Transport, and Ha Dong-su, Housing Policy Officer.

- If 50% of the general sale units are supplied as rental housing, the project will be subject to price control by the Housing and Urban Guarantee Corporation (HUG) rather than the price ceiling system. I am curious whether complexes that are already at an advanced stage such as management disposition approval are also subject to this.

▲(Vice Minister Park) According to the investigation, there are about 103 redevelopment project sites in Seoul that have been designated as redevelopment zones but where associations have not yet been formed. When the public redevelopment project is introduced, these sites are expected to be prioritized to apply this system through consultations with public project implementers such as Korea Land and Housing Corporation (LH) and Seoul Housing and Communities Corporation (SH). Since these projects have been significantly delayed due to various factors despite zone designation, it is judged that participation by public project implementers can quickly recover the previously sluggish projects.

However, the application of the public redevelopment project system is not limited only to projects where associations have not yet been established. For redevelopment projects at various stages in the future, if it is judged that the project can be implemented through consultation with public institutions considering project conditions, active consideration will be given to applying the system.

- Since the price ceiling system will not be applied but HUG control will be imposed, how much price difference will there be compared to when the price ceiling system is applied?

▲(Policy Officer Ha) Although excluded from the price ceiling system, it is expected that prices will be managed at the level of HUG’s price control, which means prices will be lower than general market prices but slightly higher than the price ceiling system prices. Since public project implementers like LH or SH must provide a large number of public rental housing units in the relevant district, part of the losses incurred by LH and SH will need to be recovered through profits from general sales, so the price will be somewhere between general market prices and price ceiling prices.

An apartment complex with 8,000 households is scheduled to be supplied on the site of Yongsan Maintenance Depot in Yongsan-gu, Seoul.
[Image source=Yonhap News]

- Regarding the Yongsan maintenance depot, since the landowner is currently Korail and the project will likely be implemented by LH, I am curious whether housing will be supplied in rental form or sale form.

▲(Vice Minister Park) The land ownership of the Yongsan maintenance depot is largely national and public land owned by Korail and the Ministry of Land, Infrastructure and Transport. This project is specifically carried out as an urban development project. It is a project that plays a role in integrating necessary office, commercial, and residential functions within the city. Therefore, this area will accommodate not only the 8,000 housing units planned for supply but also various residential, commercial, and office functions together. In particular, I understand that Seoul City is reviewing the inclusion of significant international office functions that Seoul must perform.

About half of the 8,000 units are planned to be supplied as public housing, and the other half will be sold to the private sector with the price ceiling system applied. However, specific details will likely be announced once the development plan for the Yongsan maintenance depot is finalized.

- You mentioned that housing supply using the Yongsan maintenance depot will proceed along with the Yongsan International Business District development plan, but I understand that Seoul City currently needs to establish a new master plan. What is the current status of related preliminary work?

▲(Policy Officer Ha) Currently, the development plan for the Yongsan maintenance depot is being prepared by Seoul City and Korail. The housing supply timing for 8,000 units will be after 2023. At present, the site has been secured and announced, and specific details will be disclosed once the development plan being prepared by Seoul City and Korail is finalized.

▲(Kim Seong-bo, Housing Planning Officer, Seoul City Housing and Architecture Headquarters) The Yongsan master plan is fundamentally different in nature from the Yongsan maintenance depot development announced today. The zone boundaries are also different. The master plan includes the entire Yongsan maintenance depot area, including the northern Seoul Station area, while the plan announced today targets only the Yongsan maintenance depot. Currently, discussions with Korail are ongoing, with plans to designate the urban development zone around next year, approve the project in 2023, and recruit residents by the end of 2023.

- There have been many reports about accelerating the pace of public housing district projects recently. Regarding land compensation, how far have discussions progressed for districts that are being rapidly advanced?

▲(Vice Minister Park) For several districts, residents and landowners who will receive compensation and LH have formed consultative bodies to discuss future plans and procedures related to compensation. In particular, residents want to share part of the development gains. In this regard, expansion of the land-for-land compensation system has been reviewed through consultative bodies, and significant consensus has been reached. It is expected that compensation plans may be announced as early as the first half of this year, and compensation for some districts is expected to begin within the year.

- I am curious if there is any overlap with the previously announced Seoul City plan to supply 10,000 households. Also, can you provide approximate locations or bases for the calculation of 20,000 households for public redevelopment and 15,000 households for industrial areas?

▲(Policy Officer Ha) The plan announced this time is separate from previously announced supply plans, so there is no overlap in numbers. However, the 300,000 household supply plan for the metropolitan area aims to visualize the schedule of previously announced plans, so there is some overlap. Regarding specific locations of households, LH and SH are conducting internal reviews, but it is not yet at a stage to announce and will be disclosed sequentially later.

▲(Kim Seung-beom, Public Land Planning Manager) Among the existing 300,000 household supply plan, 40,000 households in Seoul city center were announced previously. The 15,000 households announced this time do not overlap with the 40,000 households. The Korea Educational Development Institute site was included in the existing 300,000 household plan but was an undisclosed location, which is now announced, and it is not included in the 15,000 households.

- I am curious about the newly established housing supply activation zones. What form will they take?

▲(Policy Officer Ha) These are housing districts designated only when the public participates in existing redevelopment zones and provides more than 50% of units excluding association members’ units as public rental housing. Various regulations will be relaxed in these districts, such as height restrictions and zoning upgrades, to provide benefits.

(Provided by the Ministry of Land, Infrastructure and Transport)

- The public redevelopment project requires public participation and supplying more than 50% of units as public rental housing, but there are cases like the street housing maintenance project where only public participation occurs. Could you explain how this is handled?

▲(Policy Officer Ha) Even when the public participates in street housing maintenance projects, separate regulatory relaxations have been made. The December 16 real estate measures had four preconditions. These four preconditions were relaxed so that if the public participates and provides a certain portion of public rental housing, the street housing maintenance project can be exempted from the price ceiling system, lowering the regulatory threshold. The difference between street housing maintenance projects and public redevelopment projects is that street housing maintenance projects can proceed with only public participation, but public redevelopment projects require both public participation and supplying more than 50% of public rental housing. Public redevelopment projects do not proceed with only public participation.

- Can you provide specific locations of secured sites such as redevelopment project sites or semi-industrial areas?

▲(Policy Officer Ha) Specific locations are currently under internal review, and LH and SH have not yet contacted individual associations, so it is not at a stage to disclose. Especially for semi-industrial areas, since they will proceed as joint public-private competitive projects, joint competitions with Seoul City are planned for the second half of this year. It is expected that one or two sites may be designated in the second half.

- Regarding public redevelopment, you mentioned monitoring surrounding price trends and transaction volumes and considering designation of land transaction permission zones if necessary. Are there any additional concrete measures against rising housing prices in redevelopment surrounding areas?

▲(Policy Officer Ha) At this stage, no specific measures are being devised. However, in cases where redevelopment shares are purchased for speculative purposes, when LH or SH jointly implement redevelopment projects, measures are being considered to amend association bylaws so that those who purchase redevelopment shares later will be supplied apartments at market prices. Market monitoring will be strengthened after the announcement of the measures.

- To what extent does public participation involve consultation with associations? Can it be understood as a trust-led redevelopment project, and what is the scope of the role?

▲(Policy Officer Ha) Simply put, public project implementers will act as developers. The shares are still owned entirely by association members. Even if LH or SH participate, they do not own shares. Thus, association members hold shares, and LH or SH will act as entrusted developers managing the project. Important decisions related to property rights will still be made by the association general meeting or residents’ coalition. This is stipulated in the current Urban Maintenance Act.

- Since most conflicts arise during the contractor selection process when associations make major decisions, does public participation have a conflict prevention effect? Is there room for public intervention here?

▲(Policy Officer Ha) Since the public is the project manager, public involvement will certainly be significant. However, contractor selection is an important decision that still requires majority approval at the association general meeting. Both aspects must proceed in parallel. Therefore, the key to operation lies with the public project implementer acting as the developer. Experienced LH or SH are expected to handle this well.

- Regarding apartment supply in metropolitan public land, you mentioned the pre-application system. Since the government currently encourages post-application, why is the pre-application system being implemented?

▲(Policy Officer Ha) The fundamental reason for the pre-application system is to allow the public to experience the results of the government’s steady efforts to supply 300,000 households in the metropolitan area as early as possible. Nothing more, nothing less.

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