Another Regional Housing Cooperative Incident... Chairman of the Promotion Committee for Sanggye 3 District Arrested

Landowner Housing Project in Sanggye 3 District, a New Town Deregulated Area
Over 1,100 Members Gathered, Some Paying Up to 100 Million KRW Contributions
Low Success Rate for Landowner Housing... Zero Sales in Seoul Last Year
Housing Act Amendment Strengthening Union Establishment Requirements to Take Effect from July

[Asia Economy Reporter Lim On-yu] The regional housing cooperative project underway in Sanggye 3 District, Nowon-gu, Seoul, a New Town deregulated area, is facing the risk of collapse. This is due to a recent incident where the project committee chairman and others were arrested en masse on charges of embezzlement and breach of trust. Some cooperative members have formed an emergency countermeasure committee to reinitiate the establishment of the cooperative, but concerns are rising that the project’s progress has become difficult due to low land use consent rates and financial difficulties. Experts advise that, as regional housing cooperative accidents have been occurring continuously, homebuyers need to exercise special caution.

According to the real estate industry on the 7th, four people including Mr. Lee, the project committee chairman of the Sanggye 3 District regional housing cooperative, were recently detained on charges of embezzlement and breach of trust. As a result, all procedures including cooperative member registration and withdrawal, model house operation, and securing land use consent letters have been halted.

Sanggye 3 District was deregulated from Sanggye New Town in July 2014 due to the inclusion of Hope Village, which has many unauthorized houses, making the project less viable. The problematic regional housing cooperative project began in 2017. It has recruited members under different names such as Sanggye Sindonga Famille and Sanggye Central View. Currently, about 1,100 members have joined. They have paid contributions ranging from 30 million KRW to over 100 million KRW. Victim A said, "I signed the contract because I was told that the cooperative establishment approval would be granted in the second half of this year and that there would be no additional contributions, but all of that was false," adding, "The land use consent rate is less than 20%, making it difficult to even apply for cooperative establishment approval."

The regional housing cooperative project is a scheme where non-homeowners or owners of a single house with a floor area of 85㎡ or less who have lived in the area for a certain period form a cooperative to build housing. Since the cooperative entrusts the developer’s work, the sale price is about 20% cheaper than general apartments. However, many projects face various problems during the process. Under the Housing Act, voluntary withdrawal of cooperative members is basically prohibited, and many non-viable cooperatives cause delays or collapses, resulting in significant damage. In April last year, a project committee chairman of a regional housing cooperative in Jungnang-gu, Seoul, was arrested for embezzling more than 6 billion KRW paid by 103 cooperative members.

The biggest obstacle is securing land. To establish a cooperative, a land use consent rate of over 80% must be secured. Therefore, project delays are common, and there are many project committees that recruit members by deceiving them about the consent rate. In June 2017, a regional housing cooperative in Uijeongbu-si, Gyeonggi Province, advertised that it had secured a 90% land use consent rate to recruit members, but it was later revealed that the actual consent rate was only 14%.

Especially, since 95% of land ownership must be secured to obtain project approval, the success rate of regional housing cooperatives is even lower. According to Seoul City, there are a total of 27 regional housing cooperatives that have received cooperative establishment approval, but none completed sales last year. A maintenance industry official pointed out, "It is difficult to verify the land use consent rate, and since plausible advertising articles are published through reputable media, non-homeowners who want to buy a home cheaply are easily tempted." Some members of the Sanggye 3 District regional housing cooperative plan to reorganize an emergency countermeasure committee to restart the project. However, with project funds depleted and little money left in trust, the situation is not easy. A Nowon-gu office official said, "To build a 25-story apartment as planned by the project committee, even a zoning change to a higher residential area is required."

As related accidents continue, the Ministry of Land, Infrastructure and Transport, the competent authority, plans to implement a revision to the Housing Act in July to strengthen project-related requirements. According to the revision, cooperatives recruiting members must secure usage rights for more than 50% of the project site area. Also, to apply for cooperative establishment approval, whereas previously only over 80% land use rights were required, the revision mandates securing at least 15% land ownership as well. The revision also allows dissolution by a general meeting resolution if the project plan approval is not obtained within three years from the cooperative establishment approval date.

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