Excessive Lease Obligations and Donations... "Urban Renewal Project Revitalization Lacks Practicality"

Announcement of Additional Supply of 70,000 Urban Households

At Least 20% Public Rental Housing
Lack of Incentives for Private Sector Participation

40,000 Household Target but No Agreement Reached

[Asia Economy Reporters Inho Yoo, Chunhee Lee] The effectiveness of the "Measures to Strengthen the Housing Supply Base in the Seoul Metropolitan Area" announced by the government on the 6th has come under scrutiny. The core of the government's plan is to secure sites capable of supplying 70,000 housing units in downtown Seoul by 2022 through revitalizing redevelopment and other maintenance projects and utilizing idle land. However, the market criticizes the plan for focusing solely on strengthening the public sector's role while excluding the positive functions of the private sector, and for imposing stringent conditions such as mandatory rental housing that reduce project feasibility, making it unrealistic.

The Ministry of Land, Infrastructure and Transport (MOLIT) presented a plan to supply 40,000 housing units through revitalizing maintenance projects, including ▲redevelopment (20,000 units) ▲small-scale maintenance projects (12,000 units) ▲private projects near subway stations (8,000 units). Additionally, it proposed a blueprint to supply 30,000 units by refurbishing and recycling idle spaces within downtown Seoul. In particular, MOLIT plans to support the rapid promotion of redevelopment projects, which have been stalled for a long time due to conflicts among associations and lack of profitability, by involving the public sector.

The problem lies in the excessive emphasis on public interest in public redevelopment projects, resulting in insufficient incentives for private sector participation. Redevelopment areas designated as the newly established "Housing Supply Activation Zones" must supply more than 50% of units as public rental housing, excluding association members' quotas, and at least 20% of the total units must be provided as public rental housing. For small-scale reconstruction, while the floor limit is relaxed from 7 to 15 floors and floor area ratio (FAR) is increased, 50% of the increased FAR must be donated as public rental housing. The activation of private housing projects near subway stations also comes with the condition that half of the increased FAR from zoning upgrades must be supplied as public rental housing. Public rental commercial spaces for small business owners must also be created.

Experts point out that these conditions uniformly worsen the profitability of maintenance projects. Yang Ji-young, director of R&C Research Institute, said, "To activate reconstruction and redevelopment projects through public intervention, incentives must be significant, but this plan does not effectively provide such merits."

Kim Deok-rye, head of the Housing Policy Research Division at the Korea Research Institute for Human Settlements, noted, "Since the public sector cannot supply all housing, the private sector must also participate to create synergy and ensure effectiveness."

The basis for the MOLIT's supply target of 70,000 units is also unclear. Especially, the 40,000 units expected to be secured through revitalizing maintenance projects with enhanced public interest have not even been negotiated with stakeholders such as redevelopment and reconstruction associations and landowners, and most of the de-designated zones where projects have already failed have lost momentum. In fact, among redevelopment zones in Seoul, 102 areas have not even established associations within 10 years after designation. Kang Young-hoon, a redevelopment expert and head of the Real Estate Study Cafe, said, "Many public redevelopment target areas are difficult to proceed without the consent of the owners."

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