Emerging Outline of 'Gonggong Redevelopment'... Simulation Results Show 14% Increase in Project Feasibility

Simulation Analysis of Profitability Improvement in Public Redevelopment (Provided by the Ministry of Land, Infrastructure and Transport)

[Asia Economy Reporter Lee Chun-hee] The government's plan to revitalize housing supply through 'public redevelopment' is taking shape. According to the Ministry of Land, Infrastructure and Transport's (MOLIT) own analysis, applying various special measures such as exemption from the price ceiling system can increase the profitability of projects by up to about 14%.

On the 16th, MOLIT and the Seoul Metropolitan Government announced that they will hold a 'Public Redevelopment Policy Briefing' at 3 p.m. on the 17th at the headquarters of the Seoul Housing and Communities Corporation (SH Corporation) in Gangnam-gu, targeting redevelopment project managers from 25 autonomous districts in Seoul. The briefing will explain the main contents and expected effects of the public redevelopment project announced on the 6th of last month as part of the 'Measures to Strengthen Housing Supply in the Metropolitan Area,' as well as the upcoming application schedule.

The public redevelopment project involves public entities such as the Korea Land and Housing Corporation (LH) and SH Corporation participating in redevelopment projects to improve deteriorated residential environments and promote housing supply within urban areas. MOLIT plans to designate public redevelopment zones as 'Housing Supply Activation Districts,' which will include various public supports such as ▲relaxation of urban regulations including zoning upgrades, increased floor area ratio, and eased donation requirements ▲guaranteeing project profitability through measures like ensuring union members' contributions, exemption from the price ceiling system, and support for purchasing unsold non-residential facilities ▲financial support including low-interest loans covering 50% of project costs and 70% of relocation costs (deposits), and national funding for infrastructure and social overhead capital (SOC) development ▲and expedited permits through separate integrated reviews of redevelopment and urban planning by the Urban Planning Subcommittee.

In particular, when redeveloping housing deemed at risk of disaster under laws such as the 'Facility Safety Act,' MOLIT will actively consider zoning upgrades to improve project profitability and promote the creation of temporary commercial spaces for tenants in connection with urban regeneration New Deal projects.

According to MOLIT's 'Simulation Analysis of Profitability Improvement Effects of Public Redevelopment,' the profitability of projects can improve by up to approximately 13.7% through public redevelopment. Using the 'proportional rate,' a profitability indicator for redevelopment projects calculated by dividing the amount obtained by subtracting total project costs from total revenue after project completion by the previous asset appraisal value, profitability under the current system with the price ceiling system applied was about 99.4%, but it is analyzed to rise to as much as 113.0%. Even applying only the exemption from the price ceiling system special measure results in a proportional rate of 100.9%, exceeding 100%.

Incentives for Public Redevelopment Projects (Provided by the Ministry of Land, Infrastructure and Transport)

As it is public redevelopment, measures to stabilize housing for original residents and housing support groups such as youth, newlyweds, and the elderly will also be prepared. Fifty percent of the housing supply, excluding the union members' allocated units, will be supplied as public rental housing or income-generating jeonse (long-term lease) housing. In particular, 20% of the total will be supplied as public rental housing.

A MOLIT official said, "With public support, redevelopment projects that have stagnated due to low profitability can be resumed," adding, "Through transparent project management by public entities such as LH and SH, corruption will be eradicated, and conflicts among residents surrounding the projects are expected to ease."

MOLIT and the Seoul Metropolitan Government plan to select pilot project sites within this year through a joint public contest to discover specific project locations. Before the contest, LH and SH will hold visiting briefings from next month for districts that have expressed interest through autonomous districts, providing detailed information on the system and supporting preliminary project profitability analysis.

The contest will target redevelopment zones currently pursuing residential environment improvement projects or redevelopment projects in September. Unions and promotion committees interested in participating can join the contest based on a letter of intent signed by their representatives and a recommendation letter from the autonomous district. Subsequently, after joint evaluation by MOLIT and the Seoul Metropolitan Government, outstanding projects will be selected as pilot project sites within the year.

Lee Jae-pyeong, head of the Housing Redevelopment Division at MOLIT, said, "We expect public redevelopment to normalize stalled redevelopment projects and contribute to revitalizing housing supply in Seoul," adding, "We will continuously review anticipated obstacles during the promotion of public redevelopment and pursue institutional improvements such as legislative amendments."

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