Reconstruction Association Members Who Leased Out Their Apartments "Now Told to Move Back In..." Bewildered

Reconstruction Apartments Facing Urgent Crisis Due to 2-Year Residency Requirement for Occupancy Rights

Many Aging Complexes Like Eunma and Mokdong New Town
About Half of Owners Have Leased Out Their Units

If Registered as Rental Housing,
Fines Imposed When Owners Reside During the Period

[Asia Economy Reporter Lee Chun-hee] The 6.17 real estate measures have put urgent pressure on aging apartments in speculative overheated districts such as Seoul that are pursuing reconstruction. This is because the first hurdle of the project, the safety inspection, has been significantly raised, and only union members who have lived in the property for more than two years are granted the right to move in, greatly weakening the momentum for project promotion. In particular, the uncertainty of the project has increased due to the reconstruction surplus profit charge imposed after project completion.

The 'Management Plan for Housing Market Stabilization' jointly announced by related ministries at the Government Seoul Office on the morning of the 17th included multiple regulatory measures for redevelopment projects. First, regarding safety inspections, the plan includes measures such as having the city/province select and manage the primary safety inspection institutions, which were previously selected by city/county/district, and strengthening on-site investigations during the secondary safety inspection. Furthermore, at the stage of union member allocation, union members who have not lived in the property for more than two years will no longer be eligible to apply for allocation. The government also announced its intention to begin full-scale collection of the reconstruction surplus profit charge starting in the second half of this year.

Regarding the measure to have the city/province select and manage the primary safety inspection institutions, Eun-hyung Lee, a senior researcher at the Korea Construction Policy Institute, analyzed, "This is intended to raise the barriers to reconstruction project promotion," and added, "It can be interpreted as excluding basic local governments that inevitably have close ties to local residents' interests."

The most critical regulation among the recent measures is that, for reconstruction projects in speculative overheated districts in the metropolitan area, only union members who have lived in the property for more than two years are allowed to apply for move-in rights. This regulation applies to all complexes that fail to apply for union establishment approval before the end of this year, when the 'Urban and Residential Environment Maintenance Act' is amended. According to the Seoul redevelopment and reconstruction cleanup system as of the 18th, there are a total of 60 reconstruction projects at the promotion committee stage in Seoul. Including complexes still in the safety inspection stage before the promotion committee, the number of projects subject to the regulation will increase further.

The problem is that since the houses are aging and reconstruction is being pursued, many union members rent out their homes while waiting for reconstruction and rent other homes to live in. Jae-koo Choi, vice representative of the Yangcheon Development Citizens' Coalition, pointed out, "Isn't the concept of a union member defined by ownership rather than residency?" and said, "This means changing the very concept of reconstruction projects." He added, "In aging complexes, many owners inevitably live outside," and noted, "In Mok-dong, I understand that about half of the owners reside elsewhere."

The situation becomes even more difficult if the owned house is registered as rental housing. This is because the owner cannot reside in the property during the mandatory rental period of 4 to 8 years. If the owner resides during this period, a fine of 30 million won will be imposed. If the owner has not fulfilled the two-year residency requirement before renting out the house, they may face forced cash settlement without any recourse.

There are also forecasts that this measure will burden tenants. Representative mid-rise reconstruction complexes in the Gangnam area, such as Eonma Apartments in Daechi-dong and the Mok-dong New Town complexes, have significant jeonse (long-term lease) demand targeting nearby school districts. Since these are aging apartments awaiting reconstruction, the jeonse prices are relatively affordable. For example, the reported jeonse transaction price for a 77㎡ unit in Eonma this month ranges from 500 million to 590 million won. In Mok-dong New Town 6th Complex, a 48㎡ unit was sold for 1.03 billion won on the 22nd of last month, while the jeonse was transacted at 350 million won on the 16th, forming a relatively low jeonse price compared to the sale price.

Although these complexes were popular due to their affordable prices compared to nearby infrastructure, if owners who want to fulfill the residency period refuse to renew contracts with tenants, a mismatch between jeonse demand and supply may occur, potentially causing a sharp rise in jeonse rates.

Park Won-gap, senior real estate specialist at KB Kookmin Bank, predicted, "There will inevitably be a significant impact on the reconstruction market," and added, "In the early stages, when living is inconvenient, demand for gap investment purely for reconstruction investment purposes will decrease, leading to transaction contraction and price decline."

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