New Housing Supply Measures Imminent... Donation-Based Reconstruction, Floor Area Ratio Increase

Seoul and Metropolitan Area Housing Supply Measures to Be Announced Next Week
Cash and Housing Donation Reconstruction, Floor Area Ratio Increase
Increasing Floor Area Ratio in 3rd New Towns and Utilizing Downtown Commercial Spaces

Apartment area in Daechi and Gaepo-dong, Gangnam-gu, Seoul (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] The government and the Democratic Party of Korea will announce housing supply measures early next week. The ruling party and government are reportedly considering plans to grant extraordinary floor area ratio incentives after receiving cash or housing donations from reconstruction complexes. Amid the chaotic real estate market caused by 'panic buying' driven by fear, attention is focused on whether these measures can curb soaring housing prices.

According to the ruling party, government, and industry on the 2nd, the government will announce plans to expand housing supply in Seoul and the metropolitan area early next week. To this end, the Ministry of Land, Infrastructure and Transport, the Ministry of Economy and Finance, Seoul City, and other related agencies have formed a task force (TF) working group to finalize plans to expand supply.

The ruling party and government are considering a method of increasing the floor area ratio for reconstruction complexes in exchange for receiving cash or housing donations. The floor area ratio refers to the ratio of total building floor area to the site area. According to Seoul City ordinances, the floor area ratio for Category 3 General Residential Areas is capped at 250%, and building height is limited to 35 floors. Increasing the floor area ratio and allowing taller buildings can increase housing supply.

Cash donations involve receiving cash for the increased space created by the floor area ratio increase, with some public rental housing included, while housing donations involve the government receiving houses under 85㎡ in exclusive area and converting them into public sale and public rental housing. The government plans to invest the cash received from donations into government housing welfare projects, and use a significant portion of the donated housing as special supply units for low-income groups such as newlyweds.

Until now, donations have mainly been in the form of public rental housing, but this approach had limitations in encouraging participation from housing cooperatives. The government expects that through this measure, participation from reconstruction cooperatives in areas like Gangnam will increase, potentially boosting housing supply in mid-rise complexes by 2.5 times and low-rise complexes by up to 3 times. Seoul City also plans to relax the 35-floor height restriction.

In addition, the ruling party and government are reviewing ▲utilization of idle land owned by public institutions ▲increasing floor area ratios in 3rd phase new towns ▲remodeling of downtown commercial buildings and goshiwons. Regarding the plan to increase housing supply by utilizing idle land of public institutions, candidate sites currently mentioned include the Taereung Golf Course site in Nowon-gu, Seoul Trade Exhibition Center (SETEC) site in Daechi-dong, Gangnam-gu, and the Seoul Housing and Communities Corporation (SH) headquarters in Gaepo-dong.

The government has also finalized plans to increase floor area ratios in five 3rd phase new towns: Namyangju Wangsuk, Hanam Gyosan, Incheon Gyeyang, Goyang Changneung, and Bucheon Daejang. Since these 3rd phase new towns are already designated and under development, this is considered a faster and more effective measure than developing new sites. The government expects that the increased supply in the 3rd phase new towns will help disperse demand from Seoul and stabilize housing prices.

The government is also considering purchasing vacant commercial buildings, offices, and goshiwons in Seoul to convert them into housing. It is estimated that about 5,000 housing units can be supplied in Seoul through this method. A government official explained, "The exact volume will be known once the projects proceed, but given the recent rise in vacancy rates of commercial spaces due to the spread of COVID-19, we expect many participants in the projects."

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