Equity Accumulation Housing Sets 'Fair Price' to Prevent Excessive Pre-sale Profits

Proposed Amendment to the Public Housing Special Act Including Specifics on Equity Accumulation Housing
Prohibiting Sale Above the 'Normal Price' Defined by Law in Mid-Term Sales

[Asia Economy Reporter Lee Chun-hee] A 'normal price' system will be introduced to prevent excessive speculative profits from equity accumulation-type housing, where housing units are purchased through long-term installments. This system will prohibit sales above the legally set maximum price if the public equity sale has not been completed.

On the 9th, according to the National Assembly and Seoul City, Park Sang-hyuk, a member of the Democratic Party of Korea, officially proposed an amendment to the 'Special Act on Public Housing' containing these provisions. This bill reflects the review results of the 'Equity Accumulation-type Housing Task Force' operated by the government and Seoul City following the public discussion on the introduction of equity accumulation-type housing through the August 4 real estate measures.

Equity accumulation-type housing is a supply method that reduces the initial financial burden on applicants by allowing them to purchase equity shares in installments over 20 to 30 years. According to the proposed bill, the supply period varies depending on the sale price. For houses exceeding 900 million KRW, the threshold for 'high-priced housing,' the supply period is set at 30 years, while for mid- to low-priced housing below this threshold, it is 20 years. The period is determined by price, so buyers cannot directly choose it, and even if they have additional funds, they must purchase according to the set period.

For the 20-year plan, buyers initially purchase 25% equity and then acquire an additional 15% every four years. For the 30-year plan, buyers initially purchase 20% equity and then acquire an additional 10% every four years. The price for additional acquisitions is calculated by adding the regular deposit interest rate to the initial sale price. Furthermore, deposits and rents at the level of public rental housing will be charged for the equity shares not yet acquired.

Restrictions on resale and mandatory residence periods will follow current standards. Currently, the resale restriction period is set at a maximum of 10 years, and the mandatory residence period is up to 5 years. If the house must be sold during the resale restriction period, it must be sold to public entities such as the Korea Land and Housing Corporation (LH) or Seoul Housing and Communities Corporation (SH Corporation) at a price equal to the initial sale price plus regular deposit interest.

Even after the resale restriction period, housing sales are strictly limited. If an individual sells the house without acquiring all equity shares, the consent of the public entity holding the remaining shares is mandatory. Moreover, the sale price must be within the 'normal price' defined by enforcement ordinances to prevent excessive premiums, and the sale proceeds will be shared between the public entity and the individual according to their equity shares.

After the mandatory residence period ends, the house can be rented out. Since the obligation to pay rent for the unacquired equity shares remains, this effectively becomes a form of 'sublease,' where rent is collected from tenants while paying rent for the unacquired shares.

Currently, Seoul City plans to supply approximately 17,000 units of equity accumulation-type housing by 2028. These will be supplied by securing urban national and public land, idle sites, and public redevelopment and reconstruction projects through donation of development rights.

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