"What Exactly Is 'Public Direct Implementation'?"... Exploring Its Pros and Cons

Strengthening 'Public Interest' Over Public Redevelopment and Reconstruction
Complete Dissolution of Associations and Sole Implementation by Public Enterprises
Instead, Ultra-Fast Promotion Through Simplified Procedures
Excluding Regulations Like Reinvestment Tax and 2-Year Residency Requirement
However, Gathering Consent Rates Remains Key Due to Priority Supply Rights

[Asia Economy Reporter Onyu Lim] The government plans to supply 136,000 housing units over five years in the Seoul metropolitan area and five major metropolitan cities through the newly established 'Public Direct Implementation Redevelopment Project' under the February 4 supply measures. This system enhances the public nature of existing public redevelopment and reconstruction projects, where public enterprises such as Korea Land and Housing Corporation (LH) and Seoul Housing and Communities Corporation (SH) take over project rights from associations and act as sole implementers.

Procedures are simplified by omitting management disposition approval and applying integrated review, shortening the project period to within five years. Notably, in this case, the Reconstruction Excess Profit Recovery System is excluded, the two-year residency obligation for association members is waived, and exceptional incentives such as increased floor area ratio are provided. However, initial reactions from existing redevelopment and reconstruction zones are skeptical, so it is uncertain whether the government can achieve the desired scale of supply.

According to the Ministry of Land, Infrastructure and Transport on the 6th, a total of 136,000 housing units will be supplied through the Public Direct Implementation Redevelopment Project: 93,000 units in Seoul, 210,000 units in Gyeonggi and Incheon, and 22,000 units in provincial metropolitan cities.

The Public Direct Implementation Redevelopment Project allows public enterprises like LH and SH to directly implement redevelopment and reconstruction if residents wish, leading the establishment of project and sales plans. The government aims to drastically reduce the project period from over 13 years to under five years, from planning to relocation, to supply housing in urban areas.

To this end, the government will support expedited approval procedures such as integrated review. Existing redevelopment projects lack integrated review, causing excessive time consumption in various approvals like building review and traffic impact assessment. Procedures such as association general meetings and management disposition approval are also omitted. The current sequence of is simplified to .

If two-thirds of association members agree, the association dissolves and the public enterprise becomes the sole implementer to secure the site

The Public Direct Implementation Redevelopment Project can be applied for with the consent of half of the association members. The public enterprise reviews the appropriateness of the proposed project and applies to the local government for redevelopment plan changes. If the association obtains two-thirds consent from members within one year, the project is confirmed. Subsequently, the public enterprise becomes the sole implementer and secures the site through in-kind prepayment and expropriation. Once site acquisition is complete, the local government conducts integrated review and grants approval, followed by construction commencement.

Importantly, associations that confirm the Public Direct Implementation Redevelopment Project must transfer all authority to the public enterprise. In other words, the association loses its status as the implementer and transfers all decision-making functions to the public enterprise. However, landowners can directly select the construction brand. Landowners must prepay their existing assets in kind to the public enterprise in exchange for priority supply rights for new apartments, with additional charges settled later. The public enterprise compensates landowners who do not wish to receive priority supply with cash assets to secure the site.

No Reconstruction Excess Profit Recovery, no two-year residency obligation... but no sales rights for new buyers either

To encourage participation, the government decided not to apply the two-year residency obligation for reconstruction association members choosing the Public Direct Implementation Redevelopment Project. Incentives include one-step zoning upgrades or a 120% increase in the legal maximum floor area ratio. The reconstruction excess profit burden is also waived. The purpose of this system is to prevent privatization of development profits, as these profits accrue to the public.

However, to prevent speculative demand, the government designates the area as a land transaction permission zone immediately upon application for the Public Direct Implementation Redevelopment Project. Also, even if real estate is acquired in this zone after the announcement date, priority supply rights for apartments are not granted. The supply through this project consists of 70-80% public sales including association member allocations, and 20-30% public rental and public ownership.

As with public redevelopment and reconstruction, resident consent rates are crucial for the successful promotion of the Public Direct Implementation Redevelopment Project. Professor Daejung Kwon of Myongji University’s Department of Real Estate said, "If LH and SH directly implement redevelopment and reconstruction, it will shorten the project period," but added, "Ultimately, persuading opponents of reconstruction and redevelopment and guaranteeing their profits will be important."

Panoramic view of Eunma Apartment, Daechi-dong, Gangnam-gu, Seoul (Photo by Tae-min Ryu)

Initial reactions are skeptical: "It's still public anyway"

In fact, initial reactions from existing redevelopment and reconstruction zones are negative. They argue that excluding associations and having the public solely implement the project increases uncertainty about quality. A representative of the reconstruction promotion committee for Eunma Apartments in Daechi-dong, Gangnam-gu, a representative mid-rise reconstruction complex in Gangnam, said, "As soon as the measures were announced, residents contacted us to oppose," and questioned, "Who would agree when all authority is given to the public and no one knows what kind of apartment will be built?" Residents also expressed distrust, saying, "Excluding the association and having the public implement 100% fundamentally blocks association members' opinions," and "Poor living conditions are expected, which will inevitably lower asset values."

It is also uncertain how many residents will consent to public direct implementation. The priority supply method, which does not grant sales rights to new buyers, may cause conflicts among owners. Especially in Seoul redevelopment, most zones have investors seeking capital gains, making it difficult to reach the two-thirds consent threshold. Yang Palseok, CEO of Rich Dad Real Estate Research Institute, explained, "Since wealth accumulation is impossible under this method, even if the project period is shortened, it will be hard to gain investors' consent."

Existing public redevelopment zones with joint association-public implementation are also skeptical about the public sole implementation method. Residents in zones that applied for public redevelopment contests judged that public direct implementation has greater uncertainty than public redevelopment and offers no significant merit. Park Jongdeok, chairman of the public redevelopment promotion committee for Shingil 1 District, said, "Public redevelopment also has an expected project period of five years like public direct implementation, so shortening procedures is not very meaningful," and added, "Moreover, public direct implementation involves the public buying sites, which may infringe on existing homeowners' rights, so public redevelopment is better."

Concerns are also raised that the government’s aggressive supply push with limited resources may shake existing public redevelopment projects. An official from a redevelopment cancellation zone in the Gangbuk area, who requested anonymity, said, "We chose public redevelopment because we expected rapid progress due to the government's focused attention," but lamented, "Now that the government plans to supply 90,000 units through public direct implementation, with limited manpower, public redevelopment might be neglected."

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