Public-Led Benefits Claimed... Seoul City Faces Challenges in 'Satba Fight'

"Better than Private Redevelopment"... Government Offers 'Guaranteed Highest Returns' Incentive
Mayor Oh Se-hoon's 'Private-Led' Official Stance is a Variable... Key is Resident Consent

[Asia Economy reporters Kangwook Cho and Taemin Ryu] "Compared to private redevelopment, the floor area ratio increases by 56 percentage points, the number of households by 1.3 times, and the rate of return by 28.2 percentage points."

The government’s announcement on the 14th of the selection of 13 second-phase candidate sites for the ‘Urban Public Housing Complex Development Project’ can be summarized as ‘project effects’ through ‘public leadership.’ This contrasts with the emphasis on ‘scale’ described as ‘Pangyo New Town level’ when 21 first-phase candidate sites were announced at the end of last month. However, due to a decline in trust in government policies, obtaining resident consent remains a challenge. Additionally, concerns about project setbacks are growing as Mayor Oh Se-hoon officially shifts the direction of Seoul’s housing supply policy from ‘public-led’ to ‘private-led.’

◇Government: "Better than private redevelopment"= The candidate sites for the Urban Public Housing Complex Development Project announced that day include a total of 13 locations such as Mia Station and Suyu-dong in Gangbuk-gu, and Yongdu-dong in Dongdaemun-gu, Seoul. The Ministry of Land, Infrastructure and Transport explained that they selected these sites after consultations with public implementers and local governments regarding location conditions, development directions, and project feasibility for 23 proposed urban public complex project areas (15 station areas and 8 low-rise residential areas) suggested by Gangbuk-gu and Dongdaemun-gu. A key location condition is that over 60% of buildings in the area are more than 20 years old.

The Ministry estimated through its own simulation that if public redevelopment is pursued, the floor area ratio would increase to 353%, which is 56 percentage points higher than private redevelopment (297%). This figure represents an increase of 213 percentage points compared to the current level. The number of households is also expected to increase by 1.3 times to 989 households compared to the private project (738 households), and the landowners’ rate of return is expected to increase by more than 28 percentage points. Furthermore, the average contribution from landowners is projected to decrease by about 41.7% compared to private projects, and the ratio of priority supply price to market price is expected to drop by 10.8 percentage points. The government explained that the selected candidate sites are project areas where floor area ratio, building area acquisition, and height standard relaxation are possible.

In particular, the government offered the incentive of ‘guaranteed maximum rate of return’ for areas where district designation is made after obtaining resident consent within the year. This means an additional guarantee of a 10-30 percentage point rate of return, as promised during the 2.4 Plan. They also pledged to prioritize processing permits and support through urban and architectural regulation relaxations. This appears to be a response to the strong backlash from the first-phase candidate announcement, where all sites were recommended by local governments and announced without prior consent from owners.

◇Oh Se-hoon’s official shift to ‘private-led’ is a variable= The key issue is resident consent. Although the government has presented various incentives, including releasing simulation results, breaking the vicious cycle of distrust in public leadership triggered by the Korea Land and Housing Corporation (LH) speculation scandal is not easy. The government plans to hold briefing sessions on the 9th in Dobong-gu, on the 12th in Yeongdeungpo-gu, on the 15th in Geumcheon-gu, and on the 26th in Eunpyeong-gu. They intend to proceed with district designation from July for candidate sites that secure the 10% consent requirement.

However, challenges remain. Since Mayor Oh has officially adopted a private-led housing supply policy by easing height regulations, floor area ratio limits, and reconstruction safety inspection standards, a future ‘tug-of-war’ is anticipated.

Professor Shim Kyo-eon of Konkuk University’s Department of Real Estate said, "Since the final authority lies with the Seoul mayor, it is questionable whether this will gain momentum," adding, "If Mayor Oh announces measures focused on private-led development, this urban public development may lose its driving force." Professor Shim further diagnosed, "Of course, projects that urgently need development may proceed quickly and succeed, but it will be difficult for the government to achieve the large supply initially announced in the 2.4 Plan."

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