O Se-hoon's Private Sector, Government's Public Sector... Supply Expansion Solution Faces Test

Wu's 6th Redevelopment Regulation Relaxation to Supply 130,000 Units by 2025
Abolition of Residential Maintenance Index System, Removal of 7-Story Height Limit in Type 2 General Residential Areas
Inevitable Competition with Government-Led Public Supply Measures
Similar to Government Plans like Public Planning but Differentiated by Implementers and Donation Conditions

[Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] As Seoul Mayor Oh Se-hoon unlocks private redevelopment, competition with government-led supply measures such as public redevelopment has become inevitable. Mayor Oh's plan is similar to the government's in that it aims to accelerate redevelopment through active intervention. However, it does not require the donation of rental housing or other contributions as incentives. There is an assessment that Seoul City and the government are now on the testing ground regarding solutions to expand supply.

According to Seoul City on the 27th, the core of the six major redevelopment deregulation measures announced by Mayor Oh the day before is to significantly lower the threshold for promoting redevelopment projects. Through this, the plan is to supply 130,000 housing units by 2025. The key points include △abolishing the residential maintenance index system △introducing public planning △simplifying the consent rate confirmation process △designating new zones in cancellation areas △lifting the seven-story height limit in Type 2 general residential areas △discovering more than 25 zones annually.

Among these, the abolition of the residential maintenance index system and the lifting of the seven-story height limit in Type 2 general residential areas are expected by the industry to restart the redevelopment project clock that has been stalled for six years. The promotion of projects in the aging northeast and southwest areas of Seoul or in cancellation areas due to the New Town exit strategy may become visible.

In the market, there is also analysis that Mayor Oh's private redevelopment revitalization plan, which focuses on bold deregulation, might shrink government-led supply such as public redevelopment. Mayor Oh himself expressed confidence, saying, "Private redevelopment and public redevelopment will be good routes to supply new housing through mutual complementarity," but "the choice is made by the private sector."

Mayor Oh's plan also resembles the government's in many ways. It is similar in that the public plans the project and establishes the maintenance plan to speed up the process, and that redevelopment zones are designated annually through public contests, with the rights determination date for housing sale rights set as the contest date.

However, Mayor Oh's plan differentiates itself from the government's in that the association remains the project implementer. In the case of public redevelopment, the public becomes the project implementer, but due to the controversy over speculation by employees of the Korea Land and Housing Corporation (LH), residents have strong resistance to public involvement. Unlike public redevelopment, it does not receive incentives such as increased floor area ratio, but it is also distinguished by being free from the obligation to donate public rental housing.

However, since Mayor Oh raised the resident proposal consent rate from 10% to 30% to minimize resident conflicts, there is also a view that a concentration on private redevelopment will not occur. Unlike public redevelopment, the application of the sale price ceiling system, which is a fatal blow to profitability, is also cited as a limitation.

An official from the maintenance project consulting industry said, "If the merits of public redevelopment decrease due to Mayor Oh's deregulation, some zones may shift their focus to private redevelopment. However, cancellation zones where projects cannot progress due to profitability issues will still remain in public redevelopment."

With Mayor Oh's sweeping redevelopment deregulation, concerns about housing instability for low-income residents have also emerged. There is a possibility that the rapid price increase of multi-family and row houses caused by the past New Town frenzy could be repeated. Ham Young-jin, head of the Zigbang Big Data Lab, pointed out, "If the threshold for maintenance projects in aging residential areas is lowered and prices rise in villa-dense areas, price instability in the low-income housing market may become apparent."

Some also predict that even if housing prices rise in the short term, redevelopment supply will be the answer to stabilizing the real estate market in the long term. Professor Shim Gyo-eon of Konkuk University's Department of Real Estate said, "If supply becomes abundant through redevelopment revitalization, real estate prices can stabilize in the long run."

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