"Old Housing Regulations Go Against Residential Trends... Market Distortion and Widening Asset Gap"

Construction Industry Research Institute & Real Estate Development Association
"Government Regulations Go Against Housing Trends"
"Mixed-Use and High-Density Development Needed in Urban Commercial and Semi-Residential Areas"

Gwanghwamun Area with a Dense Concentration of Officetels

Amid the overheating of alternative housing markets such as officetels due to the surge in apartment prices and strengthened regulations, claims have been raised that the government's outdated and excessive housing regulations are exacerbating distortions in the housing market. This is because, despite changes in housing patterns caused by COVID-19, the institutional environment is moving against the megatrend. Accordingly, there are calls for urgent deregulation of housing policies along with updates to the system that align with the changed era environment.

On the 15th, housing experts unanimously criticized the distortions in the housing market caused by rigid housing systems at a seminar jointly hosted by the Korea Research Institute for Human Settlements and the Korea Real Estate Development Association at the Press Center in Jung-gu, Seoul, under the theme "The Role and Future of Customized Alternative Housing in the Post-COVID Era."

Lee Tae-hee, a senior researcher at the Korea Research Institute for Human Settlements, pointed out, "People increasingly want more urban residential space supply, but outdated systems and overlapping regulations are actually blocking housing supply."

The trend of increasing preference for urban living due to the rise of one- to two-person households is a global phenomenon. Although it temporarily slowed due to COVID-19, urban youthification is expected to intensify further following vaccine distribution. COVID-19 accelerated changes in the megatrends of the housing market. Amid the normalization of remote work, demand has emerged for 'monthly living' while moving around various regions. At the same time, offline commercial spaces have rapidly declined, causing a sharp drop in non-residential demand. As work and consumption spaces change and diverse types of alternative housing demands that cannot be accommodated by traditional 'housing' surge, government policies are criticized for moving in the opposite direction.

A representative example cited was officetels. Although officetels, which combine office and residential functions, are gaining attention, the Building Act prohibits the installation of balconies in officetels. While apartments and officetels are practically used in the same way, they are classified differently based on structural perspectives under the Building Act and thus subject to different regulations. The senior researcher explained, "Prohibiting balcony installation, which should be approached from health and safety perspectives, is hindering the creation of safe spaces."

Demand in the housing market and government regulations are completely at odds. The zoning system (a means to regulate and guide land use) hinders mixed-use and high-density development, and outdated inducements for non-residential supply within urban areas persist. While residential demand in urban areas is increasing and demand for commercial facilities is sharply declining, Seoul City still restricts the basic floor area ratio for residential use in commercial zones to 400%. It also maintains a mandatory non-residential ratio of over 30% of the total floor area.

Heo Yoon-kyung, a researcher at the Korea Research Institute for Human Settlements, pointed out, "Excessive land use regulation and supply suppression maintain urban comfort, but they also make supply difficult, increasing the scarcity of real estate and raising existing real estate prices." He added, "Recently, Europe has cited strong land use regulations as one of the causes of widening asset gaps between generations and social classes, and our current situation is not much different." Researcher Heo said, "Mixed-use autonomy should be guaranteed and high-density development promoted in commercial and quasi-residential areas in urban centers."

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