To Succeed in Public Redevelopment, Shintong Planning Must Shed Its Shadow...

Policy Development for Harmonizing Public Interest and Business Viability

[Asia Economy Reporters Minyoung Kim and Hyemin Kim] Although the government announced eight second-phase candidate sites for public redevelopment on the 26th, concerns about the smooth progress of the projects remain. Criticisms have been raised not only about the distinction from the privately-led New Rapid Planning (Shintong Planning) but also because the current redevelopment method proposed by the government may lead to a loss of momentum as the initiative shifts from public to private sectors. Therefore, there are calls for policies that harmonize public interest and business feasibility to ensure the smooth progress of public redevelopment projects.

Public redevelopment was included as a housing supply method in the May-June 2020 measures. In redevelopment projects that lack profitability or progress slowly, public entities such as the Korea Land and Housing Corporation (LH) or Seoul Housing and Communities Corporation (SH) participate as implementers. The price ceiling for sale is not applied, and the floor area ratio (FAR) is allowed up to 120% of the legal maximum, but half of the increased FAR must be contributed to the public.

On the other hand, the New Rapid Planning (Shinsok Tonghab Gihoek) is a redevelopment method created by the Seoul Metropolitan Government, characterized by public (Seoul city) support for planning and procedures in privately-led development to accelerate project speed. Seoul city participates from the early stages of establishing the redevelopment plan, allowing for prior coordination with the union and district offices to expedite the review process. According to the city, the period required for the initial designation of redevelopment zones can be shortened from the usual five years to two years. Seoul held a public contest for New Rapid Planning redevelopment in October last year, attracting 102 participants and achieving great success. Among them, 21 sites were selected and are currently underway. The city plans to hold a second contest early next month.

Although issues initially pointed out in public redevelopment, such as securing resident consent rates and rental ratios, have somewhat improved, experts still point out that the pace of project progress may be slow. To realize redevelopment projects, the consent rate must be raised to 66%, but it remains difficult to coordinate opinions when there are many existing union members or when the union is strong. In such cases, construction companies may be reluctant to take on the project, causing delays. The longer redevelopment projects are delayed, the higher the sunk costs become. Even the area around Ahyeon-dong in Mapo-gu, selected this time, had a project that was once overturned.

Yoon Ji-hae, Senior Researcher at Real Estate R114, explained, "To secure appropriate profitability, the price of the land must be lowered, but it is not easy to get union members' consent on this because setting a high land price reduces the burden charges."

The increased floor area ratio created to enhance profitability may raise concerns about poor residential conditions due to high-density development. Senior Researcher Yoon said, "Since the selected public redevelopment zones are not in prime locations like Gangnam, raising the floor area ratio for profitability may result in spaces with poor residential conditions."

With the Yoon Suk-yeol administration shifting the direction of redevelopment projects from public-led to private-led, the momentum for public redevelopment projects has recently diminished significantly.

An industry insider said, "It is difficult for a new government to push policies initiated by the previous administration," adding, "The fact that the Seoul mayor is Oh Se-hoon is also one of the reasons why there is a higher preference for New Rapid Planning over public redevelopment."

However, despite these limitations, there is also a view that public redevelopment should remain an option for redevelopment projects. Professor Park Hap-soo of Konkuk University's Department of Real Estate said, "There are many zones where redevelopment is difficult to proceed privately due to lack of profitability or prolonged conflicts among members," adding, "New Rapid Planning and public redevelopment can complement each other."

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