[Insight & Opinion] "Real Estate and Politics"

Chae Sangwook, CEO of Connected Ground

Recently, following a media interview by a member of the Land, Infrastructure and Transport Committee from the Democratic Party of Korea stating the intention to pass the ‘Old City Planning Act and Urban Redevelopment Promotion Act’ as a package within the year, the real estate market has reignited interest in the Old City Planning Act (Nojeong Act). This law concretizes the ‘1st Generation New Town Special Act’ (which aims to swiftly redevelop 300,000 housing units in the 1st generation new towns to 400,000 units) that was included in President Yoon Seok-yeol’s campaign pledges during last year’s presidential election. The law targets old cities nationwide with a total floor area of 1 million square meters and buildings completed 20 years ago, with 51 such locations identified.

Why has this law, which carried significant weight as a main presidential pledge, failed to secure a clear timeline or likelihood of passage even nine months after being submitted to the Land Committee subcommittee in February this year? The main reasons lie in the fairness issues, as the law benefits only certain areas, and the practical challenge that local government heads must handle relocation measures for redevelopment projects.

Regarding fairness, in South Korea, old housing undergoes safety inspections after a certain period post-construction. If the rating falls below the standard, demolition and reconstruction occur; if above, remodeling is done. However, the Nojeong Act exempts safety inspections. This is because if the 1st generation new towns built in the 1990s were subjected to current safety inspections, only a handful of complexes would pass. Additionally, alongside the exemption from safety inspections, the law provides floor area ratio (FAR) special exceptions, granting increases within 100-150% of current standards. For example, if the current FAR for a general residential zone type 3 is 300%, the law would allow up to 450%.

The second issue is feasibility. Redevelopment projects inherently require relocation measures due to the 3-5 year gap between demolition of existing housing and occupancy of new housing. Until now, relocation measures have only aimed to smooth out annual redevelopment projects, as it is common for rents and lease prices to rise in surrounding areas when redevelopment causes housing demolition. But in the case of Bundang, where 100,000 housing units are to be redeveloped over 15 years through phased redevelopment, how will relocation be managed? Assuming 15 years of redevelopment and 7,000 units relocated per year, and considering that housing construction takes 3-5 years, there must be residential areas capable of accommodating at least 21,000 to 35,000 relocated units or financial support for relocation. This is essentially equivalent to building an entirely new town. The Nojeong Act assigns this responsibility to local government heads (such as the mayor of Seongnam), raising questions about practical feasibility. Another issue is infrastructure. Local government officials commonly express concerns that there has been no study on whether existing infrastructure (roads, schools, parks, energy, etc.) scaled for the current city size would be adequate if the number of households rapidly increases due to the FAR special exceptions.

Originally, this law was initiated by government authorities, led by the Ministry of Land, Infrastructure and Transport, who prematurely introduced a bill with low feasibility and fairness issues during the presidential election and subsequent processes. Since then, expert consultative bodies and the Land Committee have been discussing the need for feasibility and improvements to create a more realistic law through subcommittee deliberations, meaning the entire Land Committee has been working hard. However, suddenly, some Democratic Party Land Committee members exposed political rhetoric such as passing the law within the year to the media, turning the law into a political agenda again. In reality, the passage of this law remains unclear for the two reasons mentioned above. Real estate is real estate, and politics is politics. It should be remembered that those who confuse the two have always faced strong backlash.

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