'Villa, Officetel' Regulations Eased to Expand Private Rentals [Real Estate AtoZ]

Easing Officetel Building Regulations to Expand Buildable Sites
Providing Tenants with Reports on Property and Landlord Risk
Financial Support for Private Rental REITs through the Seoul Housing Promotion Fund
Proposing Institutional Improvements

The Seoul Metropolitan Government has launched an initiative to expand the supply of non-apartment private rental housing, such as villas and officetels. By easing building regulations and shortening the approval period, the city aims to accelerate supply. Financial support measures will also reduce the funding burden for rental business operators.

The measures to revitalize registered rental housing, announced by the city on October 1, include four categories of support: relaxation of building regulations, administrative support for landlords and tenants, financial support, and proposals for institutional improvements to the central government.

The goal is to secure more non-apartment rental units. Following a series of rental deposit fraud incidents in 2022, the number of non-apartment housing starts plummeted from 36,000 units in 2015 to 15,000 in 2020, and just 2,000 last year. However, demand from university students, young professionals, and visiting foreigners has increased. Currently, there are 416,000 private rental homes registered with the city, accounting for 20% of the entire rental market. More than 80% of these are non-apartment types, such as multi-family homes, officetels, and urban-style housing.

'Measures to Revitalize Registered Rental Housing in Seoul' - Relaxation of Building Regulations. Provided by Seoul City

Relaxation of Officetel Building Regulations and Review Process ... Publication of 'Rental Deposit Fraud Risk Report' for Tenants

First, starting in January next year, the city will relax the road access requirement for officetels from the current 20 meters to 12 meters. Previously, construction was only allowed on main roads, but now the area eligible for construction will be expanded to include secondary main roads.

The threshold for requiring a review by the Building Committee for officetel construction will be raised from 30 units to 50 units. This means that small- and medium-sized officetels with 31 to 49 units can be built quickly without a review. The city will also propose to the central government measures such as relaxing sunlight angle regulations to secure additional floor area ratio and allowing an increase in the number of floors for urban-style housing from one to two.

Through a 'Rapid Approval Consultative Body,' the city will reduce inter-governmental disputes and shorten the approval period. The introduction of a preliminary review system for building plans will allow the procedures for district unit plan changes and building permits to be applied concurrently.

Starting at the end of this month, an 'AI Risk Analysis Report' will be provided to prevent rental deposit fraud. By entering the address of a property, users can check the certified copy of the real estate register, the availability of guarantee insurance, and whether the building is in violation of regulations. If the landlord consents to providing personal information, tenants can also access data such as the landlord's Debt Service Ratio, frequency of address changes, history of arrears, and current defaults. The city will also create rental guidelines to prevent disputes and regularly operate a public-private consultative body to listen to business operators' concerns.

Support for Private Rental REITs and Expansion of Corporate Private Rentals

Financial Support Measures in the 'Seoul City Registered Rental Housing Activation Plan'. Provided by Seoul City.

Financial support will also be strengthened to encourage participation by corporate private rental business operators. To reduce the initial capital burden, the city will provide support to private rental REITs from the Seoul Housing Promotion Fund, matching the reduction in the central government's Housing and Urban Fund equity investment ratio (from 14% to 11%). The city will also subsidize 2% of the interest on loans for private rental REITs to help ensure stable operations. Since construction costs have soared since 2022, there have been zero rental housing supplies through REITs this year.

The city will also propose to the central government the relaxation of regulations related to private rentals. Last month, the city requested that the central government ease the guarantee insurance subscription requirements for private rental business operators. In addition, the city will propose relaxing the loan-to-value (LTV) ratio restriction (currently 0%) for housing rental business operators, raising the threshold for excluding non-apartment properties from the aggregated publicly announced price standard, and granting long-term holding special tax deductions to six-year rental business operators.

Seoul Mayor Oh Sehoon stated, "Private rental housing centered on non-apartment types such as villas and officetels is a vital foundation supporting the daily lives of young people and one- and two-person households. By easing regulations and providing proactive administrative support, we will resolve bottlenecks through swift, market-driven supply and revitalize the market."

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