[Asia Exclusive] Kim Heondong, SH Corporation President: "President-elect Yoon Seokyeol Will Challenge Laws and Systems That Induce Real Estate Speculation"

by Kim Minyoung

Published 25 Apr.2022 13:28(KST)

Kim Heon-dong, President of SH Corporation. / Photo by Dongju Yoon doso7@

Ministry of Land Officials Proposed Wrong Policies

Not Appointing Them in the Transition Committee Was the Right Decision

Disclosure of Sale Prices After Inauguration in Godeok-Gangil and Others

Only Buildings in the Form of Land Lease Sold

Sale Prices of Half-Price Apartments Dramatically Reduced

Improvements Needed in Public Purchase System and Others

[Asia Economy Reporter Kim Min-young] "I believe President-elect Yoon Seok-yeol will challenge laws and systems that induce real estate speculation."

Kim Heon-dong, President of Seoul Housing and Communities Corporation (SH Corporation), expressed strong expectations for the launch of the Yoon Seok-yeol administration during an interview held on the 19th at the SH Corporation headquarters in Gaepo-dong, Seoul. He also actively refuted claims that the market has become confused due to Yoon’s moves to ease real estate regulations. Kim stated, "Contrary to some concerns, the market is not shaken," dismissing recent voices expressing worries about the real estate market as "words from those who want to destabilize the new government."

Kim is a figure Yoon contacted to study real estate policies before resigning as Prosecutor General last year and declaring his political participation. Regarding that meeting, Kim pointed out that "a huge vested interest group has formed around real estate speculation, and that vested interest is the key factor driving up housing prices," highly appreciating Yoon’s determination to stabilize housing prices through large-scale supply plans.

Kim also attached great significance to Yoon’s decision not to actively appoint Ministry of Land, Infrastructure and Transport officials when forming the presidential transition committee. He criticized, "Ministry officials have been responsible for proposing and having wrong policies adopted by the president and the Blue House over the past five years," adding, "If they had been appointed to influential positions in the new government, the policies would have just been renamed but essentially the same."

Many SH Corporation projects require consultation with the Ministry of Land. Therefore, as the head of this organization, it might be burdensome to be sharply critical. However, his attitude, shaped by over 20 years as a civic activist who did not follow trends and spoke frankly, remains unchanged despite his current affiliation. He pointed out that the government’s ‘2·4 Plan’ announced last year as part of supply measures is "almost not being followed." In particular, he strongly criticized the complete non-implementation of the full disclosure of public sector sale prices included in the 2·4 Plan.

Disclosure of sale prices has been a policy he advocated since his time as a civic activist at the Citizens’ Coalition for Economic Justice (CCEJ). Shortly after taking office as SH Corporation president at the end of last year, Kim began disclosing sale prices for Godeok-Gangil Public Housing District Phase 4, followed by Ogeum District Phases 1 and 2, Hang-dong District Phases 2 and 3, and Segok 2 District Phases 1, 3, 4, and 6. He holds the principle that the public should know that the sale price for a 25-pyeong (approximately 82.6 square meters) apartment in Seoul should be sufficient at 200 million KRW.

His advocacy for ‘half-price apartments’ is in this context. This refers to ‘building-only sales’ housing in the form of land lease. The land is publicly owned, and the buyer only purchases the building, so the sale price excluding land cost can be drastically reduced. He believes housing can be supplied at around 500 million KRW in Gangnam and around 300 million KRW in other areas. Kim said, "We must build houses that last over 100 years once constructed," adding, "Even if the basic construction cost is higher, we need to build good-quality buildings." His idea is that by reducing costs related to land, more investment can be made in construction costs, enabling the supply of high-quality housing. This is the so-called ‘Baeknyeon Jutaek (tentative name, meaning Hundred-Year House).’ It aligns with the ‘high-quality rental housing’ recently announced by Seoul Mayor Oh Se-hoon.

For the ‘building-only sales’ method to become active, improvements in supporting systems such as the public purchase system and sale price calculation system are also necessary. Under the Housing Act (Article 57), the sale price for ‘building-only sales’ is limited to the basic construction cost plus additional costs, making it difficult to secure high-quality public housing. Therefore, a separate method for calculating sale prices should be newly established.

Regarding the public purchase system, he stated, "It is desirable to revise the repurchase target of building-only sales under the Housing Act from Korea Land and Housing Corporation (LH) to the public housing developer implementing the sale housing project, unifying the project entity, and to guarantee price gains by reflecting inflation rates and holding period interest rates after move-in during public repurchase." Kim plans to apply the ‘building-only sales’ method to the Godeok-Gangil public housing district redevelopment project in Seoul, where Happy Housing and Youth Hope Town are located. The purpose is to supply affordable and high-quality housing below market prices to young people and newlyweds who have been cut off from the housing ladder due to soaring prices. This project involves constructing a total of 12,057 housing units from 2021 to 2024, including 2,916 public sale units, 6,309 public rental units, 2,808 private sale units, and 24 single-family houses. He said, "We have applied to the Ministry of Land for approval of the district plan change for the Godeok-Gangil public housing district and are awaiting approval."

To increase the supply of half-price apartments using the ‘building-only sales’ method, Kim is making efforts to secure additional sites beyond those owned by SH Corporation in Magok and Wirye. He mentioned, "There is a lot of land available for use in Seoul," citing Naegok District and Taereung, mentioned in the 2·4 Plan, as representative examples. He also clearly stated that SH Corporation, not LH, should be the developer of land in Seoul. Kim said, "The Taereung Golf Course, announced as one of the major project sites in the 8·4 Plan, is also located in Seoul," adding, "It is judged desirable for SH Corporation, the only residential welfare institution in Seoul, to be responsible for and promote the development project."

He also expressed his ambition to build a signature building unique to SH Corporation in Yongsan, where the presidential office is relocating. Kim emphasized, "Hudson Yards and Battery Park City in Manhattan, New York, are representative successful cases where only buildings on publicly owned land were sold," adding, "I want to develop Yongsan beautifully like Hudson Yards or Battery Park City in Seoul by referring to such cases."