Supply of 140,000 Public Housing Units... Increasing by 15,000 Units

The government is launching tailored support measures to revitalize the sluggish construction market. In response to the contraction in private housing supply, it plans to increase public housing supply and expand construction investment through early execution of social overhead capital (SOC) budgets. To resolve the funding crunch in real estate project financing (PF) sites, which has worsened since the Taeyoung Construction workout (corporate financial restructuring) incident, the scope of public PF loan guarantees will also be expanded.

A construction site of an apartment in Seoul. [Image source=Yonhap News]

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On the 10th, the government announced the "Measures to Expand Housing Supply and Supplement the Construction Market for National Housing Stability," which includes these details. First, the government will increase the originally planned public housing supply (permits) from 125,000 units by 15,000 units to more than 140,000 units. To this end, unsold land and returned land among privately sold lands will be converted into public housing sites to supply additional public housing (5,000 units + α). Furthermore, by utilizing possible Greenbelt release volumes and idle land in each local government, the government plans to discover 20,000 new housing sites mainly in the metropolitan area this year.

The government also plans to shorten the groundbreaking schedule for each district by more than six months by injecting additional manpower and capital into new town development. To accelerate projects such as the Gwangmyeong-Siheung district, the introduction of a "New Town REIT" and expanded participation of local public corporations in project areas will be promoted. Additionally, to prevent delays in compensation procedures, the government will manage the process by mandating compensation commencement within a certain period and requiring reports on compensation promotion plans from designated authorities.

To stimulate the sluggish construction market, expansion of SOC construction investment will also be pursued. First, out of the Ministry of Land, Infrastructure and Transport’s budget of 56 trillion won subject to execution management, 19.8 trillion won (35.5%) will be concentrated in the first quarter. The investment amount for this year by the five major SOC public institutions (LH, Korea Railroad Corporation, Korea Expressway Corporation, etc.), totaling 24.6 trillion won, will also be closely managed for early execution.

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The government has also introduced tailored support measures to improve cash flow for construction companies to ensure stable progress of housing supply projects and to restore vitality in the construction industry through restructuring and normalization of each project site. First, to enable normal projects to smoothly raise funds, 25 trillion won in public PF loan guarantees will be supplied without fail, and support will be provided to resolve difficulties at each project site. A representative support measure is the establishment of a PF loan refinancing guarantee, where HUG PF guarantees are issued to projects that took out high-interest PF loans without guarantees so they can refinance with low-interest PF loans.

In addition, to ease the liquidity burden caused by the contraction of the PF market, the conversion of PF asset-backed commercial paper (ABCP) guaranteed by construction companies into loans will be expanded through HUG and the Korea Housing Finance Corporation (from 3 trillion won to 5 trillion won). Special loans for construction companies facing financial difficulties will also be increased from 300 billion won to 400 billion won.

To improve business conditions in local areas where the housing market is difficult compared to the metropolitan area, tax burdens on unsold houses after completion in local areas will also be reduced. If a developer uses unsold houses after completion in local areas as rental housing, the original acquisition tax for housing construction businesses will be reduced by up to 50% (one-year temporary, subject to legal amendment). For buyers, if they purchase an unsold house after completion in local areas (85㎡ or less, 600 million won or less) for the first time within the next two years, the house will be excluded from the number of houses when calculating taxes.

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