Kim Sung-eun, President of the Korea Housing Builders Association: "Small and Specialized Housing Companies Must Participate in LH Direct Implementation Projects"

Kim Sung-eun, President of the Korea Housing Builders Association, stated on the 27th that regarding the public housing site development projects promoted by Korea Land & Housing Corporation (LH), "Measures must be put in place to allow mid-sized and small construction companies to participate." He also argued that, given the difficulties in securing project financing, special guarantees for project financing (PF) should be expanded for small and medium-sized construction firms.

President Kim held a meeting that day and announced these key initiatives. The Korea Housing Builders Association is an organization with around 8,000 member companies of small and mid-sized housing builders, and President Kim took office last month. He said, "Mid-sized and small companies have objected to LH's direct implementation projects being centered on large corporations," adding, "Companies with a certain level of housing construction experience or capability should be allowed to participate in direct implementation projects."

LH has been shifting its business model from selling public housing sites to the private sector to directly implementing these projects. Construction companies are now limited to taking on construction contracts or participating as joint implementers. Given the high preference for brand-name apartments built by large companies, there has been discussion about focusing participation on major corporations. The Korea Housing Builders Association believes that if such a large corporation-centered approach is adopted, it will be difficult to meet housing supply targets.

Kim Sung-eun, President of the Korea Housing Builders Association. Provided by the Korea Housing Builders Association

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The association stated, "Of the 101,276 housing units supplied from 2014, when the private participation project was introduced, until this year, about 90% were awarded to companies ranked within the top 50 in construction capability. To achieve the supply targets, participation from mid-sized and specialized housing companies is essential." They proposed, "Outside of Seoul, implementation and construction should be permitted for companies with good housing supply records and credit ratings, while in Seoul, mid-sized construction companies should be allowed to participate as lead implementers."

Additionally, the association emphasized that special PF guarantee support should be expanded for mid-sized and regional construction companies that find it difficult to utilize PF guarantees. In August last year, the government launched a special PF guarantee program worth 2 trillion won exclusively for small construction companies ranked outside the top 100 in construction capability. Since its launch, guarantees totaling 1.4 trillion won have been issued to eight projects.

Accordingly, the association argued that the scale of special PF guarantees should be increased to over 4 trillion won and that the credit rating requirement for eligible construction companies should be eased from 'BB+' to 'BB-'. President Kim stated, "To allow mid-sized and small construction companies to more easily use bridge loans (short-term loans before construction begins) and PF for their projects, the association is also working with financial institutions to establish a separate platform."

Dukjin Construction, led by President Kim, supplies rental apartments in Changwon, Suncheon, and other regions, and ranked 192nd in last year's construction capability evaluation. It is the fourth largest among companies based in South Gyeongsang Province. Despite being recognized as a solid company in the region, President Kim highlighted the difficulties faced by regional construction firms by citing the example of not receiving support from the Korea Housing Finance Corporation fund last year.

An apartment construction site in Buk-gu, Daegu, where construction has been halted for 10 months due to workers' unpaid wages. Photo by Jin-Hyung Kang

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He explained that with the regional construction economy stagnating-such as the persistent unsold housing problem-and difficulties in securing financing from the financial sector, a vicious cycle has emerged. President Kim said, "The business conditions for small and mid-sized housing construction companies with weak financial resources are extremely serious," adding, "Liquidity support for housing companies, restoration of the weakened private housing supply function, and bold consumer financial and tax support measures are urgently needed."

The association proposed tax support measures for buyers of unsold housing, such as a temporary five-year capital gains tax reduction, exemption from increased acquisition tax for multiple home owners, and improvements to tax benefits for acquiring unsold homes in regional areas after completion. They also emphasized the need to exempt mid-term collective loans from strengthened loan-to-value (LTV) ratios in the Seoul metropolitan area and regulated regions, to reinstate the purchase-lease registration system for regional apartments, to raise the corporate rental housing fund loan limit to 20 million won, and to allow early conversion to sale for private rental housing.

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