"Receiving Land but Not Building Homes? ... Changing the Supply Criteria [Real Estate AtoZ]"

Housing Supply Standard Unified at Construction Commencement, Not Permits and Approvals

One notable aspect of the government's housing supply expansion plan announced on September 7 is the shift in the supply standard from the traditional "approval and permit" stage to the "groundbreaking" stage. This change was made because, even after project developers receive permits from authorities, the actual project start time varies depending on market conditions, creating a gap between what the public experiences and the figures presented.

Kim Yoonduk, Minister of Land, Infrastructure and Transport, stated at a briefing following the real estate-related ministers' meeting that day, "Until now, we have presented fragmented supply targets for individual projects or set supply plans based on the less tangible permit and approval stage." He added, "Unlike previous administrations, the Lee Jaemyung administration will pursue sufficient and continuous housing supply in locations preferred by the public, based on the consistent standard of 'groundbreaking.'"

A senior official from the Ministry of Land, Infrastructure and Transport explained, "When supply standards are based on permits and approvals, there is often a disconnect from the actual impact felt in housing supply," and added, "Since groundbreaking typically leads to sales within three to six months and most projects are completed, this will enhance the reliability of the targets."

Kim Yoonduk, Minister of Land, Infrastructure and Transport, is announcing measures to expand housing supply at the Government Seoul Office Building on the afternoon of the 7th. Photo by Yonhap News

Industry experts estimate that there is a gap of around 20% between the number of units approved and the number that actually reach occupancy. Depending on market conditions, funding issues may arise, and in the case of redevelopment projects, disagreements within associations can cause delays or even derail the project entirely. There are also cases where projects collapse due to the bankruptcy of construction companies. The lengthy duration from permit approval to occupancy, especially during financial crises, is cited as a reason for the growing gap between the government's announced supply figures and the public's perception.

The government estimates that, considering the average annual groundbreaking volume in the Seoul metropolitan area has been 258,000 units over the past decade, and the long-term comprehensive housing plan projects an average of 245,000 units per year for the next five years, an annual supply of around 250,000 units would be appropriate. This figure takes into account the total number of households, income levels, and factors such as demolitions.

However, the government also noted that the average annual groundbreaking volume over the past three years has been only 158,000 units, and in Seoul alone, it has not even reached 40,000 units per year. As a result, they expect that instability in the housing market due to supply shortages will intensify. It is estimated that, going forward, Seoul alone will face an annual shortage of 26,000 units, and the Seoul metropolitan area as a whole will be short by 92,000 units per year.

Another change in this plan is that Korea Land and Housing Corporation (LH) will now hold the key to public housing supply. Since LH, as the implementing agency, can be directly influenced rather than simply receiving institutional or permit-related support during the project process, it is expected that the overall project timeline will become easier to predict.

A Ministry of Land, Infrastructure and Transport official explained, "The public sector is relatively less affected by economic fluctuations," and added, "We plan to establish a robust implementation system to ensure that projects involving various stakeholders, such as related agencies and market participants, can be carried out on schedule without setbacks."

Meanwhile, the government has set the supply target based on groundbreaking for the next five years at 1.35 million units, formulating the plan from the bottom up by considering supply-demand conditions and feedback from the field.