'Garojutaek Jeongbi Saeop' Emerging Faster Than Reconstruction and Redevelopment Projects

Risk Reduced and Multiple Benefits with LH Participation
Emerging as a Plan to Expand Housing Supply in Downtown Seoul

Perspective view of the Daemyeong-dong Street Housing Maintenance Project in Daegu (Photo by LH)

[Asia Economy Reporter Moon Jiwon] Amid a series of cancellations of large-scale redevelopment projects, the narrow street housing maintenance project involving Korea Land and Housing Corporation (LH) is emerging as an alternative to expand urban housing supply. There is growing interest among residents due to expectations that the participation of the public enterprise LH will reduce project risks and provide various policy benefits.

The narrow street housing maintenance project is a method where residents lead the construction of small-scale multi-family housing by replacing old and deteriorated buildings. Since there is no large-scale demolition, the local community can be preserved, and the process is faster, making it an alternative to redevelopment and reconstruction.

According to industry sources on the 25th, there are about 9,000 locations in Seoul that meet the narrow street district requirements. Even after excluding maintenance zones and commercial areas, about 2,000 places are considered highly likely to proceed with the project. The industry expects a significant increase in project promotion as residents’ benefits, such as relocation support and reduced charges, have increased.

In fact, the narrow street housing maintenance projects in Myeonmok-dong, Jungnang-gu, Seoul, and Wonjong-dong, Bucheon, where member sales were recently completed, achieved a 100% member sales rate. The project in Dongin-dong, Daegu, is also recording a 99.6% member sales rate.

There is particularly growing interest in the public contest-type narrow street housing projects involving LH. LH, together with the Ministry of Land, Infrastructure and Transport and Seoul City, will hold two public contests this month and in June for public participation narrow street housing maintenance projects within Seoul’s urban area.

Perspective view of the Bucheon Wonjong-dong Street Housing Maintenance Project (Photo by LH)

The biggest advantage of the public contest-type narrow street housing project led by LH is stable project promotion. When the project is carried out based on LH’s development know-how and creditworthiness, risks such as difficulties in fundraising due to independent resident-led promotion, project delays, and reduced profitability can be minimized. Also, since it proceeds under the public implementer method rather than the association establishment method, time and costs related to general meetings can be saved.

If the public interest requirements demanded by LH are met, the project implementation area can be expanded from 10,000㎡ to 20,000㎡, and the price ceiling system for sales can be avoided. Furthermore, if more than 20% of the total number of units or total floor area is supplied as public rental housing, the floor area ratio can be increased up to the legal maximum, and floor restrictions can be relaxed. An LH official explained, "Due to increased profits from exemption from the sales price ceiling system, resident contributions can be reduced by 15 to 30%."

LH is expanding relocation support, which was previously available only to landowners and others, to tenants currently residing. Tenants can borrow up to 70% of the jeonse deposit of the house they will move into (up to 300 million KRW in Seoul and 200 million KRW in the metropolitan area) at an annual interest rate of 1.5%.

Meanwhile, LH will accept applications for the narrow street maintenance project contest from May 11 to 21 via visits, mail, and email. After explanatory meetings and resident consultations by August, the final project sites will be confirmed. Park Hyun-geun, head of LH’s Urban Maintenance Project Department, said, "Following the government’s recent policy to revitalize small-scale housing maintenance projects, narrow street housing maintenance projects are gaining momentum," adding, "We also plan to provide project consulting if residents desire."