If You Receive Public Sale Housing, Mandatory Residence for Up to 5 Years... Must Sell to Public if Violated

Perspective view of the 3rd New Town Goyang Changneung (Provided by the Ministry of Land, Infrastructure and Transport)

[Asia Economy Reporter Lee Chun-hee] The mandatory residence period for public sale housing buyers, including those in the 3rd phase new towns, will be extended to a maximum of 5 years. If the mandatory period is not fulfilled, the buyer must resell the house to public housing providers such as the Korea Land and Housing Corporation (LH).

On the 26th, the Ministry of Land, Infrastructure and Transport announced that starting from the 27th, as part of follow-up measures to the September 13, 2018 real estate policy, the amendments to the "Special Act on Public Housing" and its subordinate laws containing these provisions will be enforced. Accordingly, all public sale housing in the metropolitan area that issues tenant recruitment announcements after the 27th will be subject to a mandatory residence period of up to 5 years from the initial move-in date, proportional to the sale price.

The core of this amendment is that the mandatory residence obligation, which had previously applied only to public sale housing supplied in areas where greenbelt restrictions were lifted or in large-scale sites over 300,000㎡, will now be expanded to all public sale housing supplied in the metropolitan area. The mandatory residence period is set at 5 years if the sale price is less than 80% of the nearby market price, and up to 3 years if it is between 80% and less than 100%.

To enhance the effectiveness of the mandatory residence period regulation, a new provision obligates sellers to sell the house (or sale rights) to public housing providers such as LH if they must sell during the mandatory residence or resale restriction period. Although current regulations allow public housing providers to purchase such houses (or sale rights), private transactions have been common by finding private buyers, making actual purchases by public housing providers very rare.

However, going forward, unless public housing providers face difficulties in purchasing the house (or sale rights) due to bankruptcy or insolvency, only public housing providers will be allowed to purchase the property. The transaction price will be set as the sum of the deposit paid by the buyer plus interest calculated at the average interest rate of one-year fixed deposits, effectively eliminating any market price gains.

Subsequently, the house (or sale rights) will be resupplied by the public housing providers. This resupply will only be available to those who meet housing ownership, income, and asset requirements, and the resupplied buyer must continue to reside for the remaining period of the originally set mandatory residence period.

The government also plans to introduce the mandatory residence system for houses subject to the private land price ceiling system, scheduled to be implemented by the end of July. The Ministry of Land, Infrastructure and Transport plans to amend the "Housing Act" within this year through parliamentary consultations to introduce the mandatory residence system for private housing as well.

Lee Byung-hoon, head of the Public Housing Division at the Ministry of Land, Infrastructure and Transport, said, "This amendment will expand opportunities for genuine demanders preparing to apply for public sale housing to own their homes," and added, "We will continue to strengthen housing supply centered on genuine demanders."