[Choi Jun-young's Urban Pilgrimage] Floor Area Ratio and Urban Development

A city is made up of buildings. As a city develops, in most cases, buildings become taller. This is to efficiently utilize the limited resource of land. However, buildings cannot rise infinitely. There are technical aspects, and often the economic feasibility decreases as the number of floors increases. The reason why there are many 49-story buildings in Korea is that regulations related to fire safety and security are significantly strengthened from the 50th floor onward. Even if it is economically feasible, buildings cannot be built taller due to regulations such as urban planning. There are various methods to regulate the height of buildings. Until the 1970s, direct restrictions on the number of floors or methods linked to road width were used. To improve the irrationality of these methods, the concept of 'floor area ratio' (FAR) was introduced.

Regulations Significantly Strengthened from 50-Story Buildings
Floor Area Ratio in Seoul Residential Areas: 250% to 300%

The floor area ratio, which refers to the ratio of the total floor area of a building to the land area, has become a decisive factor determining the economic value of land. Land prices in areas where higher floor area ratios are applied in urban planning inevitably become higher, and to receive a higher floor area ratio, various regulations and burdens must be accepted. In Seoul, the floor area ratio for residential areas where apartments can be built is typically 250% to 300%. Surprisingly, this floor area ratio standard has actually decreased compared to the past. From 1985 to 1990, Seoul's floor area ratio was at the current level of about 250%. Subsequently, as part of a policy to supply 2 million households, it was raised to 400%. Apartments with floor area ratios exceeding 300%, found in some areas like Mapo or Seongbuk, were built during this time. These high-density apartments supplied through redevelopment caused many complaints and inconveniences due to insufficient access roads. As a result, since the mid-1990s, the floor area ratio was lowered back to 300%. Then, as zoning became more detailed, a form similar to the current one has been maintained since 2000.

One of the fundamental measures discussed whenever apartment prices rise in Seoul is the proposal to increase Seoul's floor area ratio. The logic is that increasing the floor area ratio allows more housing to be built, meeting demand. It is also pointed out that Seoul's stricter floor area ratio limits compared to the surrounding Gyeonggi Province, along with a 35-floor height limit, are inappropriate. The phenomenon where outer areas have higher floor area ratios than high-demand areas occurs, even though areas with higher demand should have higher floor area ratios. If high-demand areas are subject to lower floor area ratios and stricter regulations, supply cannot meet demand, demand will always exceed supply, and this continuously stimulates housing prices.

A Regular Proposal Whenever Seoul Apartment Prices Rise:
Raising the Floor Area Ratio Ceiling

Opponents of raising the floor area ratio cite reasons such as sunlight rights, environmental issues, and traffic congestion. While these may have been valid in the past, they may not be so in 2020. Sunlight rights can be secured by detailed reviews using various computer simulations and reflected in designs. Regarding environmental issues, it is becoming common knowledge that densely built cities are much more effective in terms of energy and greenhouse gas emissions compared to low-density suburban areas. Traffic congestion caused by population growth can be resolved by expanding public transportation. The subway, which people prefer the most, requires large-scale demand to be economically viable. As urban density increases, demand rises, making public transportation expansion easier.

Choi Jun-young, Senior Advisor at Yulchon LLC

The most critical factor blocking the increase of floor area ratio may be the resentment that excessive profits go to existing landowners. However, considering the overall social benefits of raising the floor area ratio, some degree of profit sharing should be acknowledged. In fact, Seoul City is making efforts to expand youth housing supply by upgrading zoning to quasi-residential areas, mainly around station areas. Ultimately, the resistance to raising the floor area ratio seems to stem more from psychological factors that find cities made up of high-rise buildings uncomfortable. However, the generation expressing this resistance is gradually becoming a minority. Considering that the generation born, raised, and started families in apartments is now approaching their 50s, the old fixed ideas are no longer valid. Some worry that raising the floor area ratio will increase concentration in Seoul and the metropolitan area, pushing local regions into deeper crises. However, conversely, raising the floor area ratio in Seoul and the metropolitan area could be used to aid regional development.

Increasing Floor Area Ratio and Expanding Local Government Revenues
Through Balanced Floor Area Ratio Distribution

Consider a case where local governments in regions at risk of extinction due to population decline are allocated transferable floor area ratios (balanced floor area ratios) that they can sell to other regions. Seoul's floor area ratio remains at the existing 250%, but if reconstruction associations want a higher floor area ratio, they can purchase balanced floor area ratios at a cost. By utilizing balanced floor area ratios up to 150% in addition to the existing 250%, reconstruction associations can apply for a floor area ratio increased up to 400%. In areas with poor business feasibility and poor residential environments, raising the utilization rate cap can expand supply and meet demand.

Local governments that sell balanced floor area ratios can use the revenue secured as their own funds or distribute it directly as cash to local residents, which aligns with the recently active discussions on 'regional basic income.' For example, if the Hyundai Apartment in Apgujeong-dong, Gangnam-gu, Seoul, is reconstructed, a portion of that income could go to Bonghwa-gun, Gyeongbuk Province. Of course, since there are many issues to resolve, including appropriate pricing and allocation criteria for floor area ratios, immediate application is difficult, but alternatives can be sought through discussions.

Development always occurs unevenly. However, development itself should not be blocked. What is important is to find ways to ensure that the development of specific regions and areas benefits everyone, making the fruits of development shared by all. We know from the past 60 years of experience that suppressing one side does not mean the other side will grow proportionally. If liquidity and demand overflow in the real estate market, stimulating housing prices, rather than forcibly suppressing this, finding productive and developmental ways to utilize it to promote social progress and improve living standards is a positive way to view and approach the problem.