Gangnam Reconstruction Can Be Raised Up to 50 Floors... But Member Participation Is Uncertain

Government to Announce 'Housing Supply Expansion Plan' on the 4th

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is announcing plans to expand housing supply in the Seoul metropolitan area, including the Seoul region, at the Government Complex Seoul in Jongno-gu, Seoul, on the 4th. Photo by Kang Jin-hyeong aymsdream@

[Asia Economy Reporter Jang Sehee] The government has decided to supply an additional 132,000 housing units in Seoul and the metropolitan area. It plans to relax the floor area ratio for public reconstruction projects.

On the 4th, the government announced a real estate stabilization plan containing these details.

First, the government will introduce a "public participation high-density reconstruction" scheme to supply a total of 50,000 housing units over the next five years. Public institutions such as the Korea Land and Housing Corporation (LH) will participate, and under the condition that some housing units are donated, the floor area ratio will be increased up to 500%, and the floor limit, previously capped at 35 floors, will be relaxed to 50 floors. However, the price ceiling system will still apply to public reconstruction projects. Between 50% and 70% of the increased floor area ratio must be donated, and more than 90% of the expected profits from the increased floor area ratio will be recovered based on the expected rate of return.

Public idle lands, including the Tae-neung Golf Course, the Seoul Regional Public Procurement Service in Seocho-gu, and the Seoul Regional Headquarters of the Korea Land and Housing Corporation (LH) in Gangnam-gu, will be developed as public housing sites to supply 33,000 housing units. The supply scale of the Yongsan Maintenance Depot in Seoul, previously announced as 80,000 units, will be increased to 10,000 units, and 4,000 additional housing units will be supplied through high-density development in project sites planned for complex development. The pre-sale volume for the 3rd new town, initially planned at around 30,000 units, will be doubled to 60,000 units.

Along with this, the government plans to promote the confirmed measures through land acquisition and development, as well as amendments to the Urban and Residential Environment Improvement Act, and will hold weekly meetings of related ministers to monitor the real estate market and respond to disruptive and unstable factors.

The key issue is the active participation of reconstruction associations. Experts express concerns that the supply measures may be limited. To switch to the public reconstruction method, approval from two-thirds or more of the association members is required. Moreover, since the government has announced its intention to recover as much profit as possible from the associations, active participation is expected to be difficult.

Additionally, with regulations such as strengthened safety inspections, the reconstruction excess profit recovery system, and a two-year residence requirement for association members, it is questionable how much participation can be encouraged.

Professor Kwon Daejung of the Department of Real Estate at Myongji University said, "If the reconstruction safety inspection standards and the two-year residence requirement are not relaxed, it will be difficult to attract association members." He added, "Measures to withdraw liquidity simultaneously with housing supply should also be introduced," explaining, "There is still concern that the released liquidity will flow into real estate."

Yoon Jihae, senior researcher at Real Estate 114, pointed out, "It is doubtful whether the volume the government envisions will be realized without factors that association members can accept," adding, "Some short-term responses may be possible, but it is uncertain whether it will be effective in the market in the long term."