Legislation to Completely Block Rental Housing 'Zero' and 'REITs' Proposed

Hannam 3 District Panorama (Photo by Lee Chunhee)

[Asia Economy Reporter Lee Chun-hee] A bill is being promoted that requires the public sector to obligatorily acquire all rental housing built through redevelopment and reconstruction projects. The aim is to fundamentally block methods that reduce or eliminate rental housing, such as rental-to-sale conversions and REITs (Real Estate Investment Trusts).

On the 29th, So Byung-hoon, a member of the National Assembly Land, Infrastructure and Transport Committee from the Democratic Party of Korea, stated, "After consultations with the Ministry of Land, Infrastructure and Transport and the Seoul Metropolitan Government, we plan to propose an amendment to the 'Urban and Residential Environment Improvement Act' before the national audit, which mandates public acquisition of redevelopment rental housing."

The current Urban and Residential Environment Improvement Act limits the cases where the government, local governments, or public enterprises acquire rental housing constructed through redevelopment projects to "cases requested by the association." Representative So explained, "According to this provision, the association can supply rental housing as private rental housing without requesting public acquisition, and then eliminate the rental housing through sale conversion after 4 or 8 years," pointing out that this legal loophole is being exploited. The amendment aims to change this provision so that the public sector is required to acquire the housing regardless of the association's request.

Representative So explained the purpose of the bill, saying, "To prevent a recurrence of the zero rental housing pledge incident that occurred during the bidding process for Hannam 3 District, it is necessary to mandate that rental housing constructed through redevelopment projects be purchased by public entities such as the Korea Land and Housing Corporation (LH)." During the bidding process for the reconstruction of the AIID Deputy Minister Housing (Banpo 3 District) in Banpo-dong, Seocho-gu, one construction company proposed selling the rental housing to a REIT established by the construction company.

Assemblyman So Byung-hoon of the Democratic Party of Korea. / Photo by Yoon Dong-joo doso7@

The Ministry of Land, Infrastructure and Transport and the Seoul Metropolitan Government are also known to be actively supporting this amendment. The Ministry recently conveyed to Representative So's office that "it is deemed appropriate to mandate public acquisition and operation of rental housing built through redevelopment projects for tenants, thereby ensuring stable residence periods for tenants." The Seoul Metropolitan Government also stated, "redevelopment rental housing must be acquired by the public to ensure housing stability for displaced tenants and low-income urban residents, and legislation should be amended to prohibit sale as private rental housing," adding, "there is a need to clarify the legal basis for the supply and acquisition procedures of public rental housing."

Representative So plans to soon propose the amendment to the Urban and Residential Environment Improvement Act containing these provisions. Since the relevant ministries, including the Ministry of Land, Infrastructure and Transport and the Seoul Metropolitan Government, all agree on the amendment, there is a high possibility that the legislative process will gain momentum.

Representative So Byung-hoon said, "The government plans to supply 1.27 million housing units in the metropolitan area through the 3rd New Town plan and public redevelopment and reconstruction projects to stabilize the housing market, of which 390,000 units, or 31%, will be supplied through redevelopment and reconstruction." He added, "To ensure that redevelopment and reconstruction projects serve as a means for public housing stability rather than fueling housing price increases, efforts to supplement legal deficiencies must precede the full-scale implementation of these projects."