[2020 National Audit] Seoul City Audit, Public Redevelopment and Reconstruction System Improvement, Youth Housing Revitalization Focus (Comprehensive)

[Image source=Yonhap News]

[Asia Economy Reporter Kim Yuri] On the 20th, the first half of the Seoul Metropolitan Government's National Assembly Land, Infrastructure and Transport Committee audit held at Seoul City Hall focused intensively on resolving the issue of expanding supply within Seoul through the rapid promotion of public redevelopment and public reconstruction. Various measures to ensure the effectiveness of station-area youth rental housing were proposed.

During the Seoul city audit, there were multiple calls for additional institutional improvements to revitalize public redevelopment and reconstruction projects. Jo O-seop, a member of the Democratic Party of Korea, emphasized, "To expedite the promotion of public redevelopment and reconstruction projects, it is necessary to shorten or exclude the feasibility review period for new investment projects by the Local Public Enterprise Evaluation Institute," adding, "It is also necessary to improve constraints on funding procurement, such as enabling local public enterprises to independently raise funds."

The public redevelopment project is promoted through a public offering method, normalizing or accelerating stalled redevelopment projects by meeting public interest requirements (expanding rental supply) through the participation of public implementers such as the Seoul Housing and Communities Corporation (SH Corporation) and providing incentives, thereby expanding housing supply in urban areas. According to Seoul City, about 20 sites have shown interest in public redevelopment projects, and 15 sites in public reconstruction projects. Notably, among the hopeful public redevelopment project sites, many were originally designated redevelopment zones but were deregulated after obtaining only 30% resident consent due to resident conflicts, lack of project feasibility, and development charge burdens. Jo said, "There are 394 redevelopment and reconstruction deregulated zones in Seoul, raising concerns about accelerated aging of housing and infrastructure and slumification of residential areas due to deregulation," and added, "We must normalize projects and expand new housing supply through public redevelopment and reconstruction that can provide project cost support and rapid permits."

Regarding public redevelopment and reconstruction projects, Cheon Jun-ho, also from the Democratic Party of Korea, stated, "Transparency must be secured to ease conflicts, and procedures integrated to ensure speed," and requested, "Please also consider strengthening project feasibility through increased floor area ratio and project cost support." In response, Seo Jeong-hyeop, Acting Mayor of Seoul, said, "We have formed a task force (TF) with the Ministry of Land, Infrastructure and Transport to prepare together for institutional and legal improvements and lead site discovery," adding, "We will proceed without delay, starting the candidate site selection process in December."

Regarding station-area youth rental housing, there was criticism that after the 10-year mandatory rental period, conversion to general sale is possible, allowing only private developers to benefit from the station-area premium. Jo O-seop said, "Although Seoul plans to purchase the remainder when some public contributions are reclaimed after 10 years in the station-area youth rental housing project, this is unrealistic," pointing out, "Due to the nature of station areas, land and building prices could skyrocket after 10 years, making actual purchase difficult."

The station-area youth rental housing promoted by Seoul City ends the private developer's rental obligation after 10 years according to the Enforcement Decree of the Special Act on Private Rental Housing. Also, under the Act on Development Profit Recovery, 10-30% of the site is retained as existing youth rental housing through public contribution by land use, and the remaining portion allows private developers to newly set rental deposits and rents. Jo said, "Private developers participating in the station-area youth rental housing project will raise rental deposits and rents after 10 years, and at least 56,000 youths who have lived in youth rental housing will be forced to find new rented rooms again," emphasizing, "We must proactively supplement the system for various foreseeable problems and, if necessary, even consider redesigning the project."

Kim Hee-guk of the People Power Party said, "The area and rent of youth housing do not meet the expectations of demanders," and added, "To increase area and lower rent, the Korea Land and Housing Corporation (LH) should secure exclusive land and promote rent reduction through tax cuts." He further noted, "Since the implementer must buy land from landowners to start, costs are too high. The restriction limiting project promoters to landowners also needs to be reconsidered."

There was also a call to enhance the effectiveness of the station-area youth rental housing project. Lee Jong-bae of the People Power Party, through materials distributed before the audit, stated, "According to Seoul City, half of the youth housing in Guui-dong, Gwangjin-gu, which began occupancy last April, is vacant," and explained, "This housing has a deposit of 45 million KRW and monthly rent of 460,000 KRW. Applying Gwangjin-gu's deposit-to-rent conversion rate of 6.9%, the deposit converts to 10 million KRW, making the monthly rent 660,000 KRW. Contrary to the initial promise to supply at prices cheaper than surrounding market rates, the high price has reduced youth demand."

Regarding the low supply rate compared to supply targets, it was reported that the prolonged COVID-19 pandemic has led to a slump in the commercial facility sales market, making profitability uncertain for youth housing projects, and that after the government's June 17 measures, mortgage loans for rental business operators were completely banned, making project continuation difficult, reflecting the development industry's atmosphere. Lee emphasized, "The project, started with the purpose of supporting youth housing, is losing effectiveness as it fails to meet demanders' expectations," and stressed, "We must find ways to improve the quality of youth housing to increase satisfaction among actual users and realize qualitative enhancement of housing."

Meanwhile, during the Seoul city audit, opposition parties also raised issues regarding TBS programs such as 'Kim Eo-jun's News Factory' and public opinion polls. There was also a dispute over former Democratic Party leader Lee Hae-chan's remark that "Seoul is a vulgar city." Regarding criticism of Seocho-gu's property tax reduction ordinance, Seoul City stated that it is considering filing a Supreme Court lawsuit or requesting suspension of execution if the ordinance is promulgated forcibly. Acting Mayor Seo Jeong-hyeop said, "(Seocho-gu's property tax reduction ordinance) fundamentally violates the law and raises fairness issues among Seoul's 25 autonomous districts, so we requested reconsideration," adding, "If Seocho-gu continues to insist, we are considering filing a Supreme Court lawsuit or requesting suspension of execution." He further added, "It is undesirable to enact policies for specific districts by violating laws."

There was also criticism that the correction rate for illegal 'room splitting' buildings in Seoul is minimal, highlighting the need for fundamental measures to prevent and correct such practices. According to Seoul City's 'Status of Illegal Buildings and Room Splitting,' the correction rate for room splitting decreased from 11% in 2016 to 2.39% as of August 2020. Jang Kyung-tae of the Democratic Party emphasized, "First, a full survey of room splitting should be conducted, especially around university areas, to closely examine hidden residential conditions and take more active administrative measures." In response, Seoul City stated, "We plan to strengthen inspections by increasing the number of crackdowns on small buildings where room splitting mainly occurs and by filing complaints against violators of the Building Act," adding, "We will improve 'Seumter,' an integrated data management system for buildings, in consultation with the Ministry of Land, Infrastructure and Transport to monitor illegal buildings intensively and discuss strengthening laws related to enforcement penalties to thoroughly recover expected profits from illegal acts."