Redevelopment 'Zero Rental Housing', 'REITs' Completely Blocked by Amendment to the Dojeong Act

Hannam 3 District Panorama (Photo by Lee Chunhee)

[Asia Economy Reporter Lee Chun-hee] A bill to amend the "Urban and Residential Environment Improvement Act," which mandates that all rental housing built through redevelopment projects must be compulsorily acquired by the public sector, has been proposed. If the bill passes, methods to reduce or eliminate rental housing such as rental-to-sale conversions and REITs (Real Estate Investment Trusts) will be fundamentally blocked.

On the 28th, So Byung-hoon, a member of the National Assembly's Land, Infrastructure and Transport Committee from the Democratic Party of Korea, announced, "I have taken the lead in proposing a partial amendment to the Urban and Residential Environment Improvement Act to make it mandatory for local governments and public institutions such as the Korea Land and Housing Corporation (LH) to purchase rental housing."

The current Urban and Residential Environment Improvement Act limits the cases where the government, local governments, or public enterprises acquire rental housing built through redevelopment projects to "cases where the association requests it." Representative So explained, "If the association does not request (public acquisition), the association can supply it as private rental housing and then sell it through a rental-to-sale conversion after 8 years, which is problematic," pointing out that this legal loophole is being exploited. The amendment aims to change this provision so that the public sector is obligated to acquire the rental housing regardless of the association's request.

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 reasonable to mandate that rental housing built through redevelopment projects for tenants be acquired and operated by the public sector to ensure stable residence periods for tenants." The Seoul Metropolitan Government also stated, "Redevelopment rental housing must be compulsorily acquired by the public sector to ensure housing stability for displaced tenants and low-income urban residents and to prevent sale as private rental housing," and emphasized the need to clarify the legal basis for public rental housing supply and acquisition procedures.

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

Representative So said, "During the contractor selection process for the Hannam 3 District redevelopment project last year, a construction company caused controversy by pledging to build apartments without rental housing," adding, "The law must be amended so that redevelopment projects can contribute to national housing stability through the active supply of public rental housing."