Points awarded for adding community facilities to purchased rental housing
Companies contributing to easing the Jeonse crisis given priority land supply
On the 20th, Jin Sun-mi, head of the Future Housing Promotion Team of the Democratic Party of Korea, along with other lawmakers, toured the rental housing building at Seodo Hubil, an LH purchased rental housing located in Gangdong-gu, Seoul, during an on-site meeting for the housing welfare project. (Photo by Jin Sun-mi's Office)
[Asia Economy Reporter Moon Jiwon] The government will prioritize supplying public housing construction sites to construction companies that strive to improve residential welfare, such as by providing high-quality rental housing.
The Ministry of Land, Infrastructure and Transport announced on the 26th that starting next year, when supplying apartment construction sites within public land such as 2nd and 3rd phase new towns, it will introduce a method of prioritizing land supply through evaluation rather than simple lottery.
Currently, apartment construction sites within land development districts and public housing districts are supplied by lottery. This is because using a competitive bidding method that supplies to the highest bidder could raise housing sale prices.
However, under the lottery supply method that relies on chance, side effects such as collusive bidding (so-called "swarm bidding") using affiliated companies like paper companies to increase winning chances have occurred.
There has also been social demand that construction companies receiving public land, which is a public asset created through land expropriation, contribute to improving housing quality and residential welfare.
Accordingly, the government decided to completely improve the existing lottery supply method and activate a competitive supply method that evaluates social contribution and housing quality.
First, construction companies will be required to build a certain percentage of rental housing by region, and excellent companies will be selected by evaluating their business plans and then prioritized in land supply.
The government announced this plan on the 19th as part of the "Support Measures for Housing Stability for Low-income and Middle-class" to stabilize the jeonse (long-term deposit lease) market. Starting next year, companies participating in purchase-agreement type rental housing and public jeonse housing projects will receive priority supply and additional points when participating in bids.
Since purchase-type rental housing limited to villas has low demand, companies that build community facilities like apartments together are expected to receive higher evaluations. The government plans to announce specific details such as point allocation methods separately next month.
The rental housing constructed in this way will be purchased randomly by building and unit number so as not to be distinguishable from private sale housing and supplied as affordable public rental housing. This may create a "social mix" effect where public rental housing is mixed within private sale land.
The government will also introduce a public offering REIT method that shares profits generated from housing construction and sales with the general public, and select public land supply recipients by evaluating the stock offering ratio, target dividend rate, and stock allocation plans for small investors.
If a consortium is formed to activate participation of small and medium-sized enterprises, additional points will be given, and the scale of design fee compensation will be expanded to reduce the burden of design costs.
Furthermore, priority supply rights will be granted to companies meeting certain standards such as eco-friendliness and housing quality, and bids from affiliated companies aiming only to secure land supply will be blocked. Considering the period required to obtain improved subscription qualifications, the existing lottery subscription criteria will be maintained until next year.
The government plans to expand the land supplied by this method to more than 60% of the apartment land within public land supplied by 2024.
Oh Seong-ik, Director of Real Estate Development Policy at the Ministry of Land, said, "By supplying land to companies with high housing quality and social contribution, a sound land supply order is expected to be established," and added, "We plan to implement preferential land supply to companies with high resident satisfaction in the future to improve residential satisfaction."
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