The Public Redevelopment Keyword is 'Resident Consent'... "Concerns Over Obstacles Like Rental Housing Ratio"

Selected 8 Candidate Sites Including Heukseok 2, Yangpyeong 13·14, Gangbuk 5
Radical Incentives Such as Floor Area Ratio Increase and Exclusion from Sale Price Ceiling System
However, Two-Thirds Owner Consent Required for Public Redevelopment
Concerns Over High Rental Housing Ratio and Land Transaction Permission System as Obstacles
Many Owners in Candidate Sites Have Changed Hands to Investors
Experts Warn "Project May Be Halted If Profitability Is Not Secured"

[Image source=Yonhap News]

[Asia Economy Reporters Onyu Lim and Mune Won] On the 15th, the Ministry of Land, Infrastructure and Transport and the Seoul Metropolitan Government announced all eight final candidate sites for public redevelopment, marking the full-scale launch of the government's housing supply expansion policy revealed in last year's August 4th real estate measures.

Notably, all eight redevelopment zones selected as candidates within Seoul are located in 'station areas.' Given the practical difficulty of securing large-scale land for new development in Seoul, the policy intention appears to focus supply capacity on station areas where there is relatively more room to increase development density. However, concerns remain that conditions such as the high proportion of rental housing, which is a prerequisite for the project, could become obstacles to resident consent.

Exemption from Price Ceiling System, Increased Floor Area Ratio... Applications Flooded Due to Incentives

Public redevelopment is a maintenance project method where public entities such as Korea Land and Housing Corporation (LH) and Seoul Housing and Communities Corporation (SH) participate as co-implementers alongside resident associations, unlike the traditional redevelopment led solely by associations. Residents are given incentives such as increasing the floor area ratio up to 120% of the legal limit and exemption from the price ceiling system. In return, more than half of the units, excluding those for association members, must be built as rental housing, strengthening the public function of redevelopment. Due to these benefits, over 70 zones in Seoul applied for candidate site selection.

All eight zones selected as candidates are station areas adjacent to subway stations but have experienced an average of over 10 years of project stagnation since being designated as maintenance zones due to lack of profitability and conflicts among residents. The Ministry of Land, Infrastructure and Transport and Seoul City plan to supply a total of 4,700 housing units in these zones through public redevelopment.

The largest supply scale is in Heukseok 2 District in Dongjak-gu. Covering a total of 45,229㎡ and currently home to 270 households, it will be transformed into a complex of 1,310 households through public redevelopment. It has attracted attention since the application stage due to its proximity to the Gangnam area. This district was designated as a maintenance zone in 2008 and a promotion committee was formed the following year, but conflicts with nearby merchants and building owners have prevented progress to date.

The supply quantities for the other zones are △ Yongdu 1-6 District 919 households △ Gangbuk 5 District 680 households △ Yangpyeong 13 District 618 households △ Yangpyeong 14 District 358 households △ Bongcheon 13 District 357 households △ Sinseol 1 District 279 households △ Sinmunno 2-12 District 242 households. Among these, Sinmunno 2-12 District is a 1,249㎡ urban leftover land located right in front of Gwanghwamun Square. It is characterized by being in a quasi-residential and general commercial area with a floor area ratio of 900% applied.

Kim Seong-bo, head of the Housing and Architecture Headquarters of Seoul City, explained, "The first public redevelopment pilot project candidate sites were selected focusing on areas where progress can be made quickly through public support." Seoul City initially reviewed 12 sites including these zones for final candidate selection but deferred designation for four sites due to issues specific to each zone. The city plans to reconsider public redevelopment in the next selection committee.

The eight selected candidate sites will undergo resident consent processes and then LH and SH will be designated as public implementers. Subsequently, Seoul City and local districts will establish maintenance plans applying public redevelopment special measures to finalize the candidate sites as public redevelopment maintenance zones. Public redevelopment is expected to complete zone designation and begin full-scale projects as early as the end of this year.

[Image source=Yonhap News]

Excessive Public Contributions Remain a Persistent Obstacle

Experts say the success of public redevelopment depends on resident consent. To designate a housing supply activation district, consent from more than two-thirds of landowners is required. The problem lies in excessive public contributions such as the high rental housing ratio. Half of the newly constructed housing units, excluding those for association members, must be supplied as public rental or profit-sharing lease housing. In fact, Dapsimni 17 District, which had expressed intent for public redevelopment, withdrew its application due to resident opposition fearing decreased profitability.

Seoul City's land transaction permit system, implemented to prevent speculative trading and rapid land price increases, is also expected to significantly affect resident consent. This system requires approval from the local government head when purchasing land exceeding 18㎡ in residential areas and 20㎡ in commercial areas. For housing, a minimum two-year residency obligation applies, effectively banning so-called 'gap investments' where homes are bought with leases. Considering many owners in redevelopment zones are investors who have changed hands multiple times, this could provoke considerable opposition.

Ham Young-jin, head of Zigbang Big Data Lab, said, "Public redevelopment can complement the limitations of general redevelopment, but the most important factor is private sector enthusiasm," adding, "Efforts such as easing the public contribution ratio are needed to obtain consent and create a successful role model."

Senior Researcher Doo Sung-gyu of the Korea Research Institute for Construction Industry also pointed out, "A fundamental change is needed in the government's stance of not allowing development profits," warning, "If profitability is not secured, public redevelopment may start initially but could be halted later due to owner dissatisfaction."