Aftermath of LH Scandal... Unable to Settle Compensation for 3rd New Towns, Pre-Subscription at Risk

Calls for Cancellation Arise Amid Landowners' Group Compensation Boycott

On the 18th, members of the Seongnam Residents' Solidarity held a press conference in front of the Blue House Fountain in Jongno-gu, Seoul, calling for the eradication and expansion of the three major illegal acts by LH (land speculation, withholding of housing relocation expenses, and construction corruption) to eliminate vested interests and violations of housing rights. Photo by Moon Honam munonam@

[Asia Economy Reporter Jo Gang-wook] The development of the 3rd phase new towns in the Seoul metropolitan area has come to a complete halt due to the land speculation scandal involving employees of the Korea Land and Housing Corporation (LH). With the preliminary subscription schedule for the 3rd phase new towns set for July, a collective refusal to cooperate with LH’s compensation procedures has emerged, and calls for the cancellation of the 3rd phase new towns are growing, causing public sentiment to deteriorate uncontrollably. If the government pushes ahead with the project as is, there are concerns that compensation for the 3rd phase new towns will not be completed and preliminary subscriptions will have to proceed regardless. Delays in construction and move-in are also expected to be inevitable.

According to industry sources on the 23rd, land compensation for the 3rd phase new town districts such as Gyeyang in Incheon, Gyo-san in Hanam, and Gwacheon has effectively been suspended. The government initially aimed to complete land compensation issues by the end of last year, but strong opposition from landowners has caused successive setbacks. Since the LH scandal, some new town areas have even seen collective boycotts of compensation by landowners. In fact, in the Gwacheon district, no landowner has agreed to compensation due to differences in appraisal values. For other 3rd phase new towns such as Wang-suk in Namyangju, Changneung in Goyang, Daejang in Bucheon, and the Gwangmyeong-Siheung district, which is embroiled in land speculation controversies, negotiations for compensation have not even begun.

Earlier, the government planned to conduct preliminary subscriptions starting in July with 1,100 households in Gyeyang, Incheon, followed by 1,400 households in Jinjeop 2 district, Namyangju, Gyeonggi Province by August, 1,000 households in Bokjeong 1 and 2 districts in Seongnam, 300 households in Cheonggye 2 district in Uiwang, and 200 households at the former Subangsa site in Noryangjin, Seoul. From September to October, 1,500 households in Wang-suk 2, Namyangju, and from November to December, 2,400 households in Wang-suk, Namyangju, 2,000 households in Daejang, Bucheon, 1,600 households in Changneung, Goyang, and 1,100 households in Gyo-san, Hanam are planned, totaling 30,000 households by the end of the year.

Typically, the new town supply schedule proceeds in the order of ‘district designation → district plan establishment and land compensation → preliminary subscription → project approval and groundbreaking → main subscription → move-in.’ However, with complications arising from the initial land compensation procedures, the government’s public housing supply schedule is at risk of disruption. In fact, the National Council for Public Housing Districts Solidarity (Gongjeonhyeop) recently stated at a press conference, "We will not cooperate in any way, including land compensation negotiations, until the full investigation into the LH employees’ land speculation allegations is completed." Market consensus is that if the investigation prolongs, the land supply schedule will inevitably be delayed.

Voices demanding the complete withdrawal of the 3rd phase new town plan are also growing louder. Over 110,000 people have agreed to a petition on the Blue House’s public petition board requesting the cancellation of the 3rd phase new towns. According to the polling agency Realmeter, 57.9% of respondents believe that withdrawing the designation of the 3rd phase new towns is appropriate. With Minister of Land, Infrastructure and Transport Byun Chang-heum serving a ‘limited-term’ appointment and the LH president position remaining vacant for an extended period, the project’s momentum has also been lost. The appointment of a new LH president through a public recruitment process is unlikely before June at the earliest, which may coincide with Minister Byun’s vacancy.

Researcher Ra Jin-sung of KTB Investment & Securities said, "The land speculation allegations involving LH employees in the Gwangmyeong-Siheung new town have made the development of the 3rd phase new towns uncertain," adding, "Especially at this point, the possibility of smooth negotiations with landowners is very low, so disruptions in the schedule and scale starting from land compensation are inevitable."