Expectations are growing for cooperation between the central government and Seoul City on real estate policies. The outcome is the urban housing supply project. There is great interest in how much synergy the collaboration between the central government, which manages the Reconstruction Excess Profit Recovery System (재초환) and floor area ratio (FAR) relaxation, and Seoul City, which holds the approval authority, will produce.
President-elect Yoon Seok-yeol pledged during his candidacy to consider easing the Reconstruction Excess Profit Recovery System and to raise the legal ceiling of the floor area ratio, which determines the feasibility of reconstruction projects, from 300% to 500%. This policy direction is likely to create synergy with Seoul Mayor Oh Se-hoon's recent abolition of the '35-floor rule.' Even if the central government relaxes the floor area ratio, if height restrictions remain, the feasibility of projects will be significantly undermined.
A construction industry official explained, "To fully utilize the floor area ratio within limited floors, the building's size and area must be increased, which inevitably leads to shorter distances between buildings and a deterioration of the residential environment." However, with the central government's relaxation of the floor area ratio and Seoul City's lifting of height restrictions working together, the urban high-density development projects have gained new momentum.
The easing of safety inspection standards is also expected to invigorate urban supply. The safety inspection stage is strongly influenced by the Ministry of Land, Infrastructure and Transport. If a building receives an E grade in the first safety inspection, it can be exempted from the second inspection, but such cases are practically rare. If safety inspections are eased and Mayor Oh actively supports housing approvals, supply is expected to accelerate further. In the year Mayor Oh took office, the number of apartment approvals in Seoul was 54,000 units, which is more than 50% higher compared to the annual average of 30,000 to 36,000 units from 2018 to 2020.
Real estate policy requires cooperation between the central government and local governments, but until now, this has not been the case. Mayor Oh campaigned on revitalizing private reconstruction and redevelopment projects, but was hampered by the central government's real estate policy stance, including the Reconstruction Excess Profit Recovery System, the price ceiling system, and floor area ratio restrictions. Moreover, the public-led redevelopment projects promoted by the government and Mayor Oh's private-led projects appeared to be in competition. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said in April, shortly after Mayor Oh's election, "Housing supply cannot be done solely by the central government, metropolitan governments, or local governments in administrative procedures such as candidate site selection, district designation, and review/approval, and mutual cooperation must be supported." This was interpreted as a warning shot to Seoul City.
Regarding the central government's official property price assessment, Mayor Oh also voiced his opinion, asking for authority to be delegated to local governments, leading to clashes with the authorities.
Meanwhile, according to Seoul City, President-elect Yoon called Mayor Oh the day before and requested that Seoul City officials be dispatched to the Presidential Transition Committee to prepare real estate policies. Until now, President-elect Yoon and Mayor Oh have shared the view that private-led supply should be activated through easing reconstruction regulations.
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