Housing Construction Takes a Backseat at Housing Corporations... "Spent 10 Trillion Won on Rental Purchases Over 7 Years"

Over the past seven years, public enterprises have spent more than 10 trillion won in taxes on purchasing rental housing in the Seoul and Gyeonggi areas. The Citizens' Coalition for Economic Justice (CCEJ) criticized these public enterprises for wasting taxpayers' money by buying rental housing at prices much higher than the construction cost.

The Citizens' Coalition for Economic Justice (CCEJ) held a press conference on the morning of the 28th at the CCEJ Hall in Jongno-gu, Seoul, and announced the "Analysis Results of LH·SH·GH Seoul·Gyeonggi Area Purchased Rental Housing."
[Photo by Citizens' Coalition for Economic Justice]

On the morning of the 28th, CCEJ held a press conference at their auditorium in Jongno-gu, Seoul, to announce the analysis results of rental housing purchases by Korea Land & Housing Corporation (LH), Seoul Housing & Communities Corporation (SH), and Gyeonggi Housing & Communities Corporation (GH) in the Seoul and Gyeonggi areas. According to CCEJ, estimating LH’s purchase amount in Seoul and Gyeonggi based on its nationwide housing purchase data, the total amount spent by the three public enterprises (SH, GH, LH) on purchasing 44,680 housing units in the Seoul and Gyeonggi regions over seven years was 10.6486 trillion won.

The annual purchase status was as follows: ▲2016 - 786.5 billion won (4,354 units) ▲2017 - 876.7 billion won (4,695 units) ▲2018 - 1.5209 trillion won (7,255 units) ▲2019 - 2.8066 trillion won (11,920 units) ▲2020 - 2.7652 trillion won (10,479 units) ▲2021 - 1.6124 trillion won (4,998 units) ▲2022 - 280.2 billion won (979 units). However, since LH did not disclose its rental housing purchase data for 2021-2022, CCEJ explained that including LH’s purchase data would further increase the total rental housing purchase costs.

CCEJ pointed out that the purchase prices of rental housing bought by LH, SH, and GH in the Seoul and Gyeonggi areas are higher than the costs of direct construction. To demonstrate this, they compared the construction cost disclosed by SH with the purchase prices of rental housing by LH and SH. The construction cost was based on the Goduk Gangil 4 complex, which was sold in 2020, while the purchase prices of rental housing by LH and SH were based on the average prices of houses purchased in 2020.

According to CCEJ, the price per square meter of exclusive area for Goduk Gangil 4 complex, as disclosed by SH, is 5.12 million won, which translates to about 300 million won for a 59㎡ unit. In contrast, LH’s average purchase price per 1㎡ of exclusive area for rental housing in 2020 was 8.45 million won for apartments and 7.93 million won for multi-family houses, which calculates to about 500 million won for apartments and 470 million won for multi-family houses for a 59㎡ unit. For SH, the average purchase price per ㎡ of exclusive area for rental housing in the same year was 8.3 million won for officetels and 7.65 million won for multi-family houses. CCEJ explained that the amount spent to purchase one rental apartment is up to about 200 million won more expensive than the cost of directly constructing a public apartment.

Accordingly, CCEJ urged for ▲improvements in the standards for rental housing purchase prices ▲disclosure of rental housing purchase information ▲cessation of the private new construction purchase agreement method.

A CCEJ official stated, “Thanks to public enterprises purchasing large amounts of rental housing at prices comparable to market prices, construction companies and developers easily secured profits, which further inflated housing price bubbles,” adding, “Even if public housing supply through new construction is difficult due to land shortages, the purchase prices of existing houses must be strictly scrutinized.”