LH Purchased Rental Housing 400 Million Won More Expensive Than SH Apartments... Gyeongsilryeon "Waste of Taxes"

LH Maeip Imdae Costs 400 Million Won More Than SH Apartments
97% of LH Maeip Imdae Are Contracted Rentals
8.7 Trillion Won of Contracted Purchases Out of 10.8 Trillion Won in Maeip Imdae Over 3 Years

The Citizens' Coalition for Economic Justice (CCEJ) has analyzed that the Korea Land and Housing Corporation (LH) is purchasing rental housing up to 390 million KRW more expensive than the Seoul Housing and Communities Corporation (SH) apartment sale cost. Purchased rental housing refers to private housing bought by LH and rented out to youth, university students, newlyweds, and others. Essentially, the purchase price is the cost of the purchased rental housing, and it is pointed out that buying at a higher price results in wasteful tax spending.

LH Purchased Rental Apartments at 730 Million KRW... SH Wirye Forest Shine Complex 15 at 340 Million KRW

At a press conference held on the 2nd at the CCEJ auditorium, CCEJ revealed that LH's purchase price for rental housing is up to 390 million KRW more expensive than SH Wirye Forest Shine Complex 15, based on a standard exclusive area of 82㎡. The sale cost of SH Wirye Forest Shine Complex 15 is 340 million KRW. LH's purchase prices for rental housing are 730 million KRW for apartments, 570 million KRW for multi-family housing, and 560 million KRW for officetels.

The reason LH buys purchased rental housing at a higher price is mainly due to the contract purchase method, which reflects land acquisition costs and construction costs. LH's purchase methods for rental housing are divided into existing housing purchase and contract purchase. Existing housing purchase involves buying already built houses and supplying them as rental housing. In contrast, contract purchase involves LH making a pre-purchase agreement for newly constructed private housing, then buying it after completion to supply as rental housing. Contract purchase is more expensive than existing housing purchase because land acquisition costs, construction costs, and others are reflected in the purchase price during the new construction process.

According to CCEJ, the proportion of contract purchases by LH has steadily increased over the past three years. Last year, contract purchases accounted for 97% of the purchase amount and 96% of the number of purchased households. LH spent a total of 10.8 trillion KRW on purchasing rental housing over the past three years, with contract purchases accounting for 8.7 trillion KRW, or 80%.

CCEJ: "LH Should Purchase Below Construction Cost and Stop Contract Purchases"

The most expensive rental housing purchased by LH was also contracted through contract purchase. Based on an exclusive area of 82㎡ apartments, LH paid 1.16 billion KRW in Yeoksam-dong, Gangnam-gu, Seoul (April 2021), and 1.09 billion KRW in Seocho-dong, Seocho-gu (June 2023).

At the press conference, CCEJ criticized, "Buying rental housing through contract purchase is a waste of tax money," and urged, "Contract purchases should be stopped, and information such as purchase price, number of households, price per household, and supply area should be disclosed."

LH maintains that the contract purchase method has advantages over existing housing purchase and is not excessively expensive. An LH official stated in a phone interview that "There is a price ceiling for purchased rental housing depending on the region and supply type, so we do not buy at excessively high prices," and added, "In the past, we purchased rental housing through existing housing purchase, but there were quality degradation issues, and since these are already built houses, it is difficult to improve or supplement defects when they occur, so we are increasingly using contract purchase."