SH Corporation "Supervision Cost Calculation Standards Vary, Only Partially Reflected in Sale Prices, Improvement Needed"

Due to the standard construction cost, the difference in supervision fees is borne by the construction
SH Corporation "Negative impact despite expansion of public housing supply"

Seoul Housing and Communities Corporation (SH) argued that there is a discrepancy between the supervision fees actually paid to supervision companies and the supervision fee calculation standards reflected in the basic construction cost used for sale price determination, and that improvement is needed. Only a portion of the supervision fees actually incurred can be reflected in the sale price, resulting in a significant financial burden.

On the 18th, SH stated that the calculation methods, which are operated differently between public housing providers and private housing providers for expanding public housing supply and providing high-quality housing, should be normalized.

In housing construction projects, supervision companies manage and oversee whether the construction is properly carried out according to the design on behalf of the client. Public housing supervision fees are calculated and operated based on the "Construction Engineering Fee Standards" under the Construction Technology Promotion Act, while private housing supervision fees are based on the "Supervision Fee Payment Standards for Housing Construction Work" under the Housing Act. The sale price for both public and private housing is reflected based on the "basic construction cost" specified in the Housing Act.

SH pointed out that there are significant differences in supervision fees according to the three standards, and that these standards should be unified and appropriate fee standards for the work should be properly established.

The current supervision fee calculation system does not allow public housing providers to recover part of the supervision fees incurred, causing a financial burden on the providers. In the case of private housing, the scope of work for supervisors is relatively limited compared to public housing, resulting in fundamentally lower supervision fees, which is problematic.

SH is incurring supervision fees seven times higher (13 billion KRW) than the supervision fees stipulated by the basic construction cost (approximately 1.8 billion KRW), but cannot include these fees in the sale price, thus bearing the difference of about 11.2 billion KRW entirely.

Only 14% of the supervision costs for the Godeok Gangil 3rd Complex were reflected in the sale price. The contract amount for supervision fees between SH and the supervision company is about 13 billion KRW (402 million KRW per 3.3㎡), which is 4.03% of the total construction cost (321.8 billion KRW). In contrast, the amount that can be included in the sale price of the housing is only about 1.8 billion KRW, or 33,000 KRW per 3.3㎡, according to the basic construction cost system.

SH stated, "Although we are incurring supervision fees seven times higher than those stipulated by the basic construction cost, we cannot include them in the sale price and thus bear the difference entirely," adding, "The supervision fee system, which is disconnected from reality, negatively affects the sustainability of public housing supply."

Furthermore, it was pointed out that supervision fees for private housing are excessively low, raising concerns about poor supervision. A survey of supervision fees for reconstruction projects in Seoul showed fees ranging from 63,000 to 110,000 KRW per 3.3㎡, with an average of 82,000 KRW. This is only about one-quarter of the supervision fees for public projects (348,000 KRW per 3.3㎡).

Kim Heon-dong, President of SH, said, "Supervisors play a very important role in managing and overseeing the construction of safe and high-quality buildings on behalf of the client. There should be no difference in supervision fees between public and private housing," and added, "Due to the flawed system, only 20% of the supervision fees actually incurred can be reflected in the sale price, causing the corporation to bear the financial burden. This undermines the sustainability of public housing supply."