95% Land Acquisition Required for Business Plan Approval
Calls to Ease Requirement to 80%, Same as Association Establishment
Easing Rules Could Lead to Supply of 90,000 Housing Units
The regional housing association system, which was introduced to stabilize housing for people without homes, has been causing frequent damages to its members, contrary to its original purpose. As a result, there have been calls to ease the land acquisition requirements. This is because many associations are unable to meet the required land acquisition ratio, causing project delays and increasing construction costs for the associations.
On the 27th, a seminar was held at the National Assembly Members' Office Building under the theme "Improvement of the Regional Housing Association System for Revitalizing Housing Supply," hosted by the office of Jeon Yonggi (Democratic Party).
On the 27th, participants are taking a commemorative photo at the "Improvement of the Regional Housing Association System for Revitalizing Housing Supply" hosted by the office of Jeon Yonggi (Democratic Party) at the National Assembly Members' Office Building. Photo by Lee Jieun
During the seminar, some participants argued that the land acquisition requirements at the business plan approval stage should be relaxed to revitalize projects. Kim Hye-gyeom, an attorney at Law Firm Young, stated, "Under current law, regional housing associations must secure 80% of the land at the association establishment approval stage and over 95% for business plan approval. The unreasonable gap between these requirements leads to holdout issues and project delays, resulting in a vicious cycle of increased financial costs and member contributions." Kim further suggested, "The land acquisition requirement should be eased to 80%, the same as for association establishment approval."
In practice, there have been frequent cases where projects are delayed or members are harmed due to insufficient land acquisition. In one regional housing association in Incheon, the association collected member contributions and misappropriated funds despite not securing the land, resulting in damages of approximately 90 billion won. Another association in Yongun-dong, Daejeon, is also struggling with delays in land purchases and holdout problems.
There were also claims that easing land acquisition requirements could speed up projects and have a positive effect on housing supply. Kim Kwangsoo, Policy Director of the Korea Real Estate Industry Academic Society, said, "If the land acquisition requirement is lowered to 80%, a significant number of existing project sites could move from the association establishment stage to the business approval stage, which could lead to the supply of 90,000 housing units." Currently, there are 618 regional housing association projects nationwide, with 136 at the establishment approval stage and 166 at the business plan approval stage. In terms of the number of units, the total is 361,104. Of these, 316 sites, or 58.2%, remain at the recruitment reporting stage.
Another alternative proposed was to legally allow landowners to participate as association members. Under current law, landowners cannot become members of regional housing associations. As a result, there have been complaints on the ground that landowners refuse to sell their land, slowing down projects. Kim suggested, "For landowners with a certain minimum area, the law could allow them to become association members or to receive housing pre-sale rights in exchange for providing their land. Encouraging landowner participation could prevent holdout issues and reduce project delays."
The regional housing association system allows residents to voluntarily form an association, build homes, and supply them. The system is structured so that the association secures land ownership using funds raised from its members. In its early days, it was popular because it allowed people to obtain homes without a subscription savings account. However, contrary to its original intent, some associations have pushed forward with projects without securing enough land, leading to increased construction costs or misappropriation of association funds, which has become a problem.
As member damages have become widespread, the Seoul Metropolitan Government began a comprehensive investigation of 118 associations from June to October this year. The city plans to crack down on associations that use project funds for personal purposes or engage in false or exaggerated advertising, and to devise measures to improve the system.
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