Lee Administration's First Supply Plan Promises Speed and Execution... Market Remains Skeptical [Real Estate AtoZ]

LH Direct Implementation Aims to Boost Execution and Speed
Experts Welcome New Approach, but Say Delivery and Pace Will Be Key

The government has announced plans to supply 1.35 million housing units in Seoul and the surrounding metropolitan area over the next five years. Although the pace of housing price increases has somewhat slowed since the June 27 measures, concerns over insufficient supply persist. Historically, each administration has introduced comprehensive "package" policies focused on large-scale housing supply at the beginning of their term.

What is different this time is that, instead of selling land developed by Korea Land and Housing Corporation (LH) to the private sector, LH will directly carry out the projects. Additionally, unlike previous plans that set targets based on housing permits, this policy sets goals based on construction starts. Experts have positively evaluated the inclusion of mechanisms to ensure the execution of supply targets, but they also noted that actual implementation and speed will be key factors going forward.

LH Direct Implementation: Will It Really Enhance Execution and Speed?

On September 8, Lee Sangkyung, First Vice Minister of Land, Infrastructure and Transport, appeared on "Kim Hyunjung's News Show" and said, "The Yoon Sukyeol administration previously focused on private-sector supply, but this time, public entities like LH will take the lead, making it possible to proceed according to the government's plans." He added, "Since the compensation phase for the third new town projects promoted by the previous administration is nearing completion, we believe execution can be improved."

Under this policy, LH will directly implement projects on residential land currently being developed or planned for private sale. Traditionally, land was developed and then sold to private construction companies, which would build apartments. This approach often led to slower supply during economic downturns due to financing issues. By directly developing land originally intended for sale, LH expects to start construction on a total of 60,000 units by 2030. Additionally, by converting non-residential land owned by LH in land development and public housing districts, another 15,000 units will be added by 2030.

Lee Eunhyeong, a research fellow at the Korea Institute of Construction Policy, stated, "LH's direct implementation is a new attempt to supply housing at lower prices, which is highly commendable." However, he also pointed out, "In the long run, due to aging demographics and population decline, demand for new housing sites may not be as high, so it is worth considering whether LH's enhanced capabilities will actually be needed." He also noted that LH still lacks a system to offset losses from existing deficit operations such as public rental housing, which needs to be addressed.

Ham Youngjin, head of the Real Estate Research Lab at Woori Bank, explained, "Regularizing the conversion of LH-owned non-residential land will make it possible to convert knowledge industry centers and commercial sites suffering from unsold units and oversupply into residential use." He added, "With LH directly implementing projects, private construction companies are expected to focus on winning public land construction contracts or urban redevelopment projects." He further emphasized, "The effectiveness of the policy will depend on execution and speed, private sector participation, and the harmony of financial and regulatory measures that minimize inconvenience for actual homebuyers while curbing speculative demand."

Kim Yoonduk, Minister of Land, Infrastructure and Transport, is announcing measures to expand the supply of residential real estate at the Government Seoul Office on the 7th. Photo by Yonhap News

"Improving Redevelopment Conditions": Floor Area Ratio and Reconstruction Charges Deferred

To increase housing supply in urban areas, the government plans to better utilize aging facilities and idle land. The maximum floor area ratio for public rental housing over 30 years old will be raised to 500%. After reconstruction, these will be resupplied as integrated public rental housing, with additional units used for sales or as integrated public rentals. The pilot projects launched last year in Sanggye Madeul and Hagye 5 Districts will be prioritized. Large-scale complexes such as Suseo (3,899 units) and Gayang (3,235 units) will begin from the year after next. By 2030, approximately 23,000 units are expected to begin construction in the metropolitan area.

Park Wongap, chief real estate expert at KB Kookmin Bank, commented, "To develop idle land, it is essential to speed up various permit and approval processes, so close cooperation with local governments such as the Seoul Metropolitan Government is necessary." He added, "As housing insecurity continues for those without homes, rapid implementation to make the increase in supply tangible will be key to stabilizing the market."

The government will also revise the system to shorten the redevelopment process by up to three years. To flexibly respond to changes such as rising construction costs, restrictions on building height and green space requirements will be eased. The government expects these measures to supply 234,000 units over five years. Incentives for increasing the floor area ratio in private redevelopment and reconstruction projects will not be addressed immediately but will be discussed later through public debate, due to concerns that they could drive up housing prices in some areas.

The excess profit recovery system, often cited as a reason for slow reconstruction projects in Seoul, will also remain unchanged for now. Vice Minister Lee said, "After being suspended following past implementation, the reconstruction levy will be assessed, and the Democratic Party will evaluate the policy effects as the situation develops." Researcher Lee added, "The omission of the excess profit recovery system from this round is notable, but the reconstruction levy remains a barrier by increasing additional costs for association members, so future policy should consider abolishing or significantly easing it."

Apartment complexes and residential areas in downtown Seoul as seen from Namsan, Seoul. Photo by Yonhap News

Supply Policies at the Start of Every Administration: Moon, Yoon, and Lee

The shift to LH's direct implementation and other changes in this policy appear aimed at differentiating the current administration from previous ones and achieving real expansion of housing supply.

During the previous Yoon Sukyeol administration, the government pledged to supply 1.58 million units in the metropolitan area during its term, but less than 500,000 units actually began construction over three years. Although the blueprint for increased supply was presented at the start of the administration, concrete directions for actual implementation were lacking, resulting in limited impact. Soaring construction costs and concerns over project financing (PF) failures also disrupted housing supply.

The Moon Jaein administration set a goal of supplying 1 million public housing units at the start of its term under the banner of "housing welfare." While a certain level of public rental housing was secured, the main supply measures focused on new apartments in the metropolitan area were not introduced until the latter part of the term, resulting in a lack of momentum.

After a meeting of real estate-related ministers, Minister of Land, Infrastructure and Transport Kim Yoonduk said in a briefing, "Unlike previous administrations, the 'Lee Jaemyung administration' will pursue sufficient and sustainable housing supply in locations favored by the public, based on the consistent standard of construction starts."

Experts positively evaluated the policy for presenting a clear direction for housing policy that the market has long demanded, but also noted that the implementation process must be closely watched. Lab head Ham stated, "The June 27 household loan regulations helped calm the surging Seoul housing market, but given the possibility of further base rate cuts within the year and the shortage of rental listings and shift to monthly rentals, it was necessary to address long-term concerns over housing supply shortages."

Kangrae Ma, professor of urban planning and real estate at Chung-Ang University, pointed out, "As in previous administrations, grand numbers like hundreds of thousands or millions of units are being presented, but the public does not really feel the impact." He added, "In Seoul, the rapid demolition of old housing means that even if supply increases, the effect is limited, and since redevelopment projects create new relocation demand, the net increase in new apartments is minimal."