Vice Minister Lee Sangkyung: "Preventing Damages from Local Housing Cooperatives at the Establishment Stage" [Real Estate AtoZ]

"District Unit Plan First": Changes to Establishment Procedures
90% Land Purchase Contracts and Urban Planning Required in Advance
Mandatory Disclosure of Estimated Project Costs and Profit-Loss Analysis
Housing Act Amendment Planned This Year; Comprehensive System Overhaul

Lee Sang-kyung, the 1st Vice Minister of the Ministry of Land, Infrastructure and Transport, is speaking at a meeting with regional housing associations on the 17th. Ministry of Land, Infrastructure and Transport

The Ministry of Land, Infrastructure and Transport is launching institutional reforms to prevent the improper establishment of local housing cooperatives in advance. The ministry aims to address the structural problems of the current system, which has led to repeated damages for cooperative members, by significantly tightening the standards so that new members can no longer be recruited unless land acquisition and urban planning are confirmed.

On October 17, Lee Sangkyung, First Vice Minister of the Ministry of Land, Infrastructure and Transport, met directly with members of local housing cooperatives from major regions such as Seoul, Busan, and Gyeonggi Province to listen to cases of damages, including project delays and increased additional contributions, and expressed his commitment to improving the system.

Vice Minister Lee stated, "We will actively reflect your suggestions and review institutional reform measures with the goals of 'preventing damage in advance' and 'normalizing existing projects.'" He added, "It is urgent to strengthen the standards for establishing new cooperatives in order to prevent the creation of poorly managed cooperatives and the occurrence of new damages. We will immediately pursue institutional reforms for this purpose."

Lee Sangkyung, First Vice Minister of the Ministry of Land, Infrastructure and Transport, is speaking at a meeting with local housing cooperatives on the 17th. Ministry of Land, Infrastructure and Transport

Under the current system, a cooperative can file a recruitment report for new members once it secures rights to use just 50% of the land. As a result, steering committees have often recruited members without actually securing land or reviewing the consistency of urban planning, leading to frequent delays or impossibility in land acquisition later on.

Some agencies have pre-purchased project sites under the names of founders or their relatives and then resold them to the cooperative at prices more than ten times the market value. Others have attracted members with unrealistic business plans, presenting only a "planned change in district unit planning." These practices have led to project delays of over ten years, sharp increases in additional contributions from members, and ongoing conflicts due to non-transparent fund management.

To fundamentally address the loopholes in the local housing cooperative system, the ministry has decided to significantly strengthen the requirements for establishing cooperatives.

Currently, securing rights to use just 50% of the land is sufficient to file a recruitment report, but going forward, cooperatives will be required to secure purchase contracts for more than 90% of the total land before recruiting members. They must also submit documentation proving that at least 10% of the contract deposit has actually been paid.

In addition, before recruiting members, changes or decisions regarding district unit plans-such as zoning and floor area ratio-must be finalized. Previously, the process was "member recruitment report → cooperative establishment approval → district unit plan decision," but it will now be changed to "district unit plan decision → member recruitment report → cooperative establishment approval."

Through these reforms, the ministry aims to block the recruitment of members based on uncertain plans and enhance the stability of project implementation.

Furthermore, it will be mandatory to disclose estimated project costs-including land acquisition costs, construction costs, agency fees, and financing costs-as well as a profit and loss analysis table in the member recruitment notice. The goal is to enhance transparency so that members can directly verify the scale of their contributions and the viability of the project.

The ministry plans to prepare a comprehensive plan for improving the local housing cooperative system and swiftly push for amendments to the Housing Act within this year.

Vice Minister Lee stated, "We will do everything possible to ensure that local housing cooperatives become a system that protects the rights of members and achieves housing stability," adding, "We will quickly prepare effective improvement measures through continued communication with members."