Concerns Over Delays in Supplying 30,000 Homes... Seoul Urges Rationalization of 'Relocation Loan Regulations'

91% of 43 Redevelopment Sites Face Loan Regulation Crisis This Year

The Seoul Metropolitan Government has urged the government to ease loan regulations, stating that many redevelopment sites scheduled for relocation this year are facing difficulties in securing relocation funds due to government lending restrictions. The city emphasized that relocation loans should be recognized not as simple household loans, but as essential project costs for housing supply, and called for the loan-to-value (LTV) ratio for relocation loans to be raised to 70%.

According to the Seoul Metropolitan Government on January 27, a survey of 43 redevelopment zones scheduled for relocation this year found that 39 zones (approximately 31,000 households) are affected by loan regulations. This accounts for about 91% of all project zones. The affected areas include 24 redevelopment and reconstruction sites (about 26,200 households) and 15 small-scale housing maintenance projects such as Moa Housing (about 4,400 households).

The city explained that after the government announced the “Household Debt Management Plan” on June 27 and the “Housing Market Stabilization Measures” on October 15, regulations were imposed: an LTV of 40% for single-home owners, 0% for owners of multiple homes, and a loan limit of 600 million won. As a result, union members have been unable to secure the funds needed for relocation, causing project delays.

The burden of securing relocation funds is even greater for medium- and small-scale projects. This is because funding conditions are becoming increasingly polarized depending on the size of the project and the construction company. Large-scale projects in areas such as Gangnam can relatively easily secure additional relocation funds, but medium- and small-scale projects are forced to accept interest rates that are 3-4 percentage points higher than the basic relocation loan rate, leading to project delays and increased costs, according to the city.

In fact, the Moa Town project in Myeonmok-dong, Jungnang-gu, which involves small and medium-sized construction companies, is facing major difficulties as loan regulations have blocked funding just before relocation. This project consists of four unions with a total of 811 members, including 515 single-home owners (subject to LTV 40%) and 297 owners of two or more homes (subject to LTV 0%, with loans blocked). The construction company has notified the union that it cannot provide payment guarantees due to concerns about a decline in its credit rating.

Finally, the Seoul Metropolitan Government reiterated these concerns to the Ministry of Land, Infrastructure and Transport, stressing the urgent need for institutional improvements. Choi Jinseok, head of the Seoul Housing Division, said, “From this year through next year, up to 66 projects and 56,000 housing units may be affected by loan regulations, raising concerns about disruptions to the housing supply schedule. The current situation, which is causing delays in the planned housing supply schedule, must be addressed quickly.”