A claim has emerged that a rational construction cost estimation system should be established to solve the problem of regional housing cooperatives (jihutbaek) unable to proceed due to soaring construction costs. The argument is to mandate verification by public institutions similar to redevelopment and reconstruction projects and to introduce an organization to mediate when conflicts arise.
In particular, there are criticisms that the obligation for transparency in the operation of housing cooperative projects, which are conducted under "darkness," should be strengthened, especially regarding the disclosure of information by companies that act on behalf of the cooperatives. To prevent unqualified agencies from indiscriminately emerging, there are also suggestions to change the designation for agency operations to local government registration and amend the law to make agencies liable in the case of project failures.
The Korea Research Institute for Human Settlements (KRIHS) announced on the 9th that it had released a report entitled "Current Status and Issues of Regional Housing Cooperatives and Policy Directions."
Jihutbaek is a system where local residents autonomously form cooperatives, purchase land directly, and supply dwellings without competitive bidding. By forming cooperatives and carrying out projects themselves, residents can purchase dwellings at prices lower than general sales by the amount of project costs saved. Across the country, there are a total of 618 business sites for jihutbaek projects, with approximately 360,000 dwellings and about 260,000 cooperative members.
However, due to the increasing uncertainty in project promotion, more than half of the currently ongoing jihutbaek projects are still in the recruitment reporting stage. The proportion of cooperative establishment approvals, project plan approvals, and construction commencement is also low. In reality, there are 248 cooperatives that have not started construction despite more than five years having passed since recruiting members, affecting approximately 110,000 members, and the resulting expense is estimated to reach about 3.3 trillion won.
One of the conflict factors in the jihutbaek promotion process is the increase in construction costs. There have been continuous cases of project suspensions and delays in moving in due to construction companies demanding substantial increases in construction costs during the commencement and completion stages, with negotiations not proceeding smoothly. Because the cooperative members are centered on the jihutbaek, their understanding of the overall housing business is relatively low, which can create limitations in accessing information and making judgments related to construction cost contracts or price linkage conditions.
Additionally, the fact that the agencies that conduct the operations on behalf of the cooperatives provide insufficient transparency in the operation and management of business sites is a significant obstacle for jihutbaek. Typically, jihutbaek entrusts agencies with tasks related to member recruitment and management, land acquisition, project plan formulation, and the licensing procedures up to completion.
Because the agency effectively leads the project, issues such as excessive charging of project costs and lack of transparency in operating expenses arise. Some agencies recruit cooperative members through exaggerated advertisements like "100% fixed sale price" and "guaranteed winning" without properly informing them of the associated risks. Especially since agencies often exercise actual authority while having limited legal responsibility, structural problems such as excessive project cost charges and lack of transparency in operating expenses can occur.
However, despite these problems, the jihutbaek at the stage before project plan approval is not subject to local government management and supervision, which could lead to greater harm for cooperative members.
In this regard, the researcher pointed out that institutional improvements, such as establishing a rational construction cost estimation system, are necessary. They suggested that it could be considered to mandate verification by public institutions such as the Korea Real Estate Board (REB) when the increase exceeds a certain level.
The researcher explained, "There is a need to establish an institutional foundation for the rational promotion of projects," and noted that "directly, it is possible to create a body to mediate construction cost disputes and impose penalties on corporations that charge excessive construction costs to ensure that similar incidents do not recur by refining relevant systems."
It is also the opinion of the researcher that the obligation to disclose information should be strengthened in order to enhance transparency in the business process, including agencies. The researcher mentioned, "We should consider transitioning the agencies to a local government registration system, imposing certain performance and expertise standards, and amending relevant laws to hold some joint responsibility for the losses incurred by members in the event of project failures."
Furthermore, the researcher added, "We can also consider establishing an information disclosure system for cooperative members to transparently share related information," and emphasized the need to reform related institutional foundations to enable local governments to expand their supervisory authority to allow for more practical inspections and measures across the entire project.