The government will begin construction on 1.35 million dwellings in the metropolitan area by 2030 through the expansion of public-led housing supply. To achieve this, the Korea Land & Housing Corporation (LH) will act as the direct business implementer to supply public dwellings, instead of selling public land in the metropolitan area to private construction companies. There are also plans to build apartments on non-residential land, such as commercial sites, within existing second and third phase new towns instead of constructing new new towns.
To activate reconstruction and redevelopment, which play a key role in housing supply in central Seoul, an expansion of floor area ratio exceptions is also being considered. Public rental dwellings in key locations like Gangnam and Gangseo will be completely reconstructed and developed into high-density public dwellings that can also accommodate the middle class.
On the 7th, the government held a real estate-related ministerial meeting and announced a housing supply expansion plan of this nature. This is the first housing supply measure under the Lee Jae-myung government.
The average dwelling construction performance in the metropolitan area over the past three years is 158,000 dwellings, which is about 100,000 dwellings short of the appropriate supply level of 250,000 dwellings. The decrease in move-in volume due to sluggish construction is continuing to aggravate the imbalance in housing supply and demand in the metropolitan area, leading to increased anxiety over housing prices.
Accordingly, the government plans to supply 270,000 new dwellings annually for five years, totaling 1.35 million dwellings. This figure is an increase of 560,000 dwellings compared to the previous plan. The standard for this supply scale is construction starts. The government has set this standard to ensure that the public can physically feel the housing supply.
Minister Kim Yoon-deok noted, "The government has established 'extraordinary supply measures' to fundamentally improve the shortage of dwellings in the metropolitan area," and added, "(The scale of dwelling construction) is comparable to the annual production of the first phase new towns, at an average of 270,000 dwellings." Minister Kim emphasized, "To enhance the stability of housing supply, we will expand the role of the institutional sector and significantly strengthen execution power."
◇ LH will not engage in 'land trading'… supply of 60,000 dwellings through direct execution
LH will supply 60,000 public dwellings over the next five years by directly implementing instead of selling public land to private construction companies. Previously, private construction companies would purchase public land held by LH and supply dwellings. This method has a problem where the supply of dwellings by private construction companies is delayed or halted during periods of real estate market recession.
Projects directly executed by LH will proceed using a 'contract-type private participation' method where private construction companies are responsible for design, construction, and more. If LH provides the land, the private sector will handle funding, design, and construction from start to finish. The apartment brand will be that of the participating private construction companies.
The Ministry of Land, Infrastructure and Transport plans to announce specific supply plans, supply types, and funding methods later this year, based on discussions from the LH Reform Committee. First Vice Minister Lee Sang-kyung stated, "We are considering rental dwellings in a form that the middle class can move into, like the basic housing in Gyeonggi Province" and added, "The dwellings supplied by LH will not be of low quality or primarily small in size, but rather a variety of dwelling types will be provided."
LH will be allowed to convert non-residential land it owns for use in building public dwellings. This will supply approximately 15,000 dwellings +α in the metropolitan area over five years. The government will introduce a 'public land restructuring' system that regularly reviews and readjusts the use and function of non-residential land owned by LH to convert the use of long-unused or over-planned land. Currently, LH owns 19.5 million square meters of commercial and other non-residential land in public development areas such as second and third phase new towns. This equates to the size of six new towns.
Plans are underway to accelerate the speed of existing public land projects. The government will develop customized early strategies for each stage of land projects to shorten the overall project duration by more than two years. By utilizing metropolitan public land in this way, it is projected that construction can begin on 372,000 dwellings by 2030.
◇ Reconstruction of public rentals in Gangnam and other areas… a maximum of 3 years reduction in redevelopment project duration
The government believes that expanding housing supply in Seoul is key to stabilizing housing prices, thus utilizing aging facilities and vacant land in the city center. Aging public rental dwellings in areas such as Gangnam, Gangseo, and Nowon will be reconstructed. Public rental apartments will be transformed into high-density developments by securing additional floor area ratios of up to 500%.
It is expected that about 23,000 dwellings will be supplied through this, with the government resupplying the existing amounts as integrated public rentals and utilizing the increased amounts for rent and sale.
For aging or unused public buildings and state-owned land, the 'Special Law for the Renovation of Aging Public Buildings, etc.' will be enacted to mandate maintenance. The Ministry of Land, Infrastructure and Transport will approve construction projects directly and supply 28,000 dwellings over five years. Housing will also be built on school sites, with a minimum of 3,000 dwellings planned. In particular, vacant land in urban areas of Seoul will be utilized for housing supply. The targeted locations include Sungkyunkwan University baseball field in Dobong District (1,800 dwellings), Wirye office area in Songpa District (1,000 dwellings), Korean Educational Development Institute (KEDI) in Seocho District (700 dwellings), and existing facility transfer site in Gangseo District (558 dwellings).
The government will abolish the sunset provision of public urban complex projects, which had difficulty in securing momentum, and expand the regulation to ease floor area ratio by 1.4 times from existing transport hub areas to low-rise residential areas. This will supply 50,000 dwellings in the metropolitan area. The maintenance project for old planned cities, such as the first phase new towns, will fully adopt a resident proposal method and improve project procedures to supply 63,000 dwellings.
Regulations on maintenance projects such as redevelopment and reconstruction will be relaxed. Public redevelopment and reconstruction will be revitalized through floor area ratio incentives and other means.
For private maintenance projects, the project duration will be shortened by up to 3 years through procedural improvements. Floor area ratio incentives will be examined to improve project feasibility. In particular, to prevent project delays due to construction cost disputes, a unified dispute committee headed by the first vice minister of land will be established, which will create an urban dispute committee under it and grant it authority to mediate construction cost disputes. It is projected that through maintenance projects, 234,000 dwellings will be supplied over the next five years. However, the system for recovering excess profits from reconstruction, which is often cited as an obstacle to maintenance projects, will be maintained.
◇ Demand suppression through loan regulations… establishment of a real estate market supervisory organization
To limit demand in the housing market, the government will reduce the loan-to-value ratio (LTV) to 40% in regulated regions of the metropolitan area and also implement regulations limiting existing homeowners' jeonse loans to 200 million won.
To establish order in transactions in the real estate market, an organization capable of investigating and prosecuting real estate crimes will also be established. This organization, which will include the Ministry of Land, Infrastructure and Transport, Financial Services Commission, Ministry of Economy and Finance, National Tax Service, Korean National Police Agency, and Financial Supervisory Service, will punish speculative real estate and false listings.
The authority to designate land transaction permit zones will be expanded from existing local government heads to the Minister of Land. This is a measure to preemptively respond to the overheating of the housing market due to the influx of speculative demand.
The vice minister stated, "While market instability in areas such as Gangnam's three districts (Gangnam, Seocho, and Songpa) and Yongsan is showing a tendency to shift to districts like Mapo and Seongdong, we still have the capacity to monitor the market situation sufficiently," and added, "It is important to be cautious in designating regulated areas."