The government moved to expand small-scale reconstruction and other maintenance projects to increase dwelling supply in the greater Seoul area, but the supply volume appears to fall short of market expectations. As of the end of last year, there were only 41 small-scale maintenance business sites in Seoul at the construction-start stage, totaling a little over 3,500 households. Because the project implementation areas are small compared with urban renewal projects, the supply inevitably remains limited, and due to weak profitability, there are countless cases where, even after a difficult process to form a cooperative, they fail to find a contractor.
According to the Seoul Metropolitan Government on the 28th, as of the end of December last year, only 7.2% (41 sites) of the 296 small-scale maintenance business sites in the city—pursuing street housing, self-help housing, and small-scale reconstruction—had reached the construction-start stage. The number of households to be supplied is 3,572. That is about one-tenth of the urban renewal construction-start volume (32,943 households).
By project type, street housing maintenance business sites at the construction-start stage were the most with 23, followed by 12 self-help housing sites and six small-scale reconstruction sites. Small-scale maintenance projects involve demolishing old, low-rise residential areas of less than 10,000 square meters or fewer than 200 households to build new apartments. Street housing maintenance keeps the existing road network while rebuilding old dwellings, with "Moahousing" as a representative model. Unlike typical reconstruction and redevelopment, the promotion committee stage is skipped, allowing completion within three to four years after cooperative formation, which drew attention. However, due to profitability limits, the supply scale is not large enough to have a meaningful impact on the market.
Builders are reluctant to bid for small-scale maintenance projects. Construction costs are soaring while general pre-sale volumes are small, hurting profitability. The small size of complexes also makes it hard to lower construction cost basics. Looking at the standard market unit prices for the first half of this year released by the Ministry of Land, Infrastructure and Transport, the unit price per cubic meter for earth cutting (excavation), the ground-preparation foundation stage for new dwelling construction, is 3,493 won when the work volume is under 10,000 cubic meters—three times higher than the 1,323 won for large-scale work over 100,000 cubic meters. Because of this, the Geukdong Riverside Apartment in Dongjak District, Seoul (123 households) held two on-site briefings to select a contractor last year, but both attempts failed. The Pungjeon Apartment in Yongsan District also pursued a 140-household small-scale reconstruction after forming a cooperative in 2019, but after failing to select a contractor, it is now proceeding with dissolution.
To resolve these issues, the government is making sweeping improvements to the small-scale maintenance project system. The Seoul Metropolitan Government decided to temporarily ease floor area ratios for small-scale buildings to as high as 300% through May 2028, and since January this year has applied a business feasibility adjustment coefficient to Moahousing and Moa Town. The business feasibility adjustment coefficient is a mechanism that offers incentives to boost feasibility when low land prices make it hard to secure profitability. It reduces public contribution burdens such as for rental housing or parks, while increasing the number of general pre-sale households.
Starting Feb. 27, an amendment to the Special Act on the Maintenance of Vacant Houses and Small-Scale Housing (Small-Scale Housing Maintenance Act), prepared as a follow-up to the Sept. 7 housing supply measures, will also take effect. The "street block" criteria for street housing maintenance will be eased, expanding eligible areas for Moahousing. In addition, the amended law introduces a new special provision allowing construction up to 1.2 times the legal maximum floor area ratio when supplying infrastructure.
Ko Jun-seok, a professor at the Sangnam Institute of Management at Yonsei University, said, "Moahousing project sites are increasing, but unless floor area ratios are raised dramatically, progress will not be easy," adding, "Easing the public contribution ratio is also necessary. Otherwise, large builders will continue to shun small-scale maintenance projects—that is the reality." Seo Jin-hyung, a professor in the real estate law and administration department at Kwangwoon University, said, "There are legal limits to further raising floor area ratios, and small-scale maintenance projects have difficulty achieving economies of scale, making dwelling supply challenging," adding, "That said, it is meaningful that the government lowered the entry barrier by easing regulations."