A tract of land in Pungmu-dong, Gimpo, Gyeonggi, where a regional housing cooperative project was underway, has been put up for auction as a whole. The cooperative, which promoted plans to build a large apartment complex with more than 1,800 units through a regional housing cooperative and collected money from members, failed to fully secure the project site, and even the portion it did secure was a reserve lot that had not undergone land readjustment (a parcel sold by an urban development operator to cover expenses).
The cooperative collected about 60 million to 70 million won per person from nearly 1,300 members, but when a 91 billion won bridge loan from financial firms fell into event of default (EOD), the land was sent to auction in one block. The money the cooperative collected from members is close to 100 billion won. That money is no longer on hand, and it is unclear where it was used.
◇ Cooperative bought land without land readjustment processing
According to legal sources on the 16th, on July 15 last year the Bucheon branch of the Incheon District Court decided to commence an auction for 85,243 square meters (about 25,746 pyeong) around 570-7 Pungmu-dong, Gimpo. This land had been provided as collateral when the "Gimpo Pungmu Phase 1 Regional Housing Cooperative" received a 91 billion won bridge loan for land acquisition from a lender group including the Korean Federation of Community Credit Cooperatives (KFCC). A representative of the lender group said, "Due to the event of default (EOD), a senior creditor applied for the auction, and although the court has decided to commence, an auction date has not yet been set."
This project site recruited members on plans to build 1,822 multi-family housing units with one basement level and up to 36 floors above ground, plus ancillary welfare facilities, across about 119,369 square meters (about 36,109 pyeong) around 570-7 Pungmu-dong, Gimpo. YS Development signed a service agency contract. Gimpo is carrying out the "Gimpo Yuhyeon District Urban Development Project" to develop the underdeveloped Pungmu-dong area, and this is land within the Yuhyeon District.
Gimpo designated the Gimpo Pungmu Yuhyeon District Urban Development Project Cooperative as the implementing entity and is developing the Yuhyeon District through a land readjustment method. Under land readjustment, instead of expropriating landowners' rights and compensating them when carrying out urban development, their rights are exchanged for newly formed land (parcels) after development. The cooperative purchased some land that had not yet undergone land readjustment and took out a loan using this land as collateral, but fell into an event of default.
The cooperative collected around 60 million to 70 million won per person. As of July 13 last year, the date of the auction commencement order, the cooperative had 1,292 members, and the amount they paid totaled about 99 billion won. Even the members' payments alone would be enough to repay the 91 billion won bridge loan from the lender group, but the cooperative is now effectively bankrupt. It is unknown where the money collected from members disappeared to or why the loan fell into an event of default. Some members filed lawsuits to withdraw and left the cooperative, and an emergency committee is running the cooperative in place of the previous leadership.
Attorney Bae Seong-gwon of Songji Law Office said, "With no money left in the cooperative and senior creditors owed more than 90 billion won, even if the auction succeeds, it will be difficult for members to get their money back." A Gimpo official said, "We have not yet determined the exact amount of damage to members." Regarding this, a cooperative representative said, "We are seeking ways to resolve the issue centered on the emergency committee."
◇ Illegal acts and cooperative corruption continue, President Lee ordered a full review last year
A regional housing cooperative is a resident-led housing development project in which people without homes who have lived in a specific area for more than six months form a cooperative, directly purchase land, select a builder, and construct apartments. The system was introduced in the late 1970s to help people without homes acquire housing. In redevelopment and reconstruction project cooperatives, homeowners or landowners become members and promote the project. In contrast, regional housing cooperatives are formed by people without homes or owners of small homes who promote the project and secure land during the process. They begin by recruiting members before securing land ownership. Because of this difference, regional housing cooperatives have often faced problems such as corruption and embezzlement.
President Lee Jae-myung also said at the first Cabinet meeting after taking office on June 5 last year, "A large-scale incident involving a regional housing cooperative has occurred, and I understand the problem is serious," and requested, "Please provide a separate report on a nationwide fact-finding survey and issues related to laws on reconstruction and redevelopment." The Ministry of Land, Infrastructure and Transport surveyed 618 regional housing cooperative sites nationwide in June and July last year and identified 293 disputes at 187 cooperatives. The Seoul Metropolitan Government also conducted a full review of 118 regional housing cooperatives from May to October last year, found violations of the Housing Act and cooperative corruption at all 118, and referred 14 cases for investigation.
Seo Kyung-gyu, a professor at Daegu Catholic University (real estate), said, "Regional housing cooperatives recruit members before securing 100% of the project site and use that money to purchase land, and the biggest risk is failing to secure the site." He added, "With rising construction costs, a builder may demand additional contributions from members, and if the cooperative uses members' money as project expenses during the process, there is no way to recover it." Seo Jin-hyung, a professor at Kwangwoon University (real estate law and administration), also said, "A regional housing cooperative project cannot proceed unless the cooperative's integrity is ensured."