The pace of reconstructing old apartments in Dobong District, Seoul, is diverging depending on profitability. As Seoul City raises the legal cap on the floor area ratio in quasi-industrial zones to as high as 400% and shortens administrative procedures through the fast-track integrated plan, complexes with reduced cost-sharing burdens are speeding up toward designation as maintenance zones and selection of project operators. By contrast, complexes where the cost sharing is expected to rival home prices are failing to secure even a majority of residents' consent needed to receive support for reconstruction diagnosis expense. Whether deregulation actually leads to lower cost sharing is determining the success or failure of projects.
According to the maintenance industry on the 29th, the reconstruction preparatory committee for Yuwon Dobong Apartment recently began selecting an urban-planning partner to handle the fast-track integrated plan and draw up the maintenance plan. The committee is reviewing a plan to reconstruct the current 286 homes to as many as 40 stories and 585 homes on a 13,881-square-meter site by applying a floor area ratio of up to 400%.
Yuwon Dobong requested a safety inspection in Aug. 2021 and received a "safety inspection required" determination in the on-site survey. But the project stalled after it failed to secure residents' consent needed to apply for the district office's support for diagnosis expense. Afterward, as the system changed to allow proceeding with drawing up the maintenance plan and designating the maintenance zone even before completing the reconstruction diagnosis, the preparatory committee is fleshing out its project plan again.
Nearby Samhwan Dobong Apartment is a representative case of improving profitability through deregulation. The complex received a D grade in a safety inspection in Jan. 2020 and, in Oct. of the same year, a decision that an adequacy review was not necessary. However, with a high existing floor area ratio and little supply for general pre-sales, the project was stalled for a long period.
Seoul City raised the floor area ratio for multi-family housing in quasi-industrial zones converted to residential use from the existing 250% to up to 400%, and applied a profitability correction coefficient to complexes with low land prices and weak profitability. As a result, Samhwan Dobong was designated a maintenance zone in Aug. last year.
Samhwan Dobong is applying a 343.49% floor area ratio, increasing the current 660 homes to as many as 42 stories and 993 homes. The estimated average cost sharing per household was projected to decrease by about 170 million won, from 430 million won to 260 million won. After that, about 91% of land and other owners consented to designating Koramco REITs Management and Trust as the project operator. It is the first Dobong District trust-style reconstruction case to exceed a 90% consent rate.
Outside the quasi-industrial zone, Ssangmun Hanyang Phase 1 is moving the fastest. After completing a safety inspection in Mar. 2023, the complex was designated a maintenance zone in Apr. last year. It received approval for the promotion committee in June of the same year and authorization to establish the association in December. It took about 2 years and 9 months from completing the safety inspection to establishing the association. The consent rate among land and other owners was 90%. As the fast-track integrated plan shortened the time to draw up the maintenance plan and residents' consent gathered quickly, reconstruction to as many as 40 stories and 1,158 homes has entered full swing.
By contrast, Ssangmun Hanyang Phases 2, 3, and 4 received a "reconstruction diagnosis required" determination in an on-site survey in Mar. 2022 but have been unable to begin the diagnostic process for more than four years. To receive the district office's support for diagnosis expense, a majority of residents' consent is required, but they have not secured it.
The burden of cost sharing is cited as a main reason blocking residents' consent. In the initial consulting by a maintenance firm, it was estimated that an owner of an exclusive 59-square-meter unit would have to pay about 300 million won additionally to receive an apartment of the same size after reconstruction. That is similar to current apartment prices.
Dobong District's high share of older residents is also cited as a factor that makes persuading residents difficult. According to resident registration population statistics from the Ministry of the Interior and Safety, of Dobong District's 298,225 people in June, 80,304 were 65 or older, accounting for 26.9%. That is 5.9 percentage points higher than the Seoul average of 21.0% and the second highest among the 25 districts after Gangbuk District's 27.3%. The maintenance industry believes that the higher the share of older residents in an area, the more the burdens of long relocations and securing additional cost sharing act as obstacles to obtaining residents' consent.
A maintenance industry official said, "Dobong has many older owners, so it is hard to collect consent forms just by explaining that the cost sharing will shrink a little," and added, "Residents move only when shown concrete numbers on how to secure relocation loans and how much the asset value will rise after reconstruction." The official went on, "It takes longer to persuade residents to trust the profitability calculations than it does to relax the system."