The government is not expected to ease restrictions on the transfer of reconstruction and redevelopment association members' status within speculative overheating districts. The Seoul city government asked for a three-year temporary lifting, saying the rule weakens momentum for redevelopment projects, but the government drew a line, saying it is "not reviewing" the idea. The move is seen as a judgment that the risk of stimulating Seoul home prices by increasing rights-to-move-in transactions outweighs any effect of promoting redevelopment through deregulation.
According to the Ministry of Land, Infrastructure and Transport on the 11th, the government is not reviewing Seoul's request to ease the restriction on transfers of member status within speculative overheating districts. An official at the Ministry of Land, Infrastructure and Transport (MOLIT) said, "We are not reviewing the matter."
Under the current Urban Maintenance Act, in speculative overheating districts, in principle, a person who bought a building or land after authorization for the establishment of a reconstruction association, or after authorization of the management and disposal plan for redevelopment, cannot succeed to association membership status. Exceptions are recognized in cases such as when a one-household, one-home owner has held the dwelling for more than 10 years and has lived there for more than five years.
If a person sells a dwelling without meeting the exception requirements, the buyer cannot succeed to association membership and may be subject to cash liquidation. While the sale itself is not banned, the right to receive a new apartment does not transfer, making a normal transaction practically difficult.
In Feb., the Seoul city government asked MOLIT to temporarily lift the restriction on transfers of member status for three years. The request followed the designation of all of Seoul as a speculative overheating district, which increased the number of sites subject to the restriction from 42 in the Gangnam 3 districts and Yongsan District to 159.
On the 5th, Seoul Mayor Oh Se-hoon met with Presidential Chief of Staff for Policy Kim Yong-beom and delivered a report titled "Diagnosis of causes of insufficient redevelopment and reconstruction dwelling supply and countermeasures," renewing the same request. The report called for temporarily allowing, for three years, the transfer of restricted association member status across Seoul to open an exit for members who find it hard to participate in projects so they can sell their homes and leave.
The Seoul city government believes that blocking an exit for association members could weaken momentum for redevelopment projects. Even if a member wants to sell a home because construction costs and contribution charges have risen and participation has become difficult, it is hard to find a buyer because association status does not transfer. The argument is that allowing less-engaged members to leave and new members to join would reduce internal conflict and speed up projects.
The current law also provides an exception for reconstruction complexes where projects have been delayed for a long time. If no application for authorization of the project implementation plan is filed for more than three years from the date of authorization for association establishment, and a member who has continuously held the dwelling for more than three years sells the home before applying for authorization of the project implementation plan, the buyer can succeed to association membership. The Seoul city government also believes that, due to this exception, some members may be passive about pushing projects forward until they meet the transfer requirements.
By contrast, the government is reportedly concerned that lifting the restriction on transfers of association member status could attract investment demand into dwellings in redevelopment projects. Reconstruction and redevelopment take a long time from association establishment through project implementation authorization, management and disposal authorization, relocation and demolition, to move-in. Even if regulations are eased, actual dwelling supply takes considerable time, while transactions of dwellings whose association status can be succeeded may increase in the short term and spur prices.
With the government not putting Seoul's request on the review list, the restriction on transfers of association member status is likely to remain in place for the time being. As a result, even if the government streamlines redevelopment procedures to expand dwelling supply, how to provide an exit for existing members who find participation difficult remains an open task.
A real estate expert said, "Restrictions on transfers of association member status are effective in blocking speculative demand, but in a situation where construction costs and contribution charges have risen sharply, they also trap members who find it hard to continue with the project," adding, "It is necessary to review exception criteria that consider both speculative prevention and members' property rights."