The Songjeong Station youth safety dwellings in Gangseo District, Seoul, completed in January this year, is moving toward a public auction without taking a single tenant. The developer failed to repay loans totaling about 50 billion won that swelled due to high interest rates and rising construction costs. As the youth safety dwellings project—under which dwellings built with private capital are rented to young people below market rates—keeps wobbling at the financing stage, there are concerns it could disrupt Seoul City's supply of youth dwellings.
According to the construction industry on the 27th, Woori Bank, the trustee for the Songjeong Station youth safety dwellings project, recently informed Seoul City of its plan to push for a public auction of the building. A Seoul City official said, "We were notified of the planned auction, and we guided the trustee on performance requirements and administrative procedures that a new private rental operator must meet."
The Songjeong Station youth safety dwellings, located at 11-21 Gonghang-dong, Gangseo District, Seoul, has three basement levels and 12 above-ground floors, with a total floor area of 11,570 square meters. Construction ended on Jan. 28. Of the 176 total units, 72 are public supply, including 39 existing public rentals and 33 units pre-purchased by the Seoul Housing and Urban Development Corporation (SH). The remaining 104 units were planned as private rentals.
However, P&K Songjeong Station Youth Dwellings General Private Real Estate Investment Co., Ltd., the developer, failed to secure the funds needed after completion and could not even begin recruiting tenants. The loan size is known to be about 50 billion won.
The developer completed construction with a project financing (PF) loan guarantee from the Korea Housing Finance Corporation (HF). After completion, it planned to enroll in the Korea Housing & Urban Guarantee Corporation (HUG) lease deposit guarantee and then replace the existing PF loan with a lower-interest collateral loan. But as the liability ratio exceeded guarantee criteria, enrollment and loan conversion were blocked. In the end, the lenders asked the trustee to dispose of the building.
◇ Completed but zero move-ins for seven months
The Songjeong Station youth safety dwellings visited on the afternoon of the previous day was empty. The building entrance was locked with a padlock, and notices reading "exercising lien" were posted on the main gate and first-floor windows. Although it is a station-area location about a five-minute walk from Songjeong Station on Subway Line No. 5, it has not been able to take tenants for nearly seven months after completion.
A nearby licensed real estate agent said, "I understand that tenant recruitment was halted because the developer could not repay the loan," and added, "If a new operator also has to assume the obligation to operate youth rental dwellings, it will not be easy to find one."
Youth safety dwellings are rental dwellings that Seoul City supplies to unmarried young people aged 19 to 39 and newlyweds without dwellings. In return for benefits such as rezoning upgrades and floor area ratio relaxations, private operators must run the dwellings as youth rental dwellings for 10 years. Among private rentals, special-supply rents are about 75% of nearby market rates, and general-supply rents are about 85%.
The developer asked Seoul City and SH to purchase the remaining private rental units as well, but the request was not accepted. This is because under current operating standards, a certain percentage of dwellings must be supplied as private rentals, and there are limits to SH's pre-purchase scope.
◇ High interest rates and construction costs disrupt projects across the board
This is not the only youth safety dwellings project halted by funding woes. A 299-unit project pursued in Noryangjin-dong, Dongjak District, went to public auction without breaking ground. After multiple failed bids, the site was sold by private contract at a little over 50.8 billion won, far below the initial auction price. The 1,403-unit project in Yongdap-dong, Seongdong District, which broke ground in 2022, also halted construction for a long period due to funding shortages but recently resumed work.
Private operators say it has become difficult to continue projects as financing has tightened amid surging interest rates and construction costs, compounded by rent and sale restrictions. A developer official said, "The lending rate, which was in the 2% range annually, at one point rose to 7–10% a year, and construction costs jumped more than 30%," adding, "Guarantee support should be expanded so we can switch to long-term, low-interest loans after completion."
There are also calls to diversify how operators can recover their investment. Koh Jun-seok, a professor at Yonsei University's Sangnam Institute of Management, said, "Even before the full 10-year rental period is up, operators should be able to transfer project equity to professional rental REITs, and it is worth considering amending related laws to allow sales of some units."
A Seoul City official said, "We are preparing measures to improve the business viability of youth safety dwellings," adding, "After the public auction, we will review the requirements for a new operator and the procedures for business succession so that the supply of youth dwellings can be maintained."