Reconstruction association heads, Seoul city call for deregulation at Land Ministry forum

Calls for deregulation of private urban renewal projects dominated a public forum hosted Tuesday by the Ministry of Land, Infrastructure and Transport to gauge public opinion on real estate policy. Reconstruction and redevelopment association members and Seoul city officials alike pressed for relief on relocation loan rules, floor-area ratios and mandatory rental housing ratios, while experts said the same regulations were slowing the pace of renewal projects.

Oh Hyeon-seok, head of the Garibong District 1 reconstruction association in Guro-gu, Seoul, took the floor during the session on private reconstruction and redevelopment. He said the government and the Seoul Metropolitan Government pay roughly 150 million won ($99,700) to 200 million won for rental housing units whose actual construction cost runs about 800 million won. "Because pre-sale prices in Guro-gu cannot be set high, even raising the floor-area ratio leaves us at a loss once we hand over the rental units," he said.

Kim Myeong-hui, chair of the residents' council for the Singil District 2 urban development project, called for an easing of relocation loan regulations. "Many residents need to secure a lease deposit for a temporary home when they move out, and also return the deposits of existing tenants — so relocation loans are essential," Kim said. "On the ground, no financial institution is willing to extend relocation loans, and many project sites are at risk of delay."

Kim also cited a staffing shortage at the Korea Land and Housing Corporation. "A single LH official is handling multiple project sites at once, leaving many sites with inadequate communication with residents," she said. "Residents are calling for closer, more timely updates on actual progress."

Lee Jeong-sik, head of the Seoul Metropolitan Government's apartment housing division, spoke on behalf of participants and said loan-to-value ratio restrictions on relocation loans were a major obstacle. He also urged the government to ease rules on the transfer of association membership status, saying transactions had nearly ground to a halt since the expansion of speculative-overheating zone designations last year.

Experts likewise said private renewal project regulations must be relaxed to boost housing supply. Kim Hyo-seon, a real estate specialist at KB Kookmin Bank, said about 49.8 percent of Seoul's housing stock is aging. She noted that per-square-meter costs for the Sinbanpo 22nd-phase project had more than doubled — from 5.69 million won per square meter in 2017 to 13 million won when the project wrapped up in 2023 — making it critical to find ways to improve project viability.

Kim Deok-rye, a research fellow at the Korea Housing Industry Research Institute, said the reconstruction excess-profit recovery levy is the Achilles' heel of reconstruction projects, while mandatory rental housing supply ratios play the same role in redevelopment. "Recovering a reasonable share of development gains is important, but it must not reach the point of undermining project viability — so a recalibration to find the right balance is needed," she said.

Land Minister Kim Yun-deok said in his opening remarks that the forum was intended to hear the views of experts, industry, young people and citizens. "I will listen sincerely and do my best to reflect these opinions in the government's upcoming announcement on real estate so that the problems can truly be resolved this time," he said.