Stalled project-financing sites to be converted into LH rental housing for youth, newlyweds

The government is moving ahead with converting stalled real estate project financing sites into rental housing managed by Korea Land and Housing Corporation, as a follow-up to the "Housing Rapid Supply Plan" announced Aug. 13. After a pilot program last year targeting distressed project financing sites, the scope this year expands to include sites that are proceeding normally, and the acquisition method broadens from new-build purchase agreements to include existing completed housing.

The Financial Services Commission, Ministry of Land, Infrastructure and Transport, Financial Supervisory Service and LH said Wednesday they will hold an interagency meeting Thursday to review progress on converting project financing sites into rental housing. The meeting will also discuss formalizing regular interagency cooperation to sustain the initiative going forward.

The effort to link project financing sites with LH rental housing has been under way on a pilot basis since last year. Under the current process, the FSC and the Financial Supervisory Service pass information on project financing sites willing to participate in the rental housing program to the Ministry of Land, Infrastructure and Transport and LH, which then assess project viability before notifying developers through the Financial Supervisory Service.

Once a developer confirms its intent to sell, LH conducts a formal review and signs a purchase agreement. Last year, the process resulted in new-build purchase agreements covering 12 sites and approximately 2,600 units.

This year, the government is broadening the pool of eligible sites. Last year's program was limited to distressed project financing sites, but going forward it will also cover sites that are proceeding normally but risk delayed ground-breaking due to financing delays.

The types of acquisitions are also expanding. In addition to the new-build purchase agreements used last year, LH will now apply existing-housing purchases, allowing it to consider sites that have already been completed or are nearing completion. Under a new-build purchase agreement, LH commits to buying a property before completion and acquires it once finished; an existing-housing purchase covers properties that are already completed or nearly so.

Incentives for developers have also been strengthened. The acquisition tax reduction rate for land and buildings under new-build purchase agreements has been raised from 15 percent to 70 percent through 2027, and the ceiling on LH's land acquisition support funds has been expanded from 70 percent to up to 80 percent of land costs. In regulated areas of Greater Seoul, a cost-based valuation method will also be applied so that construction cost increases can be reflected in the purchase price.

The Financial Supervisory Service and LH have completed an initial review of sites with purchase potential, assessed on the basis of location and rental demand. They are currently confirming developers' intent to sell at those sites, and properties that submit applications will go through a purchase review with the aim of concluding new-build or existing-housing purchase agreements by year-end.

LH will also participate in a project financing distressed-site sales briefing to be held at the Financial Supervisory Service on Sept. 15. At the event, LH plans to explain the rental housing purchase program and offer on-site consultations for interested developers.

The government plans to supply housing secured through this process to young people and newlyweds, primarily in urban transit-oriented areas of Greater Seoul, at rents below market price. Developers stand to benefit as well: the purchase price is confirmed with the buyer after completion, reducing the risk of unsold units, while also allowing them to accelerate financing and ground-breaking.

"Project financing sites are the resource that can become homes most quickly," said Jo Seong-tae, head of the Ministry of Land, Infrastructure and Transport's residential welfare support division. "We will make active use of rental housing purchases to turn stalled sites into homes for young people and newlyweds."

Kwon Yu-i, head of the FSC's financial policy division, said the collaboration "is an attempt to solve two challenges at once — a soft landing for real estate project financing and the promotion of housing supply." She added that the agency would "continue to work with relevant institutions to ensure that finance actively supports the supply of housing where people can actually live."