Govt to cover interest on relocation loans for public redevelopment residents

The government will subsidize interest costs on relocation loans tied to public redevelopment projects, aiming to boost housing supply. Single-homeowners in public redevelopment zones who take out a Korea Housing and Urban Guarantee Corporation (HUG) loan guarantee of 300 million won ($221,000) — for relocation or to return tenants' jeonse deposits — will be able to reduce their annual interest burden by about 6 million won.

The Ministry of Land, Infrastructure and Transport announced Thursday that it has revised the "Public Redevelopment Project Interest Subsidy MOU" with HUG, Korea Land and Housing Corporation (LH), Seoul Housing & Communities Corporation (SH) and Gyeonggi Housing and Urban Development Corporation (GH), expanding the number of eligible project sites and extending subsidy coverage to relocation loans.

The move is a follow-up to the public redevelopment relocation and project-cost support expansion announced Aug. 13 as part of the government's rapid housing supply plan.

The public redevelopment interest subsidy program covers a portion of project-cost loan interest through the Housing and Urban Fund. Since four agencies signed the original MOU in May 2023, it has been applied to project-cost loans at 35 sites, subsidizing the portion of the loan interest rate exceeding 1.8 percent by up to 2 percentage points.

The Land Ministry also plans to extend project-cost interest subsidies to three sites added as public redevelopment candidates in 2024 and 2025 — Changdong 470 in Dobong-gu, Seoul; Garibong-dong 2-92 in Guro-gu, Seoul; and Chunghubu in Seoksu 3-dong, Anyang — and intends to include any newly identified candidate sites in the subsidy program going forward.

The ministry will also apply interest subsidies to relocation loans to accelerate project timelines.

The relocation loan interest subsidy covers loans taken out by single-homeowners who have entered the relocation phase — either to move to a new residence or to return tenants' rental deposits. Owners of multiple properties are excluded, in keeping with the program's intent to ease the burden on actual residents.

The subsidy covers basic relocation loans of up to 70 percent of the jeonse or other deposit amount, capped at 300 million won, and applies to loans issued by HUG-guaranteed financial institutions including commercial banks, regional banks, Korea Development Bank, and agricultural and fishery cooperatives. The support period runs from the loan disbursement date through the designated move-in period of 60 days.

For a borrower who takes out the full 300 million won basic relocation loan at an annual interest rate of 4.8 percent, the subsidy covers 2 percentage points of the portion exceeding 1.8 percent, reducing the interest burden by about 6 million won per year. If it takes three years to reach move-in, total interest support would amount to 18 million won.

"This revision of the agreement lays the groundwork for public redevelopment residents to relocate with less financial strain from interest costs," said Yun Young-jung, the Land Ministry's director of housing improvement policy. "We will continue working with relevant agencies to accelerate public redevelopment projects so that housing supply in urban areas can be realized as early as possible."