Gyeonggi Province Proposes Groundbreaking Incentives for Private Redevelopment Housing to Expand Basic Housing Supply

[Suwon Ilbo=Park No-hoon] Gyeonggi Province is pushing forward a plan to provide various incentives to private residential complexes undergoing redevelopment and reconstruction, thereby promoting participation in public rental housing projects and supplying some units as basic housing.

The province announced on the 25th that it has proposed amendments to relevant legislation including the 'Urban and Residential Environment Improvement Act' containing these measures to the government.

Previously, on February 4, the government announced the 'Innovative Expansion Plan for Housing Supply in the Greater Metropolitan Area,' which centered on publicly leading the supply of housing sites on the scale of 836,000 units nationwide by 2025. The scale in the Gyeonggi and Incheon regions is 293,000 units.

The province calculated the scale of old district development in the province—including redevelopment and reconstruction projects, urban regeneration projects, small-scale improvement projects, and urban public housing complex projects—at 117,000 units, with a plan to secure 19,000 units (including 8,000 related to private improvement projects) as basic housing through institutional improvements.

Looking at the details of this institutional improvement proposal, first, when private improvement associations supply 10% or more of the total volume as rental housing (basic housing), they would be exempted from the sales price ceiling system and the reconstruction excess profit recovery system.

The sales price ceiling system is a system that determines sales prices by adding appropriate profit margins for companies to land and construction costs. The reconstruction excess profit recovery system is a system that recovers up to 50% of excess amounts when profits gained through reconstruction by a reconstruction improvement association exceed 30 million won per member.

The province expects that providing the benefit of 'exemption from sales price ceiling and excess profit recovery systems' to private improvement associations supplying 10% or more of total volume as rental housing (basic housing) will result in many cases adopting this approach, which will be effective in expanding rental housing supply.

Second is a plan to increase floor area ratios for private improvement associations while providing a portion of the increased floor area ratio as land-lease sales housing.

The province explained that simply providing rental housing proportional to the increased floor area ratio would be difficult for private reconstruction associations to accept because residents of both rental and sales units would have to live in the same complex, and thus proposed providing land-lease sales housing rather than general public rental housing.

According to the province, land-lease sales housing, where only building ownership is sold to buyers, can help not only overcome resistance to existing public rental housing but also improve awareness of discrimination between sales and rental housing in the long term.

Additionally, the province presented two other institutional improvement measures for basic housing revitalization in this proposal.

First, to improve perceptions of current rental housing such as poor quality and low cost, the province proposed raising the benchmark unit price for acquisition prices, which is based on the standard rental housing construction cost of 3.47 million won per 3.3 square meters, to 5.62 million won per 3.3 square meters, which is the sales price ceiling system construction cost. Since basic housing aims for equal quality between rental and sales, the province believes that rationalizing acquisition unit prices will also prevent resident discrimination after occupancy.

Furthermore, the province proposed adding a clause to the current 'Special Act on Public Housing' that states 'income and asset scale can be excluded' from tenant selection criteria.

If acquisition unit prices and tenant selection criteria are improved, those without housing will have the basis to reside in basic housing with building quality equivalent to general sales housing regardless of income and property, and negative perceptions about existing rental housing can also be resolved, according to the province.

Going forward, the province plans to promote basic housing through institutional improvements and a National Assembly discussion forum on basic housing introduction, research through the Gyeonggi Research Institute, continued consultation with GH on implementation plans, and promotion of economic advantages when implementing public improvement projects.

In addition, outside of private improvement projects, for public improvement projects, urban regeneration projects, and urban public housing complex projects (such as near transit stations), the province plans to supply basic housing through consultation with public implementers (LH, GH, etc.) undertaking these projects.

Gyeonggi Province Governor Lee Jae-myung stated, "Institutional improvements are necessary to enable basic housing—where those without housing can reside for long periods regardless of income and property—to be supplied in improvement projects such as reconstruction and redevelopment," adding, "We expect to not only improve the quality of rental housing and expand its supply but also improve social prejudice discriminating against rental housing and establish a new universal residential environment."