The government has announced a total of seven housing policies since last year. The first policy, known as the June 27 measures, included regulations on mortgage loans, jeonse loans, policy loans, and living stability fund loans. The second policy, introduced on September 7, aimed to expand supply by enhancing the authority to designate land transaction permission zones, tightening mortgage and jeonse loan regulations, and strengthening real estate market oversight, with a goal of starting construction on 1.35 million units in the metropolitan area and 334,000 units in Seoul.
The third policy, announced on October 15, was a set of stringent regulations. It included expanding regulated areas and land transaction permission zones, tightening mortgage and jeonse loan regulations, raising stress interest rates, and establishing a real estate oversight body, making it more severe than the previous two measures. The fourth policy, introduced on January 29, detailed supply plans, aiming to quickly supply approximately 60,000 units by utilizing state-owned land, idle sites, and aging government buildings in prime locations within the metropolitan area.
The fifth policy, announced on February 12, included the termination of the temporary suspension of capital gains tax for multiple homeowners on May 9. The sixth policy, introduced on May 12, focused on encouraging the release of properties through regulations related to land transaction permission zones and actual residence. It mandated registration within a certain period after land transaction permission and imposed actual residence obligations, while also expanding exemptions for properties with tenants. The most recent seventh policy, announced on August 13, aims to enhance the implementation of the September 7 measures, targeting the start of construction on 1.35 million units in the metropolitan area over five years (2026-2030) and adding over 230,000 units, including 100,000 in new sites, to supply housing affordably and timely in desired locations.
From a supply perspective, redevelopment is key. This was partially addressed in the August 13 measures, which relaxed the consent rate for establishing redevelopment associations from 75% to 70% and eased the burden of park and green space donations if small housing units constitute more than two-thirds of the total units. The government also announced plans to significantly lift restrictions on development in greenbelt areas to facilitate housing supply. It decided to temporarily designate all greenbelt areas in Seoul and adjacent metropolitan areas as land transaction permission zones until the announcement of new public housing districts.
However, greenbelts cannot be the core solution for housing supply. There is already limited green space in Seoul, and even if greenbelts are developed, the impact on new housing supply is minimal, with considerable opposition to development. In contrast, redevelopment can provide new living spaces in areas with deteriorating housing conditions. By reducing donation burdens or adjusting floor area ratios, it is possible to increase housing supply.
With the consent rate for establishing redevelopment associations lowered to 70%, it is also necessary to examine the consent rates for small housing maintenance projects (Moa Town). For instance, the consent rate for landowners at the stage of establishing the association is over 80%, while the area consent rate is 66.7%. This should be linked to the current measures and lowered to around 70%.
There is also a need to accelerate redevelopment in areas that are currently stalled. The August 13 measures included provisions to relax consent requirements and streamline the procedures for establishing basic and maintenance plans, as well as shortening the processes related to project implementation and management approvals to speed up maintenance projects. Typically, redevelopment takes 2.6 years for designation of maintenance zones, 3.6 years for forming promotion committees and establishing associations, 8.6 years from project implementation and management approval to relocation, and 4 years from construction to completion, totaling 18.5 years.
However, it is possible to shorten the project duration by omitting consent forms at the designation stage and adjusting consent rates during the promotion committee formation stage. In the project implementation approval process, pre-selecting appraisal firms and reducing time during the demolition phase are also necessary to cut down the time required at each project stage.
Lastly, there are financial issues to consider. The government has raised the target for the growth rate of household loans from 1.5% to 3%, which could result in an additional 30 trillion won in loans annually. Additionally, the government has exceptionally relaxed the total loan limits to support loans related to maintenance projects and supply, as well as to assist young people and actual demanders.
The 1.5% growth rate for household loans reflects potential growth or long-term growth rates. This year, thanks to exports, including semiconductors, the economic growth rate is high, allowing the government to raise the household loan growth rate to 3%. However, it is uncertain how the growth trajectory will change in the future, indicating a possibility of rising household debt ratios again. Therefore, it is essential to properly manage the issues that may arise during the process of large-scale housing supply and acceleration of project speed from a financial perspective.
* This article has been translated by AI.
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