The South Korean government is moving to separate the Korea Land and Housing Corporation (LH) into two distinct entities. The plan aims to enhance the speed of housing supply by dividing responsibilities between land development and housing construction, and housing welfare and asset management.
According to the 'Public Institution Function Reform Plan' announced by the government on September 3, LH will be split into the 'Housing and Urban Development Corporation,' which will handle land development and housing construction, and the 'Housing and Urban Asset Corporation,' responsible for housing welfare and asset management. These names are provisional.
The government plans to design an operational structure that allows development profits to be utilized for housing welfare funding. The Housing and Urban Development Corporation will set aside a portion of the profits earned during land development and housing construction in a separate account within the Housing and Urban Fund, which will then be contributed to the Housing and Urban Asset Corporation.
This restructuring comes in response to inefficiencies that arose from LH managing both development and housing welfare functions, which led to slower housing supply and increased burdens in operating rental housing. The government aims to enhance execution capabilities for supply and secure momentum for policy implementation through this functional separation.
LH's financial burdens are also cited as a reason for the organizational split. As of the end of last year, LH's debt stood at 173.7 trillion won, an increase of 13.6 trillion won from the previous year. The debt ratio rose from 217.7% to 230.8%.
The Ministry of Land, Infrastructure and Transport launched the LH Reform Committee in August of last year to discuss reform plans with industry experts. The committee has reportedly considered the option of dualizing development and housing welfare functions.
If the organizational split is realized, it will mark the first time in 17 years that LH has been divided since the merger of the Korea Land Corporation and the Korea Housing Corporation in 2009.
The Ministry of Land plans to announce specific organizational restructuring proposals through a separate 'LH Reform Plan' in the future. This plan is expected to include methods for distributing LH's debt, the structure for transferring resources between the two entities, workforce reallocation, and operational systems.
However, even with the separation of development and welfare functions, how to divide debt and assets, and the stability of transferring development profits to housing welfare funding are expected to be key issues in the upcoming reform plan.
* This article has been translated by AI.
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