The government has emphasized the need to expand housing supply, but there are growing concerns that the process of moving from planning to actual construction remains stalled. Key bottlenecks identified include loan-to-value (LTV) regulations, relocation financing, rising construction costs, project financing, and the need for relaxed building regulations.
During a housing supply discussion hosted by the Ministry of Land, Infrastructure and Transport on July 14, Jin Mi-yun, a professor at Myongji University, stressed the importance of viewing supply policies from a 'pipeline' perspective. She noted, "The processes of permitting, construction, sales, completion, and occupancy should flow in a cycle, but currently, there is a bottleneck at the construction stage."
She added, "The flow of housing supply is more important than individual indicators like permits or construction. We need to view the situation where permits are granted but construction does not proceed in a broader context." Jin also pointed out that while financial and tax support is necessary, it must be carefully designed to avoid negatively impacting market expectations.
The most pressing issue is loan regulations. In non-apartment and redevelopment projects, LTV regulations are cited as a factor hindering supply. With LTV effectively blocked for housing sellers and rental businesses in regulated areas, new construction sellers are struggling with land acquisition and project advancement.
Loan regulations are also seen as slowing down redevelopment projects. For reconstruction and redevelopment initiatives, demolition and construction can only begin after existing residents have relocated. A reduction in relocation financing can directly delay project timelines.
A representative from the Singil Urban Public Housing Complex project stated, "Urban redevelopment projects can only proceed after existing residents have relocated. To move, they need funds for deposits and tenant reimbursements, but there are currently no financial institutions willing to provide relocation loans, putting the project at risk of delays."
Kim Deok-rye, a senior researcher at the Korea Housing Industry Institute, noted, "The reason projects are stalled is that LTV has been significantly reduced, leading to substantial lending restrictions. The government has promised to create funds and guarantee products for non-apartment projects, but these are still not available, so they need to be established quickly."
Rising construction costs and project viability have also been identified as factors exacerbating bottlenecks. As construction costs soar, the financial burden on project members increases, and the ratio of rental housing and public contributions diminishes project viability. Kim Hyo-sun, a senior real estate expert at KB Kookmin Bank, pointed out, "About 49.8% of housing in Seoul is aging, with some outer areas like Nowon and Gangbuk reaching over 60%. Redevelopment projects are crucial not only for housing supply but also for improving living conditions and asset utilization."
Kim emphasized, "While many complexes are being pursued through redevelopment in Seoul, only a few have actually begun construction. The key factor is project viability."
Meanwhile, the utilization of public land and underused urban areas has been highlighted as a critical task for transitioning to construction. Park Cheon-kyu, head of the Korea Research Institute for Human Settlements, stated, "We need to quickly secure underutilized land in urban areas and adjust zoning and density in semi-industrial zones." He proposed the creation of a 'third supply axis' that utilizes underused urban land in addition to existing redevelopment projects and new land development.
* This article has been translated by AI.
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