The Korea Land and Housing Corporation (LH) will expand its direct development of unsold residential land in the Third New Towns. As the government reduces the sale of public land to private developers in the metropolitan area, the conversion of unsold land to public sales and rentals is expected to change the housing composition in these new towns.
According to the Ministry of Land, Infrastructure and Transport and LH, the government plans to convert residential land originally intended for private sale into direct development by LH, aiming to start construction on 53,000 housing units by 2030. With an additional 7,000 units expected from increased floor area ratios, the total supply through direct implementation could reach approximately 60,000 units.
Previously, the supply of public land involved LH developing the land and selling it to private construction companies, which would then build and sell the housing. Moving forward, LH will retain ownership of the land and directly implement projects, while private construction firms will increasingly participate in construction or public-private partnership projects.
Last year, the sale of residential land to private developers was halted for 27 plots across 17 districts, covering about 650,000 square meters. The Gyeonggi and Incheon areas accounted for 19 of these plots, including parts of the Third New Towns such as Wangsuk in Namyangju and Gyosan in Hanam. These plots will gradually transition to direct implementation projects following district planning and zoning changes.
As the government emphasizes expanding public rental supply alongside direct implementation, the housing composition in the Third New Towns is likely to change significantly. If existing private sale plots are converted to public housing, some units may also be offered as public rentals.
The government’s universal public rental initiative is also considering the Third New Towns as key supply sites. Initial candidates include Block S10 in Wangsuk, Block AC2-1 in Gyeyang, and public complex land in Gyosan, which will have relaxed income and asset criteria compared to existing public rentals, aiming to attract a broader demand base, including young people and general non-homeowners.
Hong Ji-seon, the nominee for Minister of Land, Infrastructure and Transport, reaffirmed this direction during a recent National Assembly confirmation hearing. She explained that LH would directly implement the plots that were not sold to private developers and increase public rental units.
The expansion of LH's direct implementation is expected to change the business model for construction companies. The structure where private builders purchase land to gain profits from development and sales is likely to decrease, while the proportion of public housing projects involving private firms in design and construction is expected to increase.
For mid-sized construction companies, which typically focus on self-developed projects, the opportunity to secure public land in the metropolitan area may diminish. However, the ability to participate in construction without large capital investments in land acquisition could reduce financial burdens.
A concern remains regarding LH's financial burden. Selling land to private developers allows for quicker capital recovery, but direct construction requires additional investment in building costs. While public sales can recover project costs through sales, public rentals necessitate long-term asset retention, delaying the return on investment.
Last year, LH's total debt exceeded 173 trillion won. As the government is also pursuing a restructuring of LH into separate divisions for development and housing construction and for housing welfare and asset management, how to secure funding for direct implementation projects and public rental operations will be a significant challenge moving forward.
Lee Eun-hyung, a researcher at the Korea Construction Policy Institute, stated, “The extent of LH's required capabilities will depend on how much responsibility is delegated to private construction companies. It is also necessary to consider whether this business structure can be sustained in the long term.”
* This article has been translated by AI.
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