The Korea Land and Housing Corporation (LH) is reportedly considering the introduction of up to 9.5% in additional costs for public housing subject to price ceilings. This move aims to reflect the decline in project viability due to rising construction costs, but it raises concerns about the potential burden on homebuyers without properties.
According to data submitted to the National Assembly's Land, Infrastructure and Transport Committee by lawmaker Kang Dae-sik of the People Power Party, LH is examining the establishment of a 'project method additional cost' due to the deterioration of project viability stemming from increased construction costs.
The additional costs under consideration by LH include 5% based on the national contract law, 3% for small units under 60 square meters, and 0.5% to 1.5% for contracts through the Public Procurement Service. If all these are applied, the maximum additional cost could reach 9.5% of the construction cost.
LH argues that the construction cost for buildings in 2025 is projected to be 14,077,000 won per 3.3 square meters, which is 2,276,000 won higher than the basic construction cost of 11,801,000 won, necessitating the reflection of these additional costs.
In a specific project area in Goyang, if the maximum additional cost is applied, the construction cost ceiling for a 59-square-meter unit would increase from 32,340,000 won to 34,280,000 won, a rise of 19,400,000 won, or 6.0%. For an 84-square-meter unit, the cost would rise from 40,400,000 won to 41,650,000 won, an increase of 16,100,000 won, or 4.0%.
However, LH clarified that the increase in construction cost ceilings does not equate to the same amount of increase in actual housing prices. The final sale price is determined within the limits set by the price review committee, taking into account market conditions and saleability.
LH cites the growing financial burden due to rising construction costs as the reason for considering the additional costs. Last year marked the first annual deficit for LH since its establishment in 2009.
Furthermore, reflecting appropriate construction costs in housing prices could reduce the gap between market prices and sale prices, thereby alleviating excessive profits from so-called 'lottery sales' and the incentives for fraudulent applications. LH also stated that funds recovered through cost recovery could be reinvested in public housing supply, benefiting more homebuyers.
However, since public housing is intended for homebuyers without properties, there are concerns that the introduction of additional costs could lead to higher housing prices, increasing the burden on buyers. Lawmaker Kang stated, “The actual construction costs should be objectively verified and reflected, but the burden should not be easily passed on to homebuyers without properties.”
* This article has been translated by AI.
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