Ministry spats threaten Happy Housing

Concerns are rising over whether President Park Geun-hye’s pledge to build 200,000 Happy Housing units for non-homeowners will be fulfilled as the two ministries involved in the project are in a tug-of-war over budget issues.

Last week, the Ministry of Land, Infrastructure, and Transport made progress in moving forward on Park’s pledge by announcing seven districts in the Seoul metropolitan area where more than 10,000 housing units will be built using state-owned land. Park’s pledge was that throughout her five-year term, 200,000 housing units will be provided to those without a home.

Purchasing apartments is considered extremely difficult, especially for newlyweds, and many have turned to living on jeonse (a lump sum deposit) instead. But jeonse costs have skyrocketed to become an increased burden on non-homeowners. A big concern in pushing the Happy Housing project, however, is funding. The Ministry of Strategy and Finance has cut its budget for the project and the land ministry worries construction may be halted.

According to the finance ministry yesterday, the estimated budget gap between the finance ministry and land ministry for the Happy Housing project is 1.38 trillion won ($1.2 billion). The land ministry estimates that to provide 200,000 housing units by 2017, 10.77 trillion won is needed and it has requested that amount from the finance ministry, which cut the budget to 9.39 trillion won.

The two ministries also differ on how funding should be procured. The land ministry is asking for 4.13 trillion won from state coffers, but the finance ministry favors loans from the national housing fund.

The Happy Housing project is similar to the Lee Myung-bak government’s Bogeumjari project, referring to low-cost public housing for low- and middle-income families.

The new program, however, provides housing in urban areas instead of rural areas and uses railway properties and reservoirs instead of formerly protected greenbelt areas.

What’s considered unique about Park’s Happy Housing project compared to previous public housing policies is that it utilizes unused railway property. So the finance ministry argues the project does not need a separate budget for purchasing land. Rather, it places more importance on using 135 trillion won to fulfill other welfare pledges made by Park.

“It isn’t right like, in the past, to take government money and use it just because it is a state project,” said an official from the finance ministry. “The Korea Land and Housing Corporation, the construction operator, should procure its own construction fee by receiving loans from the national housing fund.”

The official added that interest on national housing fund loans is very low - about 2 percent.

The land ministry, however, says that without state funding, construction eventually could be halted. When the previous administration built Bogeumjari apartments on former greenbelt areas, even though there was no budget for land purchases, 85 percent of the cost was paid by the government.

Land ministry officials believe that without government financial support, the number of public houses built as part of the Happy Housing project will be inevitably reduced. Also, without a sufficient budget, it will be difficult to build the amenities and commercial areas necessary for a quality residential environment.

Despite the tug-of-war, the land ministry plans to announce in October the second batch of districts where Happy Housing units will be built.

By Kim Dong-ho, Lee Eun-joo [angie@joongang.co.kr]