Government rejiggers its housing plan

The government yesterday came up with another plan to make its previous real estate policies effective after being criticized for its inability to revive the property market.

Spearheaded by Deputy Prime Minister Hyun Oh-seok, related ministries teamed up to formulate the policies, none of which has taken effect. Most are pending at the National Assembly.

“For early normalization of the housing market and stabilization of the jeonse and monthly rent market, those policy bills are in urgent need of lawmakers’ agreement,” Hyun said at a meeting yesterday.

The main ideas of the latest plan are to deregulate the government’s Hope RIETs (Real Estate Investment Trust) business, scale back its Happy Housing scheme and expand the profit-sharing mortgage adopted in August to more consumers.

Hope REITs is a public business in which the government purchases properties of the so-called house poor with large, high-interest mortgages. After the purchases, tenants live in the same houses and pay rent to the Land and Housing Corporation (LH).

The Ministry of Land, Infrastructure and Transport said the regulation on Hope REITs that allows purchases of houses of 85 square meters (915 square feet) or less will be eliminated.

It also said the Park Geun-hye government’s public housing project will be downsized from its goal of 200,000 units to 140,000 by 2017.

But critics say the government is cutting back on the project due to opposition from residents of neighborhoods, designated as Happy Housing locations, and a small budget.

Seven neighborhoods, including Mok-dong, Songpa and Jamsil, have been target areas to start the project.

For mortgages offered by the government, the ministry will provide 11 trillion won ($10.3 billion) next year and raise the household income ceiling for eligible borrowers from the current 50 million won to 70 million won.

Various government-led mortgages will also be integrated into one program by the Korea Housing Financing Corporation.

The profit-sharing mortgages, an attempt by the government in August to encourage more people to take out loans and buy houses to boost the market, will be expanded from 3,000 to 15,000 households.

The government fund for the mortgages will be increased to 2 trillion won.

For married couples with less than 70 million won in annual income, the state-run housing fund will provide 20-year mortgages at a 1.5 percent fixed interest rate for an apartment or house smaller than 85 square meters, or less than 600 million won.

People can use the mortgages for up to 70 percent (about 200 million won) of the purchase price. They must be first-time buyers.

BY SONG SU-HYUN [ssh@joongang.co.kr]