2.7 million apartments to be added under Yoon's plan

Economy

Published: 16 Aug. 2022, 18:20 Updated: 16 Aug. 2022, 18:49

2.7 million apartments to be added under Yoon's plan

Land Minister Won Hee-ryong announces the Yoon Suk-yeol government's first housing supply plan at the government complex in Seoul on Tuesday. [YONHAP]

Over the next five years, 2.7 million homes will be added by the government and by the private sector incentivized by policy, according to the Ministry of Land, Infrastructure and Transport on Tuesday.

Of those, 77 percent will be in Seoul and neighboring cities.

In Seoul, about 500,000 units will be built, including apartment buildings totally rebuilt, by 2027. According to the government, that's 50 percent more than the housing units supplied over the past five years.

Another 1.58 million units will be added in Gyeonggi and Incheon.

The key to the Yoon Suk-yeol's government first housing supply plan, although still a general blueprint with details to be rolled out in following month, is relaxing "excessive" restrictions, including the payment apartment owners have to make when the value of their newly reconstructed units rise.

This is to encourage the private sector to lead housing supply, an about-face from the policies of the Moon Jae-in government.

The Yoon government's goal is to supply 1.3 million units through the private sector.

Since 2006, the government implemented a system in which homeowners would have to pay up to 50 percent of the increased value of a newly reconstructed apartment.

The system was created to prevent heated competition for aging apartments by people betting on the reconstruction of buildings.

The Moon government had planned to increase the payment rate to 90 percent of the increased value.

"Excessive" profit rules will be changed next month.

Other measures to incentivize the private sector include easing of the inspection procedures for aging apartments. This was one of the key promises that Yoon made when speaking about reconstruction in first-generation new towns, such as Bundang, now 30 years old.

The government plans to raise the floor-area ratio for reconstructed apartments so that more units can be built and the private construction companies would profit through the sale of the additional units.

Land Minister Won Hee-ryong stressed that the housing units will be built in areas where there is high demand.

"While the previous government has had several housing supply policies, supply in areas in high demand has been restricted due to piles of excessive regulations," Won said. "The new government will start by closely listening to the various demands of the public so that we can closely analyze the demand in our housing supply policy."

Yoon’s first housing supply plan is not only 200,000 units more than the president’s campaign promise of 2.5 million during the presidential race, but also more than the 2.57 million units supplied since 2018.

The government could face some challenges, particularly as some of the regulatory changes, especially those related to "excessive profits," would need approval of the National Assembly, which is controlled by the Democratic Party.

The Yoon government was supposed to announce its first housing supply plan last week. It was postponed due to the heavy rainfall.

Despite expectations that the delayed housing plan would include more specific details about housing supply for people who lost their homes in the floods, the plan announced on Tuesday only said that it would help people in units vulnerable to natural disasters, such as basement apartments.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]