50-story apartment rebuilding scheme faces market backlash

The local real estate market appears not to be very excited about the government‘s conditional approval of turning old apartments into 50-story buildings, due to its condition of donating more than a half of leftover units for public use, experts said Wednesday.

Responding to the housing supply shortage, the government has decided to build more than 130,000 residential units in the capital city and adjacent areas over the next eight years. One of the key measures is a public reconstruction project led by public housing institutes such as the Korea Land & Housing Corp. and Seoul Housing & Communities Corp. To do so, the authorities will allow an outdated apartment to be rebuilt as high as 50 stories, while expanding floor area ratios up to 500 percent, according to the Ministry of Economy and Finance.

Even though the authorities eased the existing 35-story height restrictions, associations of residents in apartment complexes -- business entities seeking gains from reconstruction of apartment complexes -- have expressed negative opinions on the required condition that 50-70 percent of the expanded floor area be donated to the government for public rental housing aimed at non-homeowners as well as the underprivileged. 

“The public-private partnership is at the core of the latest policy drive, but who on earth will partner with the government when the majority of development gains are set to be taken away by the state?” said Han Hyung-ki, head of a redevelopment committee for Acro Riverpark apartment in Banpo-dong, Seocho-gu in Seoul, saying the committee will not review the public construction. 

“The Land Ministry said 20 percent of 93 redevelopment agencies in the Seoul area will participate in the project. Well, I expect the participants will account for less than 2 percent.” 

The local reconstruction market has already suffered from worsening profitability due to the government’s strict rules, including a price cap on privately rebuilt apartments in Seoul as well as the system to retrieve excessive gains from the reconstruction. Therefore, the latest ill-conceived scheme is expected to receive further backlash in the private sector, he added.

Contrary to the market response, the government officials expected nearly twice the number of existing homes will be built in Seoul and the surrounding Gyeonggi Province after the plan takes effect.

Meanwhile, the Seoul city government said on Tuesday right after the release of the government’s new supply plan that it will continue to restrict the number of apartment floors to a maximum of 35 as part of its urban planning rules, signaling a discord with the government’s new housing supply plan.

But on early Wednesday, Vice Land Minister Park Sun-ho said that the two sides are closely communicating to promote the new housing plan. 

By Choi Jae-hee (cjh@heraldcorp.com)