Data confirm that urban redevelopment projects are producing a real housing supply effect in Seoul's property market, yet critics point out that the time from the start of discussions to completion reaches up to 20 years, making it difficult to fully feel this effect.
According to an analysis of the Ministry of Land, Infrastructure and Transport's (MOLIT) urban redevelopment project status data on the 25th, the number of existing homes in reconstruction and redevelopment projects completed in Seoul over the six years from 2020 to last year was 73,121 units, while newly supplied homes numbered 128,391 units, for a net increase of 55,270 households.
By type, reconstruction rose from 45,854 units to 74,003 units, and redevelopment increased from 27,267 units to 54,388 units. A report titled "Analysis of the Housing Supply and Demand Impact of Urban Redevelopment Projects," published last year by the Land and Housing Research Institute of the Korea Land and Housing Corporation (LH), reached the same conclusion. The report stated that "when an urban redevelopment project is completed, newly built homes are supplied to the market, accompanied by increases in floor area ratio and the number of households," defining redevelopment as a process in which new housing is re-supplied at a certain time lag after housing demolition. An analysis of MOLIT's internal data showed that as of 2022, planned household numbers for Seoul reconstruction increased by an average of 46.8% (from 817 units to 1,199 units), while redevelopment increased by an average of 6.0% (from 1,100 units to 1,166 units). The report assessed that "urban redevelopment projects contribute to housing supply not only in quantitative increase but also significantly in qualitative improvement."
The key issue is speed. According to a doctoral dissertation by Choi Chan-yong of Dankook University, which analyzed 226 residential redevelopment projects in Seoul designated after the Urban Redevelopment Act took effect in July 2003 and completed by June last year, the planning stage from redevelopment zone designation to project implementation approval took an average of 3.65 years, while the implementation stage from project implementation approval to completion took an average of 6.41 years. The total project period averaged 8.76 years, with little difference between redevelopment (8.78 years) and reconstruction (8.72 years). However, these figures count only the period after redevelopment zone designation. The Seoul city government explained that when procedures before zone designation, such as securing resident consent rates and safety inspections, are added, it takes an average of 15 to 20 years from the start of housing redevelopment discussions to completion.
Factors that erode project speed include the mandatory rental ratio for redevelopment, the reconstruction excess profit recovery system (jaechohwan), internal union conflicts, and construction cost increases. At a MOLIT debate on housing supply expansion measures held on the 14th of this month, union members in Seoul demanded regulatory easing, such as lowering the mandatory rental housing supply ratio by region.
According to an official of the Garibong District 1 in Guro-gu, the Seoul city government and MOLIT purchase mandatory rental units for redevelopment and additional rental units from floor area ratio increases at 150 million to 200 million won based on 84 square meters of exclusive area, but the actual construction cost reaches 800 million won, leaving the purchase price at about one-fifth of the construction cost. Kim Deok-rye, a researcher at the Korea Housing Institute, suggested that rental ratios should be applied differentially to reflect regional cost structures.
In the case of reconstruction, the jaechohwan, which recovers up to 50% of the excess as a levy when the average development profit per union member exceeds a certain threshold, is cited as a factor that dampens the will to pursue projects. Conflicts between unions and construction firms over construction cost increases are also a frequent cause of delays; recently, a Gangnam-area reconstruction union passed a motion to dismiss its union chairman over a construction cost settlement issue.
The previous day, Seoul Mayor Oh Se-hoon stated on his X account that "reconstruction is producing a net increase of about 40% on average in housing, and redevelopment is also producing a supply increase effect of about 15% on average as the Seoul city government actively pursues land-use zone upgrades and floor area ratio relaxation." He then emphasized that a net increase of about 87,000 households is expected from the redevelopment projects the Seoul city government is pursuing with a goal of breaking ground on more than 310,000 households by 2031, which is about 2.7 times the net supply increase of 32,000 households in Seoul under the government's Jan. 29 measures.
Seoul has actually launched "Rapid Integrated Planning 2.0 (Sincheon 2.0)" from this year to boost such speed. It newly introduced a "Rapid Integration" track that omits the promotion committee formation procedure and processes project implementation approval and management disposition approval simultaneously, and it has designated 85 zones and 85,000 households as key strategic zones to encourage priority groundbreaking.
