Rebuilding associations in Seoul's Gangnam area are threatening to file injunctions and administrative lawsuits if authorities impose levies under South Korea's reconstruction windfall recovery system. They argue they cannot pay levies running into hundreds of millions of won on gains they have not realized, calculated by a method that does not reflect actual market prices. Should the levies and court battles materialize, analysts and industry officials warn, redevelopment projects could be delayed and housing supply squeezed.
Seocho District plans to impose the levies on five complexes in sequence, starting with Banpo Hyundai (Banpo Centreville Asterium), followed by Shinsung Villa (Bangbae Centreville in the Forest), Shinbanpo 18 (Hauterre Shinbanpo), Shinbanpo 21 (Hauterre Banpo) and Banpo Jugong Complex 1, District 3 (Raemian Trinione), according to redevelopment industry sources on the 13th. The district aims to complete the assessment on Banpo Hyundai, completed in July 2021, before the end of this year, given that the statutory deadline for imposing the levy expires at year-end.
Reconstruction association members are pushing back hard against the districts' plans. Lee Soon-bok, head of the Banpo Hyundai association, said, "If an administrative order actually imposes a levy of hundreds of millions of won, we will have no choice but to sue." Ha Dong-seok, head of the Shinbanpo 21 association, said, "About 75% of our members are retired, and they could be forced to pay hundreds of millions of won without having sold their homes." Ha added, "If this goes all the way to an actual levy without the system being reformed, we will file suit."
The associations plan to press the National Assembly and the Ministry of Land, Infrastructure and Transport for changes to the system before the levies are finalized. They argue that the "normal rise in housing prices," a key component in calculating the levy, is understated under the current housing price trend survey and should instead be based on the actual transaction price index.
As of August, levies totaling about 2.2 trillion won ($1.6 billion) are set to be imposed on 46 rebuilding complexes in Seoul. The average expected levy per association member is 121.74 million won.
The National Alliance of Reconstruction and Redevelopment Associations is calling for the system to be scrapped, arguing that it lacks fairness and rationality. "The windfall recovery system restricts housing supply by discouraging redevelopment projects," an official at the alliance said. "Abolition is the right answer, but if that is not possible, the law and the guidelines should at least be changed." ▷See Page 3
