Reconstruction associations and residents are pushing back as levies worth hundreds of millions of won become a reality, with complexes subject to the reinstated excess-profit recapture system for rebuilding projects now reaching completion one after another. They say the amounts are far too large and that they cannot readily accept the way the levies are calculated. Associations and residents are pressing the National Assembly and the government to abolish or overhaul the system, and plan to file injunction requests along with administrative lawsuits if the levies are actually imposed. Because the exact amount is difficult to gauge until the levy is formally assessed, it is being reflected unevenly in transaction prices and asking prices, creating confusion in the resale market.
According to the office of Rep. Cho Eun-hee of the People Power Party on the 14th, 46 complexes in Seoul were expected to face the levy as of last month, with the total projected amount reaching 2.169 trillion won. Raemian Trinione, the rebuilding of Banpo Jugong Complex 1, District 3, faces a projected total of 514.9 billion won, or an average of about 320 million won per association member. Hangang Mansion in Yongsan District is estimated at 472.3 billion won in total, or about 680 million won per member. Across the 46 complexes, the average projected levy per member comes to 121.74 million won.
The projected levies are already affecting home transaction prices. According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system, occupancy rights for a 12th-floor unit with an exclusive area of 84 square meters at Raemian Trinione traded at 5 billion won in June, but a unit of the same size on the same floor changed hands at 5.7 billion won last month. A real estate broker in Banpo-dong said transactions around 5 billion won sometimes come with the condition that the buyer assumes the future levy, and that when the seller agrees to pay it, the projected amount is added to the sale price. The broker said some listings for the 84-square-meter type are now priced at 6 billion to 6.5 billion won including the levy.
Confusion over how the levy is calculated is not limited to Seocho District. The association for Hillstate e-Pyeonhansesang Munjeong, the rebuilding of 136 Munjeong-dong in Songpa District, filed a 2024 end-point housing value of about 875.9 billion won, but the Korea Real Estate Board's review put the figure at about 1.0444 trillion won late last year. The association immediately filed an objection. Songpa District Office has been running a public inspection notice on the board's reexamination and recalculation since the 10th of this month, but the end-point housing value remained unchanged at 1.0444 trillion won. An association official said the group is not refusing the levy itself but asking that it be enforced on reasonable standards, adding that it will pursue an administrative lawsuit if financing costs and the commercial portion are not properly reflected.
Critics say the bigger problem is not resident opposition to the levy but the risk that it delays rebuilding projects and shrinks housing supply. Typical responses include pushing back project timelines or cutting the number of units offered in general sales to reduce the levy. When the system was reinstated in 2018, Gaepo Jugong Complexes 5, 6 and 7 in Gangnam District delayed forming their association preparatory committees to lower their levies. Gaepo Jugong Complex 5 had initially planned to complete its committee formation around May that year but halted the process after Banpo Hyundai's projected levy of more than 100 million won was disclosed, later resuming the project.
In Apgujeong District 3, a "one-for-one rebuilding" approach that minimizes general sales has emerged as an alternative for reducing the levy. Cutting general sales lowers the association's development gains and thus the levy, but it also reduces the number of new homes supplied to the market. Banpo District 3, now facing a projected levy in the hundreds of millions of won, also saw the levy burden shape its project plans in the past. Industry figures say rebuilding aging complexes in Seoul and the surrounding metropolitan area could add anywhere from 370,000 to 610,000 homes, but that more projects could be abandoned or stalled for years once the levies are actually imposed.
Political debate over the system continues. Three bills to abolish or reduce the levy are pending in the National Assembly, and petitions seeking repeal or revision have been referred to the legislative subcommittee of the Land, Infrastructure and Transport Committee. The dispute over reform is expected to intensify once levies begin to be imposed in earnest. Hong Ji-sun, the nominee for land minister, said in written answers submitted to the National Assembly for the confirmation hearing that a way is needed to expand housing supply in urban centers while balancing public and private interests, and that if repeal legislation is debated in the National Assembly, the ministry will work to produce a reasonable operating framework.
Experts say that if the current system is not scrapped, it should be redesigned to ease the burden. Ham Young-jin, head of the real estate research lab at Woori Bank, said the levy applies only to reconstruction projects and not to redevelopment or remodeling, raising fairness concerns among different types of projects. Ham said it is necessary to consider fully reflecting the sharp rise in financing and construction costs, pushing back the assessment start date now set at the association approval date, or adjusting the rate, which tops out at 50%.
Others argue the levy should be abolished by reviving private reconstruction projects. Lee Eun-hyung, a research fellow at the Korea Research Institute for Construction Policy, said the levy was originally introduced to curb reconstruction, but that its original purpose has effectively disappeared now that renovating aging housing and expanding urban supply have become policy goals. Lee said maintaining a system that recaptures excess profits while pledging to revive private reconstruction does not match the direction of policy.
