The government plans to convert vacant space in knowledge industry centers into public rental housing for young adults and newlyweds. The Ministry of Trade, Industry and Energy said at a structural innovation ministerial meeting on the 10th that the government will commit budget funds to absorb vacancies at knowledge industry centers in the greater Seoul area as public housing. Eligibility for tenancy will also be broadened to all business categories except gambling, harmful and hazardous facilities. The government is undertaking a sweeping overhaul 16 years after introducing the system because vacancy rates have reached dangerous levels. At the 153 knowledge industry centers completed nationwide over the past three years, average vacancy and unsold rates stand at 43.5% and 26.9%, respectively. At some sites, vacancy rates have hit 90%, leaving them little more than ghost buildings.
The problem is that converting office and manufacturing space into housing does not automatically produce the homes young adults want. Few of these buildings offer decent living conditions in terms of natural light, soundproofing, parking and amenities. The cost of changing the designated use, upgrading fire safety systems and reworking plumbing is far from trivial. The bigger issue is whether demand will hold up. Low rents may draw young tenants for now, but without jobs, transit and everyday infrastructure nearby, these units are likely to end up as cheap homes no one wants to live in. If housing supply expands or market conditions shift, residential knowledge industry centers could become yet another headache.
The vacancy crisis at knowledge industry centers, once known as apartment-style factories, is the result of a policy failure that inflated demand with tax breaks and low-interest loans while allowing supply to balloon. Opening an exit through residential conversion without properly examining the causes amounts to covering the losses of bad investments with public money. The right approach is to weigh public purchase prices, remodeling costs, rental demand and the responsibility of existing buyers, and to proceed cautiously only where the economics have been verified. Making matters worse, the ministerial nominees set to lead the second cabinet are themselves mired in allegations involving gap investment — buying a home while a tenant's jeonse deposit covers most of the price — stretching finances to the limit to buy a home, and special housing allotments for displaced residents. The public distrust built up by the string of property controversies surrounding those in charge of policy is not to be taken lightly.
What young adults want is a home close to work where they can marry, raise children and plan for the future. Converting knowledge industry centers into housing is a stopgap measure and nothing more. What must come first are fundamental measures to expand supply in urban centers through private rebuilding and redevelopment projects and to stabilize the lease and sales markets. Cutting vacancy rates with a quick patch and supplying proper housing are plainly two different matters.
