‘8·8 Measures’ Focus on Reconstruction Sector
Delaying the disclosure of estimated contributions
Establishing a union requires lower consent rate
Strengthening business viability by increasing the 3-year limited-time floor area ratio
On the 8th, the ‘8·8 Housing Supply Measures’ were announced, which are based on supplying a total of over 427,000 housing units and new housing sites in Seoul and the metropolitan area. The plan to enact the ‘Reconstruction and Redevelopment Promotion Act (Special Act)’, which will be applied temporarily for 3 years, and to adjust the safety diagnosis period to reduce the redevelopment project period, which usually takes 15 years, to 9 years, was particularly notable.
This real estate red pen has reconstructed the 8/8 supply measures according to the order of reconstruction projects. Let’s find out how the reconstruction complex I live in is affected. Please note that many issues, such as the enactment of special laws and the revision of the Urban and Residential Environment Improvement Act (Dojeong Act), must be passed by the National Assembly, so we will have to wait and see whether they are actually implemented.
Q. The apartment complex I live in is one that passed the detailed safety diagnosis and had a placard hung. There hasn’t been any news since then. Will the pace of the project accelerate after the announcement of the measures?
“The business process will be somewhat simplified. After the safety diagnosis stage, a maintenance plan, which is the blueprint for the complex after reconstruction, will be established. Key issues such as the location and height of infrastructure such as roads and parks, and the floor area ratio will be determined. The revised Urban Development Act will be implemented in November 2022, and the estimated contribution to be paid by cooperative members and the basis for calculation must also be announced when establishing the maintenance plan.
However, from now on, only the representative type of contribution will need to be calculated when establishing the maintenance plan. The generational contribution will be disclosed when establishing the association. The original purpose of introduction was to prevent the project from being canceled due to the late disclosure of the contribution, but it was evaluated that it actually acted as a factor that incited conflict among residents and increased the tension of the project in the field. There was also a criticism that the additional disclosure of the contribution estimate when changing minor issues in the maintenance plan established before November 2022 would slow down the project. It is said that a revision to the Provincial Government Act will be proposed to the National Assembly in September regarding this matter.
Additionally, initial business expenses can be supported by the Housing and Urban Development Fund. Up to 5 billion won is available. It can be used for services required to establish a business plan or costs for holding a general meeting. Since reconstruction projects generate profits after the sales stage, many places borrowed money from construction companies, service providers, etc. in the early stages to proceed with the project. It seems that the fund was made available for use because there was a lot of criticism that the project was not conducted fairly during this process.”
Q. I saw a report that a maintenance plan has been established for our complex. I heard that the next step is to establish a promotion committee and a union. I wonder how our complex will be affected.
“It seems that it will be easier to establish a cooperative. Reconstruction directly affects the property rights of existing residents. So, in the past, in order to establish a cooperative, it was necessary to secure the consent of 75% of all owners and the consent of 50% of owners in each neighborhood. In the future, it will only require the consent of 70% of all residents. The consent rate for each neighborhood will be reduced to 33%.
In the field, attention is being paid to the reduction of the ‘consent rate by neighborhood’. In the reconstruction complex along the Han River, the union members in the neighborhood closest to the Han River often demand that they agree to the establishment of the union only if they secure their current location even after reconstruction. Even in small neighborhoods, the requirement of the consent rate by neighborhood had to be met in order to establish the union, so the demands had to be met.
![Is it true that reconstruction will be accelerated by the ‘8/8 supply plan’?[부동산 빨간펜]](https://dimg.donga.com/wps/NEWS/IMAGE/2024/08/15/126539845.1.png "Is it true that reconstruction will be accelerated by the ‘8/8 supply plan’?[부동산 빨간펜]")
It is also noticeable that the scope of consideration for consent to the establishment of a union has been expanded. In the future, when requesting the establishment of a redevelopment zone to a local government, those who have submitted a consent form will be considered to have also agreed to the establishment of the union. In simple terms, this means that consent forms will no longer have to be submitted two or three times.”
Q. I am a resident who regularly receives news about the progress of reconstruction through the union executive committee. Is there anything in this measure that will increase profitability?
“It will increase profitability as we can build and sell more apartments than before. We decided to temporarily increase the maximum floor area ratio to 1.1 times the legal limit for three years. Reconstruction usually takes place in residential areas of the third type. The previous maximum floor area ratio was 300%, the legal limit. However, this limit will be raised to 330% in the future.
The important point is that the content excludes the regulated areas of Seoul’s ‘Gangnam 3-gu (Gangnam, Seocho, Songpa)’ and the redevelopment complexes in Yongsan-gu. Places that applied for business plan approval before the announcement are also excluded. If all redevelopment complexes try to delay the progress of the project in order to receive the benefit, it will be a deterrent rather than a promotion measure. The specific details will be included in the Redevelopment and Redevelopment Promotion Act, which will be proposed to the National Assembly in September.
In addition, various reviews required to obtain business execution approval will be integrated, which will shorten the approval period. This includes consultations on disaster impact, fire performance design, and facilities for the disabled.”
Q. I am a member of a cooperative whose entire property is a single reconstruction complex. I am worried that I will not be able to secure the necessary funds for the project. Are there any countermeasures?
“In the future, you will be able to use your housing pension to pay for maintenance projects. You will be able to individually withdraw up to 50-70% of your pension limit. Currently, this is only allowed for limited reasons such as education and medical expenses. It is also good to note that the housing pension subscription criteria were relaxed from the announced price of 900 million won to 1.2 billion won or less in October of last year. The announced price of 1.2 billion won is approximately 1.7 billion won when converted to market price. It is said that this will be promoted through the revision of the Enforcement Decree of the Korea Housing Finance Corporation Act in December of this year.
“We will continue to push for the abolition of the excess profit recovery system for reconstruction projects. However, since this is an issue that has already been announced, it seems that the key will be to get it through the National Assembly.”
Q. I heard that other reconstruction complexes have been significantly delayed due to conflicts over construction costs. Are there any measures to prevent similar incidents from happening in our reconstruction complex?
“In the future, construction companies participating in construction bids will have to provide detailed information on the type, level, and cost of finishing materials. We have reflected the criticism that the basis for requesting an increase after being selected was unclear. In addition, when a union signs a subcontract with a construction company, we plan to have them submit the details and reasons to the local government. The same applies when a request for an increase in construction costs is made. We plan to improve substance by linking the relevant data with the Korea Real Estate Board’s construction cost verification.”
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Reporter Lee Chuk-bok [email protected]
2024-08-16 16:53:02