The Revival of the Compulsory Construction of Small-sized Housing

The compulsory construction of small-sized housing (under 60m2, 18 pyong) will revive from September if the law starts early. The law obliges a construction company to build certain number of small-sized apartments when they build new apartments in the National Capital region such as Seoul and Inchon. The law was abolished in 1998, January, a time right after the crisis of the foreign exchange shortage, because of the burden from the law may impose the construction companies.

After the conference with the Seoul municipal administrative body, the Ministry of Construction and Transportation announced ``the counter-plan for the stable price of lease.``

The counter-plan obliges the construction companies to build a certain number of small-sized housing with the construction or reconstruction of more than 20 apartments or tenement residences in the National Capital region. The detail supply percentage by the size will be determined during August after the conference with relative branches, municipal bodies, and the consumer’s association etc. Yet, certain regions, where the review on the construction is completed already, and the area of law density of population such as Jamchil, Banpo will not be under the validation of the law.

Before the law was abolished in 1998, the percentage of the small-sized housing was 30 percent in Seoul, 2 percent in Kyungkido and 20 percent in the reconstruction area.

The revival of the law will be a serious blow to the reconstruction companies since the earning rate is low for building small-sized housing. Moreover, the city of Seoul authorities and others already reduced the volumetric ratio to 250%, and this is not good news for the reconstruction companies. As a result, there are concerns that total housing supply will be lowered than before since the low earning rate of reconstruction will lead the slowdown of rebuilding housing. If this is the case, the negative side effect rises in the prices of lease and housing trade may be aggravated in some area.

Moreover, there are dominant views saying that the revival of the compulsory construction will not help mitigate the crisis of the shortage of lease housing during a short period of time. This is because that the small-sized housing supply will be available after 2 or 3 years even if the law is activated on September.

Meanwhile, the Ministry of Construction and Transportation plans to lead the lease housing demand that flows into apartments to multi-householder housing. For this, the Ministry of Construction and Transportation has decided upon a positive plan to use the playground of elementary, middle and high schools as parking lots. This plan, which will be reviewed by the Ministry of Education, has been suggested in order to alleviate the shortage of parking space, a partial but crucial cause for avoidance for multi-householder housing.

Meanwhile, the new policy on the tax return for the homeless masses suggested by the Ministry of Construction and Transportation has been aborted due to the objection of the Ministry of the Finance and Economy. The policy was designed to reduce the burden of the homeless masses with low income.

bonhong@donga.com