No approval for management and disposal plans until 'social mix' lotteries are completed, putting reconstruction and redevelopment on alert

From now on, reconstruction and redevelopment apartment projects will be required to hold public lotteries for both rental housing and units for general sale to the public before obtaining approval of a management and disposal plan. As a bill effectively mandating a social mix—combining rental and for-sale units within the same complex—nears passage in the National Assembly, the urban renewal industry is voicing concern over potential friction with association members and other growing pains.
According to political sources on the 23rd, the Democratic Party of Korea (DPK) plans to convene a plenary session during the February extraordinary session of the National Assembly to pass an alternative amendment to the Act on the Improvement of Urban Areas and Residential Environments that contains these provisions.
Previously, the government included a measure in last year’s September 7 Housing Supply Plan that would make public lotteries for rental housing mandatory before approval of a management and disposal plan. Following that, on September 29, DPK lawmaker Lee Geon-tae introduced an amendment to the Act on the Improvement of Urban Areas and Residential Environments reflecting this proposal. The core of the bill requires that the buildings, floors, and unit numbers of rental housing and units sold to non-association members or non-landowners be determined by public lottery, and imposes penalties of up to three years in prison or fines of up to 30 million won for violations.
However, during review by the standing committee, the penalty clauses were removed. Instead, the bill was revised to require that the public lottery be completed before applying for approval of a management and disposal plan, and to have the mayor or county governor verify this before deciding whether to grant approval. In effect, the rules have been tightened so that approval will not be granted unless the lottery has been fully carried out.
Currently, public lotteries for rental housing are stipulated in the enforcement decree, but the lack of sanctions has meant poor compliance. Many associations first allocate units to their members and then assign the remaining units to rental housing.
Industry officials expect the new system to disrupt projects, as association members could end up being assigned less desirable buildings or floors and suffer disadvantages. In high-end apartment complexes in particular, prices for units of the same size can differ by hundreds of millions of won depending on whether they have a view of the Han River, raising the risk of intensified conflict.
In fact, in April last year, the reconstruction project at Jamsil Jugong 5 Danji in Songpa District saw its review postponed once by the Seoul Metropolitan Government Integrated Deliberation Committee for Urban Renewal Projects. The committee cited the fact that most public rental housing units had been placed on lower floors and in less desirable buildings, excluding the main buildings adjacent to the Han River.
An industry official remarked, "On the ground, even after approval of a management and disposal plan, project operators often apply multiple times for changes to the project implementation plan, which can alter buildings or floor areas. How are all those adjustments supposed to be coordinated?" The official went on to warn, "With such strong internal backlash, all urban renewal projects could come to a halt."
The bill is set to take effect six months after its promulgation. Typically, a bill passed by the National Assembly’s plenary session is delivered to the government and promulgated two to three weeks later, so if there are no setbacks in passage, the new rules are expected to be applied on-site as early as September.
According to the Seoul Urban Renewal Information Portal, there are 1,082 urban renewal project sites within the jurisdiction of the Seoul Metropolitan Government, of which 724 have yet to obtain approval of a management and disposal plan. Many of the flagship projects in the Apgujeong-Yeouido-Mok-dong-Seongsu areas fall into this category.
act@fnnews.com Choi Ah-young Reporter