Future Response Fund to inject 500 billion won into housing supply, but 6 of 7 publicly funded sites have yet to break ground

[Financial News] The government plans to inject a new 500 billion won from the Future Response Fund next year to revive housing development projects stalled by funding shortages. It aims to establish a 3 trillion won fund, including private capital, to support the supply of 18,000 homes. However, six of the seven residential project sites that previously received public funding have yet to break ground. As President Lee Jae Myung and the Democratic Party of Korea move to accelerate housing supply, critics say that simply injecting more money without addressing the causes of delays to existing projects’ groundbreaking will limit efforts to expand supply.
According to the 2027 government budget proposal and the Financial Services Commission on the 25th, a new 500 billion won allocation for contributions to a fund to normalize real estate project financing (PF) sites has been included in the Growth Engine Account of the Future Response Fund, which will be established next year. The aim is to provide funding to stalled development projects and encourage them to resume housing construction. The Financial Services Commission plans to pool public and private funds to establish a 3 trillion won fund by the first half of next year, investing 60% of it in residential projects to support the supply of about 18,000 homes.
The key question is whether financial support can lead to actual groundbreaking. The PF normalization support fund established by the Korea Asset Management Corporation (KAMCO) was also intended for this purpose, but few projects have broken ground. According to materials KAMCO submitted to Park Sung-hoon of the People Power Party, a member of the National Assembly’s Political Affairs Committee, as of the end of August, only one of the seven residential project sites invested in by the fund had broken ground. A total of 312.6 billion won was invested in the other six, but construction has yet to begin.
Obstacles delaying the projects remain even after financial support is provided. A project site in Jung-gu, Seoul, received 67 billion won in September 2023, but negotiations with the construction company were delayed, pushing back the completion schedule by one year and five months. A site in Yuseong-gu, Daejeon, also received 70.1 billion won, but completion was delayed by one year and seven months amid difficulties raising additional project funds. Even when initial funding is provided, the projects are unlikely to break ground unless contractor selection and additional financing are secured.
At a Cabinet meeting on the 20th, President Lee said that actual groundbreaking and move-ins mattered more than announcing supply volumes, and called for a ‘housing-supply blitz.’ The Democratic Party of Korea also plans to support expanded supply by shortening permitting procedures and simplifying regulations. However, the government’s figure of 18,000 homes is a projected supply volume, not the number of homes in projects that have actually broken ground. With construction delayed at existing sites despite investments of hundreds of billions of won, critics say the key issue for the new fund will be whether concrete measures can ensure projects move from funding to groundbreaking.
[email protected] Jiwon Song Reporter