Government Plans to Supply 110,000 Non-Apartment Homes by 2030

The government plans to promote a scheme to supply 110,000 new non-apartment housing units in the Seoul metropolitan area by 2030. The focus is on easing construction standards for urban living homes and expanding the conversion of vacant commercial properties and offices into residential spaces to counter rising rental prices and housing shortages in urban centers. The aim is to encourage private developers to build more homes by flexibly applying standards for unit numbers, building height, and parking, along with increased financial support.

The government has set a target of supplying 77,000 urban living homes by 2030, making the normalization of their supply a key priority. Urban living homes can be rapidly supplied by utilizing small urban plots and are in high demand among young people and single- or two-person households. However, their supply has dwindled to about 5,000 units per year recently due to rising construction costs, difficulties in the project financing (PF) market, and the impact of the "jeonse" fraud incidents. Under the new measures, the unit limit will be eased to allow up to 500 units in mixed-use residential, commercial, and industrial zones, and up to 700 units in areas around train stations. Building height limits will be raised from the current 5 floors to a maximum of 6 floors, and daylight access requirements will also be relaxed to improve project viability. Parking regulations can be eased by up to 70% depending on local ordinances, and the introduction of robot parking and auto-valet systems will be permitted. The obligation to install communal facilities will be waived if similar facilities exist within a 300-meter radius, reducing the project burden.

Furthermore, the government will significantly expand the conversion of vacant commercial buildings, offices, and knowledge industry centers within urban areas into residential use, targeting over 33,000 units by 2030. The conversion of vacant offices and commercial spaces into officetels or 'premium one-room' units (1.5-room type) will be actively supported. For vacant knowledge industry centers in general industrial zones, conversion into officetels will be temporarily permitted until next year; previously, only dormitories or gosiwons could be converted, but now officetels will also be allowed. The obligation to secure additional parking spaces upon conversion to semi-housing will also be temporarily waived. The Korea Land and Housing Corporation (LH) will initiate a pilot project for residential remodeling of 2,000 vacant commercial buildings this year. Eligibility for residents of dormitories within knowledge industry centers will be expanded beyond employees of the respective company to include nearby workers, easing regulations.

The government is also strengthening financial support for non-apartment projects. The loan limit for urban living home project operators will be increased from the previous 70 million won per unit to a maximum of 110 million to 120 million won, with interest rates reduced to around 3.4-3.6%. The fund loans for urban living homes measuring 60-85 square meters, previously available only for public projects, will be extended to private developers. Separate fund loans and semi-housing mortgage guarantees will be newly established for remodeling projects of vacant commercial spaces and offices. The Housing & Urban Guarantee Corporation's (HUG) PF guarantee and sales guarantee products will be expanded and reorganized into special products exclusively for non-apartment projects in the Seoul metropolitan area, aiming to reduce the burden of initial capital procurement and stimulate private supply.

Alongside the expansion of non-apartment supply, the government will also undertake efforts to normalize 100,000 units in the Seoul metropolitan area that have received approvals but have halted construction. Approximately 323,000 units in regulated areas of the Seoul metropolitan area have not commenced construction after receiving permits, with about 100,000 units experiencing construction delays of over a year. Of these, 94,000 units are apartment projects. The Ministry of Land, Infrastructure and Transport will establish a 'Field Difficulty Resolution Support Center' with relevant associations, including the Korea Housing Association, to continuously monitor financing, construction costs, and permitting issues, providing customized support for each project.

Skepticism exists in the market regarding the effectiveness of this supply expansion. While increasing non-apartment supply is necessary to ease rental market strain, critics argue that additional policies are needed to resolve market distrust and lead to demand recovery for active private participation. Analyses suggest that simply easing regulations will have limitations as demand for non-apartments remains subdued. Although the government expects these measures to contribute to easing rental market conditions and resolving housing shortages in the Seoul metropolitan area, actual market reactions and demand recovery will need to be observed.