KCCI, audit authority collaborate to resume construction of 4,000 public housing units
The Korea Chamber of Commerce and Industry's headquarters in central Seoul / Korea Times file
The audit authority has cleared a key hurdle for six stalled public housing projects totaling nearly 4,000 units after the Korea Chamber of Commerce and Industry (KCCI) sought a preliminary consultation on behalf of builders struggling with soaring construction costs.
The KCCI said on Tuesday that the Board of Audit and Inspection (BAI) determined that project costs for the six sites, covering 3,936 housing units, can be recalculated to reflect current market conditions. The case marks the KCCI’s first use of the consultation program since it was opened to private organizations in May.
“Companies have faced difficulties for a long time, but this was not an issue they could easily make a decision on,” Lee Jong-myung, head of the KCCI's industry innovation division, said.
“The BAI's decision to open its doors to the private sector has added another channel for resolving corporate difficulties, and its first result will benefit the public through housing supply.”
The six projects are part of a public-private housing program, with public agencies providing the land while private builders handle financing, design and construction.
The agreements were reached between 2019 and 2021, but delays in land development and compensation pushed back construction as the COVID-19 pandemic and the war in Ukraine drove up costs. The construction cost index rose about 30 percent, from 103.8 five years ago to 135.2 this year.
The government introduced a framework for adjusting project costs in 2023 and urged agencies to make the changes. However, the project agreements generally prohibited cost adjustments based on price changes, raising concerns among public agencies about potential audit scrutiny.
The KCCI sought the consultations on behalf of the participating companies on Sept. 8, after the BAI expanded eligibility for its preliminary consultation program to include private organizations.
The BAI concluded that the project costs for all six sites could be recalculated to reflect current conditions. It said exceptions could be made through mutual agreement, citing the government’s recognition of the need for adjustments and the public interest in keeping the projects on track rather than terminating them.
It also said the adjustments should be capped so that public agencies would not bear more than they would if the existing agreements were terminated and the projects re-tendered. Final costs must also be determined through an objective process.