Home supply plan infringement on property rights?

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By Lee Kyung-min

Concern is mounting that the latest real estate policy could escalate into full-blown property rights disputes, as residents in redevelopment zones would have fewer options to be heard after the government eased related rules.

At issue will be whether eminent domain, the action by the state of taking property from a private owner for public use or benefit, will infringe on the individual property rights of residents in areas designated by the government for redevelopment projects.

Experts say the supply-bolstering measure of providing 836,000 new homes nationwide by 2025 could be thwarted by legal battles that could drag on for years, with the prompt improvement in housing for a large number of the public becoming more elusive.

They also say state-run redevelopment projects to increase housing supply should be equally pursued with proper resettlement plans for “evicted” residents, who are sometimes left with few options but to move far away from the metropolitan area. This fans concerns of gentrification, a process whereby existing communities are displaced and dispersed by the introduction of more expensive housing and businesses that cater to wealthier customers rather than serving community needs.

The Ministry of Land, Infrastructure and Transport announced Feb. 5 that over 800,000 homes will be built via state-run redevelopment and reconstruction projects.

This is a notable change from the two dozen previous “botched” real estate policies, defined by demand control including a heavier tax on multiple homeowners and tighter lending rules for mortgage seekers among other measures to curb property speculation.

Expropriation, gentrification

A considerable part of the new policy will be conditioned on the government leading development after taking over land and property from private owners, a process to be shortened following a revised rule concerning eminent domain.

A related rule requires a separate vote for finalizing a state-led reconstruction plan after it is initiated with the agreement of more than half of the area's residents.

But the government lowered the minimum consent required to 67 percent of the total, significantly down from 75 percent. This means the government can railroad the project even with a third disagreeing.

“The lowering by almost 10 percentage points of the minimum consent needed can be a central point of dispute in a court ruling,” an attorney said on condition of anonymity.

The issue in his view may require a constitutional interpretation, since the government is likely to argue that time is of the essence citing policy priority about providing affordable housing for low-income people.

“Japan, for reference, requires the minimum consent be no lower than 80 percent, far stricter compared to Korea. Which argument the court would find more compelling remains to be seen,” he said.

The troubling scenario of gentrification can very much become a reality, if residents do get forced out of their current residences despite their opposition, according to Construction Economy Research Institute of Korea (CERIK) senior research fellow Doo Sung-kyu. “A large numbers of residents in those areas are low-income earners, with their only property being aging and run-down housing,” he said. “Even if the government gives proper compensation according to related rules, it will be far short of what they need to move to nearby areas, given housing prices have nearly doubled in Seoul.”

Incentives

The government plans to guarantee landowners a return that is up to 30 percentage points higher than previous figures, in a move to increase the participation of wealthy individuals without whom the entire project could be derailed.

Owners of old, aging apartments will be exempt from a related rule whereby a certain amount of profit gained from the redevelopment project be returned to the government.

They will also be able to leave their apartments unoccupied for two years, in another major exemption from tightened real estate policy balked at by multiple homeowners.

Affordable housing will be built for residents leaving redevelopment zones, a policy that will benefit senior citizens who lack monthly income.

Data from the Korea Center for City and Environment Research showed only 32.7 percent of apartments in four favored districts in Seoul were occupied by their owners, indicating the remaining 67.3 percent were held by real estate speculators. The four districts were Gangnam, Yongsan, Nowon and Mapo.