[Boomerang Effect of High-Density Apartments④] Seoul Tests 25% FAR Increase... "Only Prevents Negative Reconstruction"

Seoul Introduces Business Feasibility Adjustment Coefficient

High-Density Apartments to Have Current FAR Recognized

Complexes with 200% FAR Accelerate Reconstruction Efforts

Concerns Over Profitability Remain Amid Surging Construction Costs

To address the challenges posed by aging, high-density apartment complexes, it is essential to either conduct self-repairs or revitalize maintenance projects by easing reconstruction requirements. The Seoul Metropolitan Government is currently introducing institutional improvements, such as recognizing current floor area ratios (FAR) and applying business feasibility adjustment coefficients, to enable complexes with insufficient profitability to pursue reconstruction. However, experts believe that incentives related to FAR alone are insufficient to alleviate the financial burden on association members. They point out that more progressive measures, such as adjusting the mandatory supply ratio of rental housing, are necessary to improve the overall business feasibility.

In September 2024, the Seoul Metropolitan Government announced plans to enhance the profitability of high-density apartments through the 'Two Major Support Measures for Redevelopment and Reconstruction.' The core of these measures is to recognize the current FAR—specifically, the FAR at the time of construction before the subdivision of residential zones in 2004—as the allowable FAR. For example, a complex with a current FAR of 320% may have this recognized as the allowable FAR without additional public contributions. Through rezoning and the provision of public benefits or rental housing, the FAR can be increased up to a maximum of 400%. For complexes with a FAR of 300%, the allowable FAR can be raised up to 375%, which is 125% above the current FAR, taking into account the upper limit set at one-fourth (125%) of the current FAR.

Until recently, high-density reconstruction projects in Category 3 general residential zones faced significant limitations. Unless the zone was upgraded or benefited from special station area exceptions, any FAR exceeding the legal maximum of 300% was not recognized, making it difficult not only to secure units for general sale but also to maintain the existing number of association households. According to the 'Basic Plan for Urban and Residential Environment Improvement' by Seoul Metropolitan Government, Category 3 general residential zones are subject to a four-stage FAR system: ▲ base FAR at 210% ▲ allowable FAR at 230% ▲ maximum FAR at 250% ▲ legal maximum FAR at 300%. The base FAR is the default ratio granted. This can be raised to the allowable FAR by providing public pedestrian walkways, childcare facilities, and so on. To reach the maximum FAR, additional public contributions are required, and to further expand up to the legal maximum FAR, half of the added floor area must be supplied as rental housing.

However, with the application of the city's new support measures, there is a positive outlook for improving business feasibility. The recognition of the current FAR as the allowable FAR, even without additional public contributions, allows this to be incorporated into the maintenance plan.

In addition, the Seoul Metropolitan Government has introduced a business feasibility adjustment coefficient system, which can raise the allowable FAR by up to two times in areas where land prices are low and sales revenue is limited. For redevelopment zones located near subway stations, the legal maximum FAR can be relaxed up to 360%, provided that 60–70% or less of the increased floor area is supplied as public rental housing under the Station Area New Home Program.

Apartments with FAR in the 200% Range Accelerate Reconstruction Efforts

To date, no high-density complexes with a FAR exceeding 300% have received district unit plan approval under the condition that their current FAR is recognized. Nevertheless, the Seoul Metropolitan Government anticipates that more complexes will begin pursuing reconstruction in light of the new support measures. A city official explained, "Since less than two years have passed since these business support measures were introduced, it may take some time for residents to reach a consensus and start full-scale implementation."

There are already cases of complexes with a FAR exceeding 200% accelerating reconstruction. For instance, the Sinchon Lucky Apartment complex, completed in 1993 with a FAR of 229% and 855 units, launched its reconstruction committee in December 2024.

The Miseong Apartment complex in Bulgwang-dong, Eunpyeong-gu, completed in 1988 with a FAR of 227%, also had its maintenance plan for reconstruction—raising the FAR to 299.78% and allowing buildings up to 40 stories—approved with amendments in March 2024, facilitated by the easing of allowable FAR and the application of business feasibility adjustment coefficients. Similarly, Daerim Apartment in Sadang, Dongjak-gu, completed in 1990 with a FAR of 208%, began forming a reconstruction committee in 2024 and is currently collecting consent forms for the maintenance zone designation proposal and committee formation.

"Only Enough to Prevent Negative Reconstruction"…Limits to Improving Business Feasibility

Nevertheless, experts agree that the current support measures have limited effect in significantly improving profitability. As construction costs for reconstruction projects now frequently exceed 10 million won per 3.3㎡ due to rising material prices, it remains difficult for overpopulated complexes in the outskirts of Seoul with low sales prices to cover construction costs, even if some units are secured for general sale.

Kim Jekyung, head of Tumi Real Estate Consulting, explained, "The Seoul Metropolitan Government's system of recognizing the current FAR is primarily intended to prevent 'negative reconstruction,' where the number of units decreases compared to before. Even if some units are made available for general sale, unless the sales price is high enough to offset construction costs, the shortfall will inevitably have to be covered by association members' contributions."

Baek Jun, CEO of J&K Urban Maintenance, also pointed out, "Even if the current FAR is recognized, for overpopulated complexes to meet all requirements for spacing between buildings, building coverage ratio, and construction law permits, one-to-one reconstruction still seems difficult."

Calls have also been made for sweeping deregulation of maintenance projects, including lowering the mandatory rental housing ratio and adjusting the acquisition price of rental housing to reflect current conditions. When an association offers rental housing as a public contribution, it is currently required to sell it at the standard construction cost, which is lower than the basic construction cost. While construction costs have risen sharply, the acquisition price for rental housing does not sufficiently reflect this increase, leading to a situation where the more rental housing the association supplies, the less profitable the project becomes. Furthermore, if the FAR is raised to the legal maximum, there is the additional burden of supplying 50% of the increased floor area as public rental housing.

Kim also emphasized, "The recognition of the current FAR alone is insufficient to ensure the business feasibility of maintenance projects in overpopulated complexes. More progressive measures are needed, such as reducing the mandatory rental housing ratio and adjusting the purchase price of rental housing to reflect actual costs."

This content was produced with the assistance of AI translation services.