Real Estate Policy: After Tax Reform, Will Supply Take Center Stage with Semi-Industrial Zones and Greenbelts?

Contemplating Short-Term Supply Expansion to Alleviate Demand Concerns
Non-Apartment Market Revitalization Likely to Include Officetels and Multiplex Housing

As the government unveiled major tax reforms—including comprehensive real estate tax and capital gains tax policies—for stabilizing housing prices, the market’s attention has now shifted to ‘plans to expand housing supply.’

Despite rolling out aggressive tax reform measures that target not just owners of multiple homes and non-resident single-home owners, but even single-home residents in the Gangnam area, many both inside and outside the administration believe that unless there is a breakthrough in expanding supply, these measures alone will not be enough to resolve chronic housing price instability.

Panoramic view of the Gyeongin-ro area, a representative semi-industrial zone in Seoul. The Asia Business Daily DB

Additional housing supply measures that have recently been discussed at a series of public forums and by government officials include: ▲ developing idle land for residential use ▲ revitalizing urban redevelopment and reconstruction projects ▲ expanding non-apartment housing supply ▲ shortening the supply timeline for public housing sites such as the so-called “3rd generation new towns.”

One of the most prominent options for increasing urban housing supply being considered is the use of semi-industrial zones. Kim Yong-bum, chief policy officer at the Blue House, first raised this issue at the Kwanhun Forum in late June, making it a leading alternative. At the time, Kim stated, “To rapidly and effectively increase supply inside central Seoul, we must actively identify and redevelop semi-industrial areas such as Yeongdeungpo and Guro.”

According to the Seoul Metropolitan Government, there is a total of 19.97km² of semi-industrial zones in Seoul. Notably, two-thirds of this area—13.34km²—is concentrated in three districts in the city’s southwest: Yeongdeungpo, Guro, and Geumcheon.

The advantage of utilizing semi-industrial zones for housing is that they are located in city centers with well-established subway networks, so there is no need for extensive additional investment in large-scale transportation infrastructure. The semi-industrial areas in the southwest are formed along subway lines 1, such as the Gyeongin Line and Gyeongsu Line, which means that central Seoul can be reached in about 30 minutes. Previously, as industrial facilities have shifted to the outskirts and these areas underwent swift industrial decline, they have become increasingly susceptible to urban blight and development pressure.

However, many semi-industrial zones still serve industrial purposes, and complex landownership interests make it difficult to achieve the rapid supply increases the government hopes for.

‘Greenbelt utilization’ rapidly emerged as a policy alternative at the National Real Estate Policy Debate chaired by Prime Minister Han Sung-sook on July 27. During this forum, Minister of Land, Infrastructure and Transport Kim Yoon-duk said, “After becoming Minister, I have developed a strong desire to build housing, even if it means lifting greenbelt restrictions.”

Supplying housing by removing large-scale greenbelts was a strategy used by both the Roh Moo-hyun and Lee Myung-bak administrations. Currently, the total greenbelt area in Seoul is 149km²—which is 50 times the size of Yeouido (2.9km²). Although most of this greenbelt is forest land, which significantly limits the realistically usable area, there are numerous well-situated plots available in areas such as southeast Seoul.

The problem is effectiveness. In the past, substantial developments in lifted greenbelt zones such as Naegok and Segok did not stabilize prices in the surrounding areas as intended. Instead, they have been criticized for only providing large windfall profits to the small number of successful buyers.

The Ministry of Land, Infrastructure and Transport, which is the primary responsible agency, is also considering repurposing vacant retail and office spaces that are currently struggling with high vacancy rates into residential officetels for rental use by young people and the elderly. Recently, the possibility of converting the workspace of knowledge-industry centers in the Seoul metropolitan area, where there is oversupply, into residential officetels has reportedly also been placed on the policy table.

Plans to expand the supply of villas and officetels are also being considered as a measure to alleviate rising price pressure in the non-apartment rental market—including row houses, multiplexes, and multi-family dwellings. Minister Kim commented on this, saying, “Since a diverse range of parties—including landowners and developers—are involved in the construction of new non-apartment housing, we need to consider simplifying tax, finance, and permit procedures in parallel.” He added, “We will swiftly coordinate with relevant ministries.”

However, it remains uncertain if bold measures for the revitalization of redevelopment and reconstruction projects in Seoul, which city authorities have strongly requested, will be included. President Lee Jae-myung showed a skeptical attitude towards expanding housing supply through these projects during the national debate, and Policy Chief Kim also stated that redevelopment and reconstruction alone would not be sufficient to rapidly boost the housing supply in the short term.

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