First-Generation New Towns See Flood of Urban Renewal Applications... but MOLIT's "Quota System" Holds Them Back

Some areas received applications for more than twice their allocated volume
Areas not selected must compete again for next year's allocation
Local governments urge the ministry to consider making additional capacity available
Seoul is also considering applying the system to Sinnae, Gayang and Deungchon
"Jeonse and monthly rentals are in short supply... Setting a cap would constrain projects"

Concerns are growing that the annual cap on the volume of maintenance projects introduced by the Ministry of Land, Infrastructure and Transport could worsen bottlenecks in urban renewal projects. The annual cap is a kind of quota system designed to regulate the pace of these projects, as a concentration of projects at one time could affect the supply and demand of jeonse and monthly rental housing in nearby areas. Some urban renewal projects in first-generation new towns such as Bundang are already facing bottlenecks. Seoul, which is struggling to draw up relocation plans for urban renewal projects, may also introduce the system, raising concerns that it could affect the pace of housing supply.

A view of the aging planned city in Bundang, Seongnam, Gyeonggi Province. The Asia Business Daily DB

Applications for designation of maintenance areas are flooding in across first-generation new towns. According to Gunpo City in Gyeonggi Province on October 17, about 8,300 housing units across four areas have been included in formal maintenance plan applications for designation as second-round special maintenance areas in the aging planned city of Sanbon. That is more than twice the 3,400 units allocated for this year. Seongnam City, which includes Bundang, received applications last month for 66,037 housing units across 50 areas, 5.5 times its allocation of 12,000 units. In Pyeongchon New Town in Anyang, applications were received for more than 14,000 units across six areas, despite an allocation of 4,800 units. Areas that fail to secure designation this year will have to compete again for next year's allocation.

A Gunpo City official said, "The Ministry of Land, Infrastructure and Transport is also looking for ways to make additional capacity available, so we are waiting for the outcome. The government is also emphasizing the need to expand supply, so we will have to see whether there are any changes." A Seongnam City official said, "Bundang has more applications, so areas that are not selected have the inconvenience of having to apply again every year. Since the beginning of the year, we have repeatedly asked the ministry to abolish the volume cap and delegate authority, but we have not received a response yet."

Under the Special Act on the Maintenance and Support of Aging Planned Cities, enacted in 2024, the annual cap on maintenance projects is intended to prevent housing market instability caused by large-scale relocation demand when projects are concentrated in a particular period. It requires local governments to incorporate relocation plans into their master plans for the maintenance of aging planned cities and proceed in stages.

Attention is focused on whether Seoul will introduce the quota system. The city has not yet applied to have any areas designated as aging planned cities. However, with the ministry asking Seoul to prepare relocation plans for urban renewal projects, some analysts say the annual cap under the Special Act on Aging Planned Cities could become a key framework in the future.

A Seoul City official said, "There are areas where we are discussing the application of the Special Act on Aging Planned Cities with the ministry, including the Sinnae Housing Development District in Jungnang-gu and Gayang and Deungchon in Gangseo-gu. We are still receiving consultations, so it is too early to consider the annual cap. We plan to pursue both reconstruction and the preparation of master plans under the Special Act in line with local demand, and hold briefings for residents once the ministry's consultation is complete."

Experts warn that the method for calculating the annual cap could paralyze urban renewal projects. Under the Special Act on Aging Planned Cities, the annual cap is determined based on estimates of housing supply within a 10-kilometer radius that could accommodate relocating households.

The problem is that the supply of jeonse and monthly rental housing in nearby areas that could serve as relocation options is limited due to owner-occupancy requirements and lending restrictions. Applying a quota system that sets approval caps based on this supply could inevitably shrink the volume of urban renewal projects allowed.

Kim Jun-hyung, a professor of real estate at Myongji University, said, "With the supply of jeonse and monthly rental housing in the market reduced by government regulations such as owner-occupancy requirements, setting a cap based on nearby supply would theoretically reduce the volume of urban renewal projects allowed in Seoul to zero."

Kim Je-kyung, director of Toomi Real Estate Consulting, said, "Even if urban renewal projects begin at the same time, all complexes do not move in at the same time. Like a long-distance marathon, each complex progresses at its own pace." He added, "The government imposing an artificial quota system is bureaucratic, desk-bound administration. The volume cap should be abolished."

In a statement last month, the Ministry of Land, Infrastructure and Transport said, "If local governments take comprehensive account of regional housing supply and demand and relocation conditions to prepare effective relocation plans, we will actively consider increasing the volume of maintenance projects."

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