A Seoul Metropolitan Government survey of 43 redevelopment zones scheduled for resident relocation this year found that 39 sites face project delays due to loan regulations hindering relocation fund procurement. With these areas accounting for approximately 31,000 planned housing units, supply disruptions appear inevitable. The city is now urging the central government to rationalize loan regulations related to relocation costs to ensure housing stability and expand supply.
Choi Jin-seok, director of Seoul's Housing Bureau, disclosed the survey results at a briefing held at Seoul City Hall on the 27th and submitted a formal request to the Ministry of Land, Infrastructure and Transport (MOLIT) for loan regulation adjustments. "Over seven months since the second half of last year, we conducted on-site inspections at about 20 selected project sites and found many struggling with relocation cost issues," Choi said. "We understand the government will soon announce supply-related measures, and we hope relocation costs will be adequately addressed."
The unscheduled briefing appears to be Seoul's public response to growing concerns that MOLIT's upcoming housing supply measures may not include relocation loan regulation relief. The city explained it had conducted 20 on-site inspections over seven months since July last year and held multiple working-level consultations with MOLIT requesting regulatory relief, but decided to disclose the situation after those requests were not accepted.
Of the 43 redevelopment zones surveyed, 39 sites (approximately 31,000 planned units) were found to be affected by loan regulations—about 91% of total project areas. These include 24 redevelopment and reconstruction sites (approximately 26,200 units) and 15 small-scale housing improvement projects such as "Moa Housing" (approximately 4,400 units). Large-scale project sites in Nowon-gu, Seodaemun-gu, Gangnam-gu, and Songpa-gu are among those affected.
The city attributes the delays to regulations implemented after the government's June 27 and October 15 measures, which set loan-to-value (LTV) ratios at 40% for single-home owners and 0% for multi-home owners, with a 6 billion won loan ceiling. These restrictions have prevented cooperative members from securing necessary relocation funds. While cooperatives consider additional loans from secondary financial institutions backed by construction company guarantees, the city notes this would impose substantial interest burdens due to high rates and add to members' financial strain.
Residents of "Gaepo Jugong 5 Danji" in Gangnam-gu's Gaepo-dong, who began relocating this month, secured additional relocation funds through project budgets. However, following the October 15 measures, nearby jeonse and monthly rental listings have sharply declined, leaving them needing more cash to move. Currently, about 10% have completed relocation. Kim, a buyer who acquired a unit from a cooperative member, said, "Even combining relocation funds and additional allowances, we cannot find suitable housing nearby and are considering transferring our children to different schools. Jeonse prices for 84-square-meter units in nearby new apartments are running 1.5 billion to 1.6 billion won ($1.1 million to $1.2 million), and they keep rising."
Cooperative members who applied for "1+1" allocations at Noryangjin Zone 4 have also seen their financing plans disrupted. While mid-payment loans were exempted from regulations, the final payment loan ceiling was capped at 6 billion won. One cooperative member said, "With this policy blocking financing, more members are saying they'll apply for larger unit types during reallocation. They say they want to increase supply, but if this continues, cooperative member allocations will concentrate on larger units, reducing general public sale volumes."
A real estate agency representative in Dongjak-gu explained, "Premiums on properties eligible for two units through 1+1 applications used to be at least 500 million to 600 million won higher than single-unit properties, but popularity has declined due to relocation funding difficulties and tax burdens, and prices are gradually falling." In Noryangjin Zone 8, only about 120 of 401 total cooperative members—less than one-third—chose the 1+1 option.
The 1+1 allocation system was introduced during the Park Geun-hye administration in 2013 to increase small housing supply and encourage participation from large-unit owners. It once spread to Gangnam reconstruction sites as one unit could be used for residence while the other served investment or inheritance purposes. However, the Moon Jae-in administration's strengthened taxation and loan regulations on multi-home owners made the system controversial. Consequently, cooperative members at Seocho-gu's Banpo Jugong 1 Danji Zones 1, 2, and 4, Sinbanpo 21st, and Sinbanpo 15th—all pursuing reconstruction—withdrew their 1+1 applications during reallocation processes.
Relocation cost burdens are heavier for small and medium-sized project sites, as financing conditions have become polarized depending on project scale and construction companies. While large-scale sites in Gangnam can relatively easily secure additional relocation funds, small and medium-sized sites must accept interest rates 3 to 4 percentage points higher than basic relocation loans, leading to project delays and cost increases, the city explained. "Financing negotiations and procedural compliance are taking considerable time, spreading adverse effects including project delays and cost increases across all fronts," Choi noted.
Seoul requested on the 22nd during a working-level consultation with MOLIT that relocation loans be separated from general mortgage loans and subject to a 70% LTV ratio as part of rational regulatory adjustments. The city also submitted damage assessments for 40 redevelopment projects affected by loan regulations.
Choi emphasized that relocation costs should be recognized as essential project expenses for housing supply rather than simple household loans. "We estimate 66 sites affecting 56,000 units will be impacted through next year," he said. "Housing supply comes from both public and private sectors. The current situation causing delays to scheduled housing supply must be promptly resolved."
