Higher redevelopment floor-area ratios could boost future supply, but push up home prices now

A proposal to raise floor-area ratios for private redevelopment and reconstruction projects in Seoul has exposed a housing-policy dilemma: more homes eventually, but potentially higher prices immediately.

The National Assembly is discussing amendments that would allow ratios of up to 1.2 times the legal ceiling for private projects. Existing legislation would temporarily permit publicly supported redevelopment and reconstruction projects to reach 1.3 times the legal limit, or a maximum of 360%, for three years. The measure followed the government’s September 7 housing supply package and aims to improve the feasibility of public projects.

The Democratic Party has reportedly proposed extending a 1.2-times ratio to private projects, while excluding Seoul’s Gangnam districts and Yongsan. It would also require the additional floor space to be used for small homes of 60 square meters or less. The proposal has not formally become party policy, and the Ministry of Land, Infrastructure and Transport says it is not reviewing the measure at government level.

Seoul says higher ratios could significantly increase supply. In data submitted to the government, the city said housing numbers at 59 redevelopment projects completed over the past three years rose 36.4% from previous levels. Seoul has set a goal of starting construction on 310,000 homes through redevelopment projects by 2031. It says 87,000 would represent net additions, and that a 1.2-times ratio could add roughly 43,000 more.

The concern is that the benefit could reach union members as economic gains and lift prices before the apartments are built. Average Seoul apartment prices rose 6.4% through July this year, while prices for apartments more than 20 years old rose 7.2%, according to Korea Real Estate Board figures. With redevelopment expectations already supporting prices, lower additional contributions could fuel further increases in project areas.

Higher ratios could also intensify competition to start projects and trigger large-scale relocations, affecting nearby rental markets. Redevelopment generally takes at least seven to eight years from planning to completion, creating a risk that measures intended to increase long-term supply could unsettle the housing market immediately.

The land ministry sees stronger public benefits in public redevelopment, particularly in areas with weak project economics. Higher ratios there can secure additional public housing and lower sale prices. The government remains more firmly opposed to broadly allowing the transfer of redevelopment association membership, which is restricted in overheated districts except in limited circumstances designed to prevent speculation.

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Of the 310,000 homes, about 87,000 are net additions, and raising the floor-area ratio to 1.2 times would add roughly 43,000 more net homes.