President Park Geun-hye and Minister of Land, Infrastructure and Transport Yoo Il-ho participate in a ceremony to launch the government-initiated, 

1st “New Stay” rental housing project at the Dohwa District in Inchoen on Sept. 17. (Photo:MOLIT)

The government’s initiative to boost the private sector’s inventory of rental housing has gotten a boost thanks to regulatory reform. 

Following the government’s easing of regulations on the supply of publicly built housing, the rental housing program has enjoyed a boom. The competition ratio to select winners of sites for the second “New Stay” rental housing project is higher, while prospective buyers are crowding model houses for the first New Stay project.

Korea Land & Housing Corp. (LH) officials and contractors said the average competition ratio for the selection of five consortia of the second New Stay project was 2.5:1, higher than the 1.7:1 ratio for the first project. New Stay housing refers to quality rental apartments, built by contractors, in which occupants are allowed to stay for eight years in return for paying wolse (monthly rental fees).

In efforts to boost the New Stay projects, the government plans to establish 'Real Estate Investment Trusts (REITs) for 14,000 apartments this year and recruit prospective occupants of 6,000 apartments out of the total. It plans to ante up New Stay housing supply to a maximum of 20,000 households and designate five areas to build New Stay apartments next year.

Financial investors will be allowed to invest in preferred capital stock like housing urban funds guarantee profit yields. The government plans to introduce a system in which funds will be allowed to invest into mother REIT companies and reinvest in REIT companies to diversify risk. 

These are among the measures the government announced on Sept. 2 to stabilize the housing for low- and medium-income earners. 

Minister Yoo Il-ho of the Ministry of Land, Infrastructure and Transport presided over a meeting of CEOs of construction companies at the Marriot Hotel on Aug. 20 to discuss ways of giving New Stay projects a shot in the arm. The meeting took place following the National Assembly’s approval of the Special Act on New Stay Housing.

“Amid the recent trend of changing jeonse into wolse, causing a rise in housing costs, the New Stay projects will serve as new housing opportunities for medium-level income earners now that occupants are allowed to stay for a long period of eight years with rental fee hikes limited to an annual maximum growth rate of 5 percent,” Minister Yoo said. 

“To contractors, the New Stay projects will emerge as new opportunities,” he added. 

Construction companies have so far been focusing on the pre-sale of apartments in the short-term perspective, but contractors will find it necessary to focus on New Stay projects covering all areas ranging from housing planning to construction and rental housing management in the long-term perspective, thus raising added values of the construction industry, he added. 

President Park Geun-hye called for the business leaders to explore ways of boosting the private sector’s rental business as an institutional foundation for the private sector’s rental housing business has been established. Yoo urged contractors to participate in the New Stay projects, and he also promised to aggressively reflect recommendations from the construction industry to boost the New Stay business. 

Among the participants were Chairman Choi Sam-kyu of the Construction Association of Korea; Chairman Park Chang-min of the Korea Housing Association; Chairman Kim Moon-kyung of the Korea Housing Construction Association; Hyundai E&C President Chung Soo-hyun; Lotte E&C President Kim Chi-hyun; Daelim Industrial President Kim Han-ki; and Hanwha E&C President Choi Kwang-ho.