An organization that will take care of President Moon Jae-in’s most important campaign pledge in the real estate sector, the City Rebirth New Deal Project, officially opened for business under the Ministry of Land, Infrastructure and Transport (MOLIT) on June 4. The government plans to successfully implement the city rebirth new deal projects through the organization, which will cooperate with other government agencies while pushing the project. But many suspect things won’t be that easy as there are many tasks that have to be taken care of before taking on the project.
MOLIT officially launched the City Rebirth Project Planning Team in a June 4 ceremony, with key officials of related government agencies and state-run companies in attendance, including Chief Commissioner Jei Hei-seong of the Presidential Commission on Architecture Policy, President Park Sang-woo of the Korea Land and Housing Corp., President Kim Seon-deok of the Korea Housing & Urban Guarantee Corp., led by MOLIT Minister Kim Hyun-mee.
Minister Kim said the new organization should focus on upgrading the residential environment of the old city centers and the quality of life around the old residential areas, job creation and growth. They should also listen to the ideas and opinions of all related levels in society before setting up detailed implementation plans, which should be enforced so that the people can benefit from the changes.
But the team has a long way to go before producing successful results in the “city rebirth” projects. First, a standard has to be established for the selection of the cities where projects are to be held. The government has a rough idea to go ahead with projects in 500 locations in cities across the country, 100 in each of the five years of President Moon’s term of office, but the roles that the central and regional governments will play has yet to be hammered out.
Aware of the challenges, the ministry commissioned research on the city rebirth new project in order to set up a detailed plan for the project and initiate moves to pick the city centers. The second task involves decisions on the participation of civilians in the project, which is are considered public works and do not have many profit motives.
Some 10 trillion won is to be ploughed into the project during the five-year period, which will come to total 50 trillion won or 100 billion won into each selected location. The project should have room for profit to attract the civilian participation with profit motives in the project.
The last issue that should resolved is gentrification, which means many current low-income tenants will be forced from their homes after rents soar due to rising real estate values where the rebirth projects take place. An answer to the problem is to find a means with which the owners of real estate can share the benefits of rising property values with their tenants.
A total of 50 trillion won will be needed to complete the city rebirth project, making it the biggest policy in the area of real estate for President Moon. The investment is the largest single amount ever made by the government for a real estate development project to be financed from the national budget.
Many question whether the government would be able to allocate 10 trillion won from its budget for the project in each of the next five years. President Moon said only 2 trillion won will be allocated from the government budget each year, 3 trillion won from state-owned development firms including the Korea Land and Housing Corp., and the Seoul City Housing Corp. while the remaining 5 trillion won will come from the City Residential Fund.
No problem is seen in providing 2 trillion won from government budget, although it requires parliamentary approval, along with 3 trillion won to be met with the funds to be provided by the state-owned housing and urban development firms.
But they see some problems in getting 5 trillion won from the City Residential Fund, with the fund already being allocated 65 billion won for its housing projects, and the government is thinking about getting some funds from the Residential Account Project Fund which has 21 trillion won in fund.