en.Wedoany.com Reported - The private sector participation in public housing projects promoted by the Korea Land and Housing Corporation (LH) is becoming a new business area in the construction industry. Against the backdrop of a reduction in private construction projects and LH's cessation of sales of public housing land to the private sector, this business model has emerged as an alternative.
Private sector participation in public housing projects was first introduced in 2014. The model involves LH providing the land, while private operators are responsible for the entire process of public housing, from design and construction to sales. Initially, a profit-and-loss sharing model was used. However, due to criticisms that it drove up public housing prices and provided excessive benefits to the private sector, it now operates solely on a fixed-price contract basis, with construction companies receiving only pre-agreed project fees.
This public housing initiative has been formally scaled up since 2024. During its structural reform process, LH decided to convert 30% of its total public housing construction volume into private participation projects. Last year, LH newly tendered private participation public housing projects for a total of 36 sites and 30,200 units, accounting for approximately 30% of the annual permitted volume of 110,000 units. LH plans to supply 26,000 units (based on construction start) through private participation public housing projects this year, which is half of LH's total projected public housing construction starts of 52,000 units.
In its supply measures announced on September 7 last year, the Ministry of Land, Infrastructure and Transport stated that by 2030, the Seoul metropolitan area will supply a total of 60,000 units as private participation public housing projects. This includes 53,000 units through direct execution conversion by LH and 7,000 units through land use efficiency measures such as floor area ratio increases, with the potential for this scale to be further expanded. LH is currently converting idle land within public housing sites and sold joint housing land where sales have been delayed due to contract cancellations or unpaid interim payments into private participation public housing projects.
As the market scale expands, attention from the construction industry is increasing. Among the top ten construction companies, Daewoo E&C, DL E&C, and GS Engineering & Construction are the most active in private participation public housing projects, and Hyundai Engineering & Construction also plans to further expand its orders. In the first batch of LH's private participation public housing tenders this year, a consortium led by DL E&C won the bid for 4 sites and 1,697 units in Incheon's Geomdan·Yeongjong area, while a consortium led by Namkwang Engineering & Construction won 2 sites and 1,172 units in Yangju's Hoecheon area. For the tender of 1 site and 2,100 units within the Seoul Dobong-gu Seongdaebang Stadium site announced on April 7, Hyundai Engineering & Construction is observed to be a likely participant.
A construction industry insider stated: "Compared to LH's own projects where it designs and selects construction companies itself, private participation public housing projects are faster by 6 months to over a year in terms of permitting and project advancement. It's a mutually beneficial structure: LH can utilize private capital and technology to reduce financial burdens and improve public housing quality, while the private sector can conduct stable business without the PF burden required for land acquisition." LH and the Housing & Urban Guarantee Corporation plan to launch a project cost guarantee product in the first half of this year to enable construction companies to raise project funds at low interest rates.
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