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Investigation on REITs under a Special Act on Public Housing - Resident Stability vs. Debt Reduction of LH -

  • Public Land Law Review
  • Abbr : KPLLR
  • 2017, 80(), pp.25-55
  • Publisher : Korean Public Land Law Association
  • Research Area : Social Science > Law

Sunbae Lee 1 Yoon Lee 1

1선문대학교

Accredited

ABSTRACT

Korea Land & Housing Corporation (LH) was a solid supplier of public housing in Korea until now. LH has an external pressure, however, from a debt reduction policy by the ministry of strategy and finance, led to change its business profile from providing public housing to adopting the real estate investment trusts (REITs). This approach is that LH sales its rented housing or unsold real estate sites to REITs and allows private real estate companies to plan and construct on those site which could ultimately reduce burden of construction and debt. However, in this business cycle, LH becomes an investor or a manager, which makes REITs are one of the corporations of LH. Fundamental research question can be arisen that these REITs can increase resident stability and debt reduction of LH. In result, this new approach can only reduce debt of LH but not for the resident stability. Analyzing the end of leasing contract, the investment earning rate of LH, only 3% investment from LH, could be 1,000% if 10% to 20% housing price increases. Although the future profit of public housing services should be returned to the homeless, this REITs approach only utilized the debt reduction of LH. In this research, an alternative approach is suggested that the resident stability and debt reduction for LH considered simultaneously. In this sense, the minister of land, infrastructure, and transport should discard the special act on public housing article 4 section 1 number 6. Second, the korea land and housing corporation act article 11 should be revised. Third, the public institute classification accounting operation guideline should be reconsidered as removing the security deposit of public housing and housing fund financing from the balance sheet of the public housing service. Fourth, an ambiguous sentence of conversion of rental housing for sale should be revisited as a reasonable probit guaranteeing method. Suffice to say that aforementioned revisions can lead LH returns to its initial purpose of establishment. This can ultimately contribute to resolve the reduction of birth rate and income inequality problems in Korea.

Citation status

* References for papers published after 2022 are currently being built.

This paper was written with support from the National Research Foundation of Korea.