Unsettled funds at four redevelopment projects carried out solely by Korea Land & Housing Corporation (LH) total 47.36 billion won ($33 million), with some cases still unresolved as long as a decade after completion. Parts of the accounts have been closed, but lawsuits, the possibility of additional taxes and difficulties in recovering claims have dragged out the process. With LH's debt problems becoming chronic, critics say the agency should examine whether the size of its reserves is appropriate and consider ways to distribute the money more efficiently.
According to data on delayed settlements at LH-run redevelopment projects, submitted to the office of Rep. Kim Mi-ae of the People Power Party, a member of the National Assembly's Land, Infrastructure and Transport Committee, unsettled amounts at the Jung 1, Geumgwang 1, Shinheung 2 and Anyang Deokcheon redevelopment projects came to 47,360,980,000 won as of last month. The data was released on the 21st. The Anyang Deokcheon district, completed in October 2016, has gone nearly 10 years without a final settlement. Settlement is the process of clearing project costs, claims and debts and distributing remaining assets to rights holders.
Shinheung 2 had the largest amount at 23.93 billion won, followed by Geumgwang 1 at 12.98 billion won, Jung 1 at 7.83 billion won and Anyang Deokcheon at 2.62 billion won. Jung 1 was completed in September 2022, Geumgwang 1 in November 2022 and Shinheung 2 in October 2023. All four have completed transfer notices and ownership registration, but three to 10 years after completion they still await final settlement steps such as clearing reserves and recovering claims.
LH has pointed to the Jung 1, Geumgwang 1 and Shinheung 2 public redevelopment apartments in Seongnam, which it carried out on its own, as success stories for public-led redevelopment. Public participation made the projects easier to push forward and allowed the agency to actively gather residents' views in turning an old downtown area into a new one, LH has said.
But friction with residents' representative councils was frequent as LH worked to secure project viability, and some disputes ended up in court. Burdened by excessive debt, LH at one point declared it would abandon the redevelopment of the Jung 1, Geumgwang 1 and Shinheung 2 districts, saying they lacked viability. Residents protested that they had suffered financial losses, and the redevelopment eventually went ahead after a series of setbacks. LH's unilateral notice of suspension, however, undermined residents' trust in public agencies.
For the areas where settlement has not been completed, LH said it is "withholding the distribution of some remaining assets in preparation for additional levies on omitted corporate tax and changes in project costs depending on the outcome of lawsuits with rights holders." It added that it would "carry out the final settlement after the statutory period for imposing national taxes expires and all litigation ends." That statutory period is the legal window during which the state can impose additional taxes.
The unsettled amounts at Jung 1 and Geumgwang 1 are reserves set aside for corporate tax penalties and a lawsuit seeking construction payments. Shinheung 2 includes reserves of the same nature plus an amount LH recorded as "unpaid contractor costs for landscaping and other work." For Anyang Deokcheon, LH cited claims for litigation costs and the recovery of claims following a commercial property auction. The expected completion date for all four was listed as "upon conclusion of litigation," with no specific timetable.
"A redevelopment project carried out by the public sector does not end with completing the housing. It must be responsibly wrapped up through settlement," Kim said. "Even if reserves are needed in preparation for lawsuits and taxes, we need to examine whether the size of the reserves for each project is appropriate and consider whether the amounts that can be settled could be distributed first." She added, "Since LH has explained that it is preparing for additional levies on omitted corporate tax, I will also check the specific circumstances behind that and the impact the penalty burden has on rights holders."
