Seoul - 5.2 Apartment Nation and Economic Imbalance between Gangnam and Gangbuk
| Understanding Korea Series No.4 | ||
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| 1) The Miracle on the Han River: Accomplishments and Shortcomings | 2) Apartment Nation and Economic Imbalance between Gangnam and Gangbuk | 3) Disappearance and Regeneration of the Traditional Urban Residences |
The most popular form of residence is the apartment nowadays, but 40 years ago it used to be a type of housing ‘people would not want to live or cannot live in.’ Seoul encountered a serious housing shortage due to an unprecedented population growth, which led the city government to build small apartments in bulks to relieve the pressure. First, the city built 360 small apartment units of 12 pyeong (1 pyeog = 3.3058 square meter) and 15 pyeong in 12 buildings in Yeongdong District in 1971, and ordered government employees who didn’t own homes to move in. Next, they prepared new apartment-only site of 7,794,000 square meters in Apgujeong, Banpo, Cheongdam and Dogok areas and started supplying apartments in large scale. The construction of apartment complexes proceeded rapidly as private construction companies, which grew enormously due to the ‘Middle East Boom,’ joined in. Mega construction companies such as Hyundai, Daelim and Sindonga began building apartments with their foreign currency; people began to prefer ‘modern and convenient’ apartments while the Korean economy enjoyed its heydays.
Real estate speculations also became rampant as the demand for apartments increased, and prices for apartments with high liquidity skyrocketed. The unearned income generated by real estate speculation solely went to the middle class, and the private construction companies took all the revenue from the construction of apartments. This system contributed to social inequality, and in terms of geography, resulted in the imbalance between Gangnam and Gangbuk, which was mainly comprised of single-family housings. All of the financial benefits of the economic miracle made possible by the Three-Low Policy (low exchange rate, low oil price and low interest rate) of the 1980’s, which was designed to stimulate Gangnam’s development, was allocated to Gangnam. The imbalance between Gangnam and Gangbuk, where Gangbuk fall behind, became apparent in the 2000s. Gangnam, equipped with mega apartment complexes, education facilities, wide roads, huge department stores, cultural and administrative institutions, continued to grow each day. On the contrary, Gangbuk became stagnant due to poor infrastructures and the houses were getting old and roads remained narrow.
Photo 12 Apartment Complexes in Gangnam
Figure 25 Increase of Apartment Units and Decrease of Low-income Housing
In order to resolve this imbalance between Gangnam and Gangbuk the 4th mayor elected by popular vote launched the ‘Balanced Urban Development’ project, which as the first priority aimed to rebuild the aging downtown area and to minimize the housing and educational gap between Gangnam and Gangbuk. This project included major projects such as converting the aging residential area into New Towns to promote balanced development and inviting special purpose high schools in Gangbuk to minimize the educational gap. Out of all the plans the efforts of revamping the old residential areas of Gangbuk into New Towns were the most welcome. There is an old saying in Korea, ‘I will give you my old house; give me a new house.’ The New Town Project sort of worked that way: one was promised a free new house if he or she gave up an old house. The project, which has been compared to a ‘golden goose,’ became immensely popular, and the New Town boom took over the whole city of Seoul. After 2004 in particular, the New Town Districts increased dramatically; 305 districts were designated as the New Town Areas. It was 5.7 times greater in number than what it was 7 years back. More reconstruction projects were launched: Urban and Residential environment Areas were expanded to 61.6 square kilometers in 1,300 areas (305 New Town Areas, 529 Redevelopment Areas, 276 Single-family Residential Reconstructions and 190 Communal Residential Reconstructions). This comprised 20% of Seoul’s total residential area (309.35 square kilometers). The project turned not just Gangnam but the whole city into an apartment nation.
Nevertheless, various social and economic issues surfaced after the global financial crisis of 2008. Most notably the real estate market got cold rapidly so the number of unsold apartments increased, and the number of low-income housing decreased due to large-scale demolitions (compared to 1970, apartments increased 14 folds and low-income housings were cut in half). Old urban organizations centered on old streets and byways disappeared and due to the overheated real estate speculation and the consequent increase in the housing price, many homeowners became ‘house poor,’ that is they had no cash under the pressure to repay the housing loan. The ‘exit plans’ to solve these problems arose from the New Town Projects are underway. For instance some of the designated New Town Areas were released from the plan, but the issue of sunk cost, i.e. the fund used in the preparation stage of the project, still remains unresolved. The emotional gap between the residents who agree with the New Town Project and those who oppose it is still deep not only in the areas affected by the exit plan but almost everywhere. This is another major issue that has to be resolved.
