Parking regulations, not floor area ratio, emerge as key factor in villa development profitability

The key variable determining the profitability of villas (multi-family or multi-unit houses) is not the buildable floor area ratio, but the number of parking spaces that can be secured. When building on small plots of 50 to 100 pyeong, even if floor area ratio remains, the number of units cannot be increased if the legal number of parking spaces is not met. Consequently, there are growing calls to relax parking installation regulations to stimulate housing supply.

A difference of one parking space determines profitability, causing a 20% gap

According to an analysis by Understanding: All the Knowledge in the World, the number of available parking spaces varies significantly depending on the shape of the land and the area adjacent to the road, even for plots of the same size. For example, on a 100-pyeong plot, a wide road frontage and a good shape might allow for 8 parking spaces, whereas a narrow road or irregular shape might limit the capacity to only 6 spaces.

This difference directly impacts profitability. If a property with 6 parking spaces generates 10 million won in monthly rent, increasing the parking to 8 spaces to allow for more subdivided units, such as studio or two-room flats, could raise monthly rent to 12.4 million won. A difference of just two parking spaces can create a roughly 24% gap in business profitability. Reporter Jang Sun-won explained that while a parking space occupies about 3.78 pyeong, realistically, one car requires 7 to 9 pyeong when considering turning and entry space, noting that strict parking regulations force developers to build fewer houses and fail to utilize the full floor area ratio.

Current parking regulations in South Korea run parallel area-based and unit-based standards. Taking the Seoul Metropolitan Government as an example, if there are six households with units of 80㎡ or less, the area-based standard might only require 2 spaces, but the unit-based standard (applying 0.5 spaces per unit) would require 6 spaces. Ultimately, developers must meet the higher of the two standards, which increases the business burden.

Deregulation in Seattle, USA, and Japan's Proof of Parking Space System

Overseas cases are being cited as potential solutions for relaxing parking regulations. Since 2012, Seattle, United States, has implemented a policy to relax minimum parking installation standards. Previously, Seattle mandated more parking than was actually demanded, creating a side effect where construction and management costs were passed directly onto tenants through higher rents. Because parking was a factor that increased property value in the car-centric United States, it was oversupplied, leading to a cycle where operating deficits were transferred to rent. Seattle began by relaxing regulations in areas with very convenient public transportation and gradually expanded the policy.

According to a report by the Construction Industry Research Institute, the number of parking spaces in projects receiving building permits decreased by approximately 40% between 2012 and 2017 following Seattle's deregulation. This resulted in a reduction of approximately $20,000 (about 26 million won) in construction costs per unit. This figure represents about 16 million won in pure construction cost savings out of an assumed $30,000 total parking construction cost. If the opportunity cost of building housing instead of parking and the savings in management and operating costs are included, the actual economic benefit could be even greater.

Japan follows a different approach. Through the "Proof of Parking Space System" implemented since 1966, individuals must prove they have secured a parking space within a 2km radius when purchasing a vehicle. Furthermore, even apartment owners in Tokyo must pay separate parking fees ranging from a minimum of 200,000 won to as much as 600,000 won. Due to this environment, the number of apartments without parking spaces is increasing in urban centers with good public transportation infrastructure.

New construction deregulation and parking conflicts with existing residents

However, applying these overseas models to the South Korean context faces many practical obstacles. While Seattle is a case of reducing an oversupply of parking in an area where space was relatively abundant, South Korea's aging residential areas already suffer from extreme parking shortages. If regulations are relaxed to reduce the parking obligations for new buildings, a "balloon effect" may occur, where vehicles from the increased number of units spill into existing alleys, harming current residents. There are concerns that while the benefits of new construction deregulation concentrate on new tenants, the cost of the resulting parking shortage is borne by existing residents.

Ultimately, local governments are forced to choose between relaxing parking regulations to increase housing supply or maintaining regulations to prevent parking chaos in alleys. Even if local government heads have the authority to relax regulations, the burden of civil complaints makes it difficult to make decisive moves. As an alternative, opinions suggest applying flexible parking regulations only to areas with easy access to public transportation, such as station influence areas, while simultaneously strengthening enforcement and securing public parking lots. Additionally, limited deregulation could be considered for cases with verified demand, such as when it is proven that residents do not own vehicles or when demand is concentrated in specific areas.

Source: original video (YouTube)