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Incentive program for reconstruction of dangerous and old buildings


I. Background

Taiwan's cities are densely populated with 80 percent of the total population living in urban areas—just 12 percent of the nation's land—according to urban and regional development data from the National Development Council. Yet some 34,000 of the 86,000 buildings over 30 years old do not meet seismic resistance standards, according to real estate data from the Ministry of the Interior (MOI). So in a densely populated country as earthquake-prone as Taiwan, any strong seismic event has the potential to cause considerable property damage and loss of life.

Taiwan also faces an aging population and a declining birth rate, with more than 13 percent of the population now aged 65 or over. Given that most old buildings with five or fewer floors lack elevators, the need for barrier-free residential environments is more pressing than ever.

To head off potential disasters while improving residential safety and quality, the Executive Yuan drafted a special bill to provide incentives for expediting the reconstruction of dangerous and old urban buildings. The bill was approved by the Legislative Yuan on March 30, 2017.

II. Reasons for drafting dedicated legislation

A. Urban Renewal Act requires lengthy amendment process

The Urban Renewal Act has been amended eight times since it was promulgated and implemented on November 11, 1998. As building relocation or reconstruction measures involve individual property rights guarantees that are protected under the Constitution, such measures cannot be subject to compulsory execution. The attendant controversies make amending the Urban Renewal Act difficult, necessitating the drafting of separate, dedicated legislation that prioritizes dealing with issues surrounding dangerous and old buildings.

B. Promoting reconstruction difficult without incentives

Incentive measures are needed to encourage property owners to rebuild aging and dangerous buildings. In the past, these projects have been difficult to promote for a variety of reasons: floor area laws are stricter than earlier regulations; the usable first-floor area would be decreased due to building coverage ratio regulations; residents may decide for themselves whether to participate in such projects; and economically disadvantaged areas have less access to reconstruction funding and government assistance mechanisms.

III. Buildings to be covered by the draft act

A dangerous or old building approved for reconstruction may be rebuilt in conjunction with adjacent building sites or plots of land, provided that the combined area does not exceed the size of the plot of land on which the dangerous or old building sits. The prospective builder should first file an application and acquire the consent of all land and building owners within the proposed reconstruction project zone.

A. Definition of a dangerous building

1. A building for which a mandatory demolition order, or an order to demolish within a certain time period, has been issued by the competent authority pursuant to the Building Act or the Disaster Prevention and Protection Act.
2. A legal building that has been deemed unsafe and must be demolished or structurally reinforced within a certain time period.

B. Definition of an old building

1. A legal building over 30 years old that a performance evaluation has deemed to be unsuitable for renovation and must be demolished and rebuilt.
2. Guidelines for building performance evaluations will be prescribed by the MOI.

IV. Higher floor area ratios, building coverage ratios

A. Floor area ratio:
The amount of usable floor area relative to the size of the plot of land on which the building sits (the higher the ratio, the greater the floor area)

1. Based on actual needs, owners of properties within designated reconstruction zones may receive appropriate incentives in the form of additional floor area of up to 30 percent of the building site's base floor area or 15 percent of the building site's original floor area.
2. Property owners applying for reconstruction within three years after the draft act is implemented may be granted an additional 10 percent statutory floor area.

B. Building coverage ratio: The size of the building's floor when viewed from the sky relative to the size of the plot of land on which it sits (the higher the ratio, the smaller the vacant space that must be retained)

Building coverage ratios may be increased for buildings reconstructed under the draft act. Standards for such increases will be decided by the competent authority of the local government and applicable to residential building sites only.

V. Tax incentives, loan guarantees

A. Tax incentives

The competent authority of the local government may, based on the region's development trends and financial situation, grant the following tax privileges to those who apply for reconstruction within five years after the draft act is implemented:

1. Participants need not pay land value tax if the land is not usable during the reconstruction period.
2. Participants will receive a 50 percent reduction in the land value tax and housing tax for two years after the reconstruction project.
3. A legal building that is owned by the same person before and after reconstruction, where that owner does not transfer ownership during the two years of housing tax reduction, will continue to enjoy the 50 percent housing tax reduction until the property is sold.

B. Loan guarantees

Residents of a building or an economically disadvantaged area who initiate a reconstruction project without the assistance of an experienced construction company often have difficulty securing reconstruction loans. The draft act thus stipulates that the competent authority may, depending on its financial situation, provide guarantees for reconstruction loans to applicants deemed by the local government to have fundraising difficulties, lacking fundraising assistance from profit-seeking enterprises, or being located in a priority development location.

VI. Conclusion

One of the government's most important tasks is safeguarding the lives and properties of citizens, and this includes mitigating the hazards posed by dangerous buildings including falling facade tiles, aging public pipelines and illegal rooftop additions. Many of these buildings are also located in narrow alleys with unsafe surroundings; they lack proper firefighting equipment and do not meet earthquake resistance guidelines. Promoting urban renewal and the reconstruction of aging buildings will therefore make homes safer and improve residential quality, while promoting activities that generate economic output and spur domestic demand.

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