Newsletter
Recent Legislative Developments in Urban Renewal and Reconstruction of Dilapidated and Aging Buildings: Focusing on Floor Area Ratio Incentives
In Taiwan, efforts to promote urban renewal and the reconstruction of dilapidated and aging buildings often face obstacles such as a lack of willingness among property owners, institutional constraints, and inefficient execution. As the problem of urban aging becomes increasingly severe - particularly given the inadequate seismic resistance of many old buildings located in earthquake zones - urban renewal and the reconstruction of dilapidated and aging buildings are not only crucial to urban development but also impact residential safety and long-term social stability. To address this, the Taiwan government amended Article 65 of the Urban Renewal Act (the “Act”) in 2024. Additionally, the Ministry of the Interior passed a draft amendment to the Statute for Expediting Reconstruction of Urban Unsafe and Old Buildings (the “Statute”) at the end of 2025, with both sets of amendments primarily focusing on provisions related to floor area ratio (FAR) incentives or floor area bonus.
In principle, the relevant authorities in all counties and cities in Taiwan implement floor area ratio controls (“FAR Controls”) to limit the ratio of the total floor area of a building to the total area of the land lot on which the building is located. One of the primary objectives of FAR Controls is to ensure that land use contribute to maintaining the quality of life in the area. Based on the floor area ratios specified under relevant laws and regulations (such as urban planning documents, guidelines on land use zoning controls, and rules on land use zoning controls), the base floor area of a building may be calculated based on the area of the land lot; however, under specific regulations (such as the Act and the Statute), certain floor area bonus may be granted in addition to the base floor area.
The recent amendments to the Act and the Statute are explained in detail below:
I. Amendments to Article 65 of the Act and its relevant implementing regulations:
In urban renewal practice, floor area bonus has long been one of the incentives for owners of old buildings to participate in urban renewal projects. Prior to its amendment on October 25, 2024, Subparagraph 1, Paragraph 2, Article 65 of the Act provides: “For buildings lawfully built prior to the implementation of FAR Controls, where the original floor area exceeds the base floor area, the bonus shall not exceed 0.3 times the base floor area (calculated based on the area of the land lot) plus the original floor area, or 1.2 times the actual floor area of original building.” This meant that only “buildings lawfully built prior to the implementation of FAR Controls” are eligible for the floor area bonus that is calculated based on the original floor area. As for the term “a building lawfully built prior to the implementation of FAR Controls”, according to the Ministry of the Interior’s Order No. Tai-Nei-Ying-1110811966 dated July 5, 2022, it refers to a legally constructed building (i) for which the effective date of its construction permit falls between the date on which the FAR Controls were implemented and March 2, 1993, and (ii) that was built prior to March 2, 1993, with March 3, 1993 being the record date for determination of the FAR Controls basis by the competent authority.
Pursuant to Article 3 of the Regulations on Floor Area Ratio Incentives for Urban Renewal, the “base floor area” referred to under Article 65 of the Act is arrived at by multiplying the maximum floor area ratio specified under the urban planning regulations by the area of the land lot. According to the competent authorities' interpretations, the calculation of “original floor area” should include the “building area below ground level” and “floor area below ground level.” Such calculation involves taking the total floor area above and below ground as originally approved, recalculating each separately based on the definition of floor area under Article 162 of the Architectural Design and Construction Section of the prevailing Building Technical Regulations, and treating the sum of the resulting floor area as the “original floor area” (Please refer to Taipei City Government Department of Urban Development Letter No. Bei-Shi-Du-Shin-09607390100 dated October 12, 2007).
However, according to statistics from the Ministry of the Interior, as of 2024, there were approximately 8,216 legally constructed buildings (approximately 270,000 households) with six or more stories throughout Taiwan that applied for construction permits before the implementation of FAR Controls but obtained occupancy permits only after the FAR Controls were implemented. In most of these cases, the original floor area exceeds the base floor area. Since these buildings were not completed before the implementation of FAR Controls, the aforementioned provisions do not apply to them, thereby affecting the willingness of property owners to participate in urban renewal projects. To address this issue, the 2024 amendment to the Act expanded the scope of eligibility for the aforementioned incentives to include buildings for which a construction permit was issued before the implementation of FAR Controls and which were completed after the FAR Controls took effect.
At the same time, while the general principle of legal application is that laws take effect prospectively after their enactment, the 2024 amendment also revised the latter part of Paragraph 9, Article 65 of the Act whereby an urban renewal proposal that was submitted to the local government for review prior to the effective date of the 2024 amendment may also be subject to Subparagraph 1, Paragraph 2, Article 65 of the Act after the amendment takes effect.
Furthermore, to align with the aforementioned amendments, the Ministry of the Interior concurrently amended the following regulations to broaden the scope of eligibility for floor area bonuses. This ensures that “legally constructed buildings for which a construction permit was issued prior to the implementation of FAR Controls” may qualify for relevant floor area bonus even if they were not completed before the implementation of the FAR Controls:
(1) Articles 3 and 5 of the Regulations on Floor Area Ratio Incentives for Urban Renewal were amended on January 13, 2025; and
(2) Articles 2 and 12-1 of the Regulations on Floor Area Ratio Incentives for the Promotion of Reconstruction of Urban Unsafe and Old Buildings were amended on March 4, 2025.
II. Draft Amendment to the Act:
In the past reconstruction efforts on dilapidated and aging buildings have frequently faced numerous obstacles; for example, difficulties in reaching a consensus among property owners; a lack of timely consultation with and assistance from competent authorities; difficulties in raising funds for buildings in disadvantaged areas; and original floor area exceeding the base floor area. If reconstructions were to rely solely on the mechanisms of urban renewal, the cumbersome planning, application, and review processes often fail to address urgent needs in a timely manner. To break this deadlock, the Taiwan government promulgated and implemented the Statute in May 2017. The Statute contains provisions on accelerating reconstruction and simplified incentive mechanisms, thereby offering greater flexibility in implementation for buildings meeting statutory requirements compared to the Act. Consequently, it has remained one of the key pieces of legislation and policies that the government has sought to actively promote.
However, Paragraph 2, Article 5 of the Statute explicitly stipulates that the Statute will no longer be in effect after May 31, 2027. To extend the policy’s benefits, the Ministry of the Interior passed a draft amendment to the Statute on November 27, 2025, proposing to remove such sunset clause, incorporate mechanisms to extend the lifespan of older buildings, expand tax incentives, and re-examine provisions regarding floor area ratio incentives.
The draft amendment is currently under review by the Executive Yuan, and its subsequent legislative developments warrant continued attention. According to the Ministry of the Interior’s announcement and related press releases, the key points of this draft amendment are as follows:
(1) Realizing the Legislative Intent to Ensure Residential Use: To prevent the recurrence of the “skinny houses” phenomenon caused by excessively small plots in the past, and to avoid abuses such as hotels and commercial office buildings obtaining excessive floor area bonuses under the guise of dilapidated and aging building reconstruction, the draft amendment stipulates that residential use must account for at least one-half of the building in a reconstruction project, thereby ensuring that the initiative remains true to its original purpose of improving housing security.
(2) Adjustment of the Floor Area Ratio Incentives for Small Sites: First part of Paragraph 1, Article 6 of the Statute states: “Building sites within the scope of a reconstruction project may be granted appropriate floor area bonuses based on actual needs.” To ensure construction safety and encourage larger-scale redevelopment, the draft amendment to the Statute reduces the upper limit for floor area bonuses for cases where the reconstruction area is less than 500 square meters to 1.2 times the base floor area (currently 1.3 times) or 1.1 times the original floor area (currently 1.5 times). For cases where the reconstruction area is 500 square meters or more and includes social housing and welfare facilities, a bonus of up to 15% of the base floor area is granted.
(3) Legal Framework for Extending Lifespan of Old Houses: For buildings that do not yet require immediate reconstruction but are relatively old, several improvement measures (such as exterior wall repairs, waterproofing and insulation, and replacement of aging pipelines) may be implemented under certain conditions. Building owners who are willing to implement improvement measures may apply for subsidies, for which the applications will be reviewed and decided by local governments based on actual needs. On March 16, 2026, the Executive Yuan approved the “Old Housing Revitalization and Lifespan Extension Plan,” which includes provisions that allow building owners to apply for subsidies for interior and exterior renovations (for example, exterior subsidized items include the installation of emergency lifts, exterior wall repairs, and improvements to wall-mounted air conditioners and their ductwork). Once the “Old Housing Lifespan Extension Mechanism” under the Statute is passed into law, the results of its implementation in conjunction with the aforementioned plan warrant continued attention.
(4) New Tax Incentives for Joint Development Agreements and Old House Renovations: To increase property owners’ willingness to participate, the draft amendment to the Statute also proposes to introduce tax incentives for joint development agreements, modeled after Article 67 of the Act. If an original property owner transfers ownership of the property to the developer as part of a joint development arrangement, they may, under this new provision, receive a 40% reduction in land value increment tax and deed tax; furthermore, during “the period of renovating an old building and the two years thereafter”, a 50% reduction in land value tax and house tax will be granted.
Furthermore, the Ministry of the Interior has announced that the amendments also include revisions to the scope of application for reconstruction and introducing floor area ratio incentives for donations of social housing and welfare facilities.
Not only does the government prioritize the promotion of urban renewal and the reconstruction of dilapidated and aging buildings, the regulatory revisions and the aging of urban areas have prompted an increasing number of property owners to consider urban renewal and reconstruction of dilapidated and aging buildings as potential options for asset revitalization. Taking Taipei City as an example, according to the public information released by the Taipei City Government’s Urban Regeneration Office, the number of urban renewal cases submitted for review in Taipei City ranged from approximately 120 to 190 between 2021 and 2023, with approximately 106 to 120 cases approved by the Taipei City Government. Following the 2024 amendment to the Act, the number of applications submitted increased to 274 in 2024 and 240 in 2025. Additionally, according to statistics released by the Taipei City Construction Management Engineering Office, the number of reconstruction plans for dilapidated and aging buildings approved by the Taipei City Government reached 1,057 as of the end of January 2026.
Given that amendments to the Act and the Statute directly impact real estate rights and interests, it is advisable to pay close attention to current regulations and legislative developments when conducting real estate transactions and asset allocation, and to plan accordingly at an early stage. Furthermore, whether you are a landowner, a builder, or a developer, there are numerous legal risks and considerations when drafting joint development agreements. These include, among others, the confirmation of the subject matter of the project, implementation methods, architectural planning (including construction work, building materials and equipment, completion deadlines, warranties and so on), handover of premises, trust arrangement, allocation of rights, unit selection and differential adjustment, as well as contract termination and damages. Lee and Li’s Real Estate and Construction Practice Group has extensive experience in this field. If you have any questions in this regard, please feel free to contact our practice group.