Experts: "Simple splitting actually rewards... Role reduction needed"
[Sejong=Asia Economy Reporter Kim Hyunjung] As the ruling party and government are reviewing an innovation plan to dismantle Korea Land and Housing Corporation (LH) and decentralize its functions into a holding company and subsidiaries, experts point out that such re-separation could rather become a reward. There are also claims that the role should be reduced by handing over rental housing projects and some small-scale development projects to the private sector and local governments, and that the organization itself should be slimmed down.
According to the National Assembly and government authorities on the 24th, ministries such as the Ministry of Economy and Finance and the Ministry of Land, Infrastructure and Transport are discussing an LH innovation plan that assigns housing supply functions such as land, housing, and urban regeneration to a holding company called the Residential Welfare Corporation (tentative name), and separates other functions into 2 to 3 subsidiaries. The holding company will manage and supervise subsidiaries to prevent recurrence of speculative incidents through prior information, handle non-profit residential welfare projects such as purchase, jeonse rental, and rental housing policies, while other management and counseling non-core businesses will be separated into subsidiaries, which is the gist of the draft.
However, experts agree that the core of innovation is ‘role transfer and organizational reduction.’ Professor Park Jin of the Graduate School of International Policy at the Korea Development Institute (KDI) said, "There will be some strengthening of accountability through the holding company system and clearer responsibility through accounting separation," but pointed out that "structural adjustment of excessive tasks that have been raised as problems is also necessary." Professor Park argued, "In particular, regarding rental housing projects, it is desirable to reduce LH’s role by expanding the housing voucher program currently provided only to the extremely poor, and to hand over the projects themselves to the private sector," adding, "Also, small-scale development projects, except for large-scale urban development projects that are easy to monitor, should be handed over to the private sector and local governments instead of LH."
Professor Park continued, "In the case of the housing voucher program, it creates profit incentives for private operators to supply quality housing and induces competition among operators," criticizing, "According to the current innovation plan, LH’s monopoly supply method for rental housing is maintained, but this cannot solve housing polarization and rather attracts the middle class to rental housing." He also emphasized, "As long as LH leads development projects, the risk of prior information leakage and speculation remains," and stressed, "Instead of aiming for systemic prevention, it should naturally disappear through post-detection, strong punishment, and role reduction in small-scale development projects."
The necessity of completely separating land and housing development functions, which was initially predicted by the market, is also raised. Professor Kwon Daejung of Myongji University Graduate School of Real Estate said, "Large-scale land and housing development and rental housing projects are areas that cannot be entrusted only to the private sector," but argued, "However, land and housing functions should be completely separated, and the current 100% subsidiary Housing Management Corporation should be converted into a corporation to divide roles." Professor Kwon expressed concern, saying, "Instead, a self-help plan to drastically reduce the workforce, currently about 12,000 people (including subsidiaries), to only essential personnel is also necessary," and warned, "The current holding company-subsidiary system will be a reward plan, not an innovation plan."
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