[Desk Column] Housing Supply, How Long Will the False Hope Last?

Jung Doohwan, Head of Construction and Real Estate Department

The current real estate market situation ahead of next March's presidential election recalls the scenario from 34 years ago. During the 1987 presidential election, the biggest issue in our society was the sharp rise in housing prices due to a shortage of housing supply. At that time, the ruling party's candidate, Roh Tae-woo, pledged to build "2 million houses," including 900,000 units in the Seoul metropolitan area. The result of this pledge was the creation of the first-generation new towns in the metropolitan area, such as Bundang and Ilsan. Back then, even the southern greenbelt, considered forbidden land, was excavated to develop large-scale new towns, but the supply volume achieved was less than 300,000 units. Here, the government made a masterstroke: the introduction of the "multi-family housing" system. By legalizing single-family houses that were illegally rented out as warehouses or basements and bringing them into the formal system, the supply figures could be increased on paper. It was like magic that transformed a single-family house into multiple multi-family housing units overnight.

Although the numbers were filled, the cost of introducing the multi-family housing system was high. The proliferation of multi-family houses encroached upon major single-family residential areas in large cities that had good living environments, and over time, it caused serious problems such as parking shortages and slum formation. The overcrowding caused by indiscriminate multi-family housing construction became an obstacle that made urban renewal projects like redevelopment and reconstruction of aging residential areas difficult. The government's reckless attempt to meet unrealistic numbers turned into a long-lasting headache for the city.

The controversy over inflated housing supply numbers is not unique to the Roh Tae-woo administration. It has been experienced every time a new government takes office. The Moon Jae-in administration, which for over four years insisted on suppressing demand by blaming multi-homeowners, gap investors, and excessive liquidity as the causes of soaring housing prices, also seems to have succumbed to the temptation of inflating supply. The major supply measures such as the August 4th Plan last year and the February 4th Plan this year promise a supply volume that, on paper, surpasses even the historic 2 million units promised by the Roh Tae-woo government.

However, it would have been better if only the numbers resembled the past; the content also mirrors the previous 2 million housing supply plan. Take the February 4th Plan, for example. A significant portion of the 836,000 units the government announced it would supply by 2025 frankly lacks substance. Except for the 263,000 units supplied through direct land development, most of the supply depends on the active participation of the private sector, making it more of an expectation than a guarantee. Among these, 100,000 units are planned to be secured by remodeling non-residential buildings into housing or purchasing houses built by the private sector. The side effects of these forcibly squeezed and exaggerated numbers are appearing everywhere. Public-led redevelopment projects, hastily selecting candidate sites, are facing opposition from residents in many places, and even selecting candidate sites for reconstruction is not easy.

Moreover, the pledges that presidential candidates are competitively making are no less exaggerated than those during the era of former President Chun Doo-hwan, who promised an unrealistic "5 million housing supply." They are competing to promise building 1 million basic housing units where people can live for 600,000 won per month in rent for 30 years, or supplying 2.5 million units nationwide over five years. Some candidates even promise apartments in northern Seoul at half or less than half the price. These are blueprints presented by leading candidates from both ruling and opposition parties, not minor parties. Of course, there are no concrete plans on where to find the land or how to finance the construction.

The lesson left by past governments' supply policies is simple: if housing supply were that easy, housing prices would never have skyrocketed. Now, both the government and the political circles should stop playing number games around housing supply. How long will they continue to torment the public with false hopes?