[Insight & Opinion] Real Estate Policy: We Must Start by Finding New Clues

[Asia Economy] The 28 real estate measures announced by the previous administration only caused great confusion in the real estate market as a backlash and ultimately played a decisive role in handing over the government. The current administration is trying to revise housing-related tax systems, financial sanctions, and transaction systems from the previous government, but it seems unable to proceed as intended due to the opposition party controlling the National Assembly.

At this juncture, I hope we can first find clues to dispel the superstitions widespread in our society related to housing. The first is the ideology that housing should be a public good. Accordingly, realizing profits through housing has been stigmatized as a sin, and acquisition tax and capital gains tax have been strengthened to prevent it. Believing that the market could be controlled without acknowledging it was a major mistake. The result was great confusion and only restricted the freedom of movement for the people. Even if the elderly want to move to the outskirts or downsize their homes, it is impossible. Instead of rushing to suppress housing prices in specific areas, the government should recognize the free market functions of the private sector while focusing on policies to expand the supply of public housing (public goods) for youth and the homeless.

Multi-homeowners have been treated as quasi-criminals, considered a problem group driving up housing prices, subjected to punitive taxation, and effectively restricted from holding public office. As a result, multi-homeowners have protected their one valuable property, causing high-priced homes to remain expensive, while various support policies have induced excessive borrowing (Yeongkkeun), causing low-priced homes to also skyrocket in price. Moreover, the rental market has been distorted and destabilized with cost-shifting phenomena. Out of 18.5 million households nationwide, over 8 million are multi-homeowners, effectively supplying rental housing. What is the government’s solution if they are told to sell all but one property? It is not as if the homeless suddenly gain purchasing power, nor can the government buy all these properties. Furthermore, over 80% of rental housing consists of multi-family homes for low-income people, mostly owned by elderly people who rely on rental income for their livelihood.

The idea that housing problems can be solved through public-led initiatives must be abandoned. The public sector is already insufficient to meet the levels desired by the private sector. In a time when poverty and wealth coexist, trying to control housing prices by supplying ordinary housing in ordinary areas is futile. Housing prices in some areas do not drive up prices across the entire housing market. Social factors such as abundant market liquidity, labor costs, material costs, and logistics disruptions are pushing housing prices up. The market already offers various types of housing reflecting region, environment, and quality, from ultra-luxury to high-end and mid-range. How can prices determined by the market be controlled? The public sector should focus solely on policies that solve housing problems for the lower classes.

I hope we can break free from the illusion of balanced development. This is political and ideological. There is no country in the world that practices balanced development. Since cities provide all the functions humans need, concentration in large cities is inevitable. Even within cities, concentration naturally occurs in specific areas. Moreover, with population decline, super-aging, regional extinction, and the need to achieve carbon neutrality, South Korea must avoid horizontal expansion. Development that causes increased traffic nationwide must be stopped. Instead, urban centers should be developed more intensively, and regional clusters should be promoted. Remaining areas should be returned to nature.

Kim Hongjin, CEO of Work Innovation Lab