Will Housing Policies Win Public Support... Can SOC Stimulate the Economy Amid Construction Crisis? [Presidential Election]

Lee: "Increase Public Rental Housing" vs. Kim: "Lower Pre-sale Prices"
Ultimately Converging on Market-Friendly Approaches
Construction Industry Faces 'Worst Crisis Since 1998'
Surge of SOC Campaign Pledges

With the conclusion of the long process of candidate consolidation, Kim Moonsoo has been confirmed as the People Power Party's final presidential candidate, effectively establishing a three-way race (Lee Jae Myung, Kim Moonsoo, Lee Junseok). The main candidates are placing the expansion of housing supply at the forefront of their campaigns, aiming to address public concerns over real estate. This policy direction is in response to a decline in housing supply and rising prices amid a downturn in the construction sector, making it increasingly difficult for ordinary citizens to secure homes.

Additionally, the expansion of social overhead capital (SOC) to stimulate the economy and stabilize employment is another key construction policy among the leading candidates. However, there are criticisms that both major parties are too preoccupied with political maneuvering-such as legal risks and consolidation conflicts-to present concrete directions for housing supply. Regarding SOC, there are concerns that unrealistic projects could simply increase the fiscal burden.

According to political circles and the real estate industry on May 12, the official start of the presidential campaign and the day designated by the National Election Commission for the announcement of key policies and pledges, the presidential candidates are unveiling their top 10 core pledges. Even before the official announcement, the housing policies each candidate has presented in public forums or through their campaign teams reveal the overall contours of their real estate policies.

Lee: "Increase Public Rental Housing" vs. Kim: "Lower Pre-sale Prices"... Ultimately Converging on Market-Friendly Approaches

Lee Jae Myung, the Democratic Party presidential candidate (right), and Kim Moon Soo, the People Power Party presidential candidate, are attending the Buddha's Birthday celebration ceremony for the year 2569 at Jogyesa Temple in Jongno-gu, Seoul, on the 5th, engaging in conversation. Photo by Yonhap News

All presidential candidates are unanimously calling for an expansion of housing supply. However, the methods of supply differ according to each party's platform.

Lee Jae Myung places greater emphasis on public-led supply through organizations such as the Korea Land and Housing Corporation (LH). While he has indicated plans to ease reconstruction and redevelopment regulations in the Seoul metropolitan area (such as increasing floor area ratios and relaxing cost-sharing requirements) for genuine homebuyers, he also maintains a strong focus on public interest, including mandatory public rental housing quotas and the revival of mandatory apartment ratio policies. Lee’s campaign has stated that "supplying 2.5 million housing units over five years seems appropriate." In the previous presidential election, Lee proposed various types of public housing, including basic rental housing, building-sale type basic housing, equity-accumulating housing, the "Anyone’s Home" model, and profit-sharing housing.

He also announced plans to utilize idle state-owned land and promote a "4th generation smart new city" initiative. However, experts question the effectiveness of a fourth new city, citing the current progress rate of the third new city projects (6%) and their expected move-in date (2030). None of the five third new city sites have even completed land negotiations. Han Mundo, adjunct professor of Real Asset Investment Analysis at Myongji University Graduate School, said, "What is needed now is not new plans, but faster move-ins," adding, "The priority should be to accelerate third new city supply with realistic measures such as lowering pre-sale prices."

Kim Moonsoo, on the other hand, advocates for expanding private-sector supply, promising to lower pre-sale prices by easing floor area and building-to-land ratio regulations. He also pledged to supply specific housing for certain groups, such as half-price rental zones near universities, officetels for single-person households, and 150,000 homes for newlyweds, as well as to create housing that supports both childcare and caregiving.

The principle of "minimizing government intervention in the market" is a common stance among all presidential candidates. Lee Jae Myung has shifted significantly from his previous regulatory-heavy approach to a more market-friendly stance. On May 8, Lee remarked regarding real estate policy, "There is no way to stop people from viewing housing as an investment vehicle," and added, "Instead of suppressing the market with taxes, let’s just leave it alone." Earlier, in February, he had stated that "as long as multiple homeowners pay their taxes diligently, that should suffice," even opening the door to easing or abolishing the comprehensive real estate tax.

The issue of recapturing excess profits from reconstruction (the so-called "reconstruction excess profit recovery system") is a major point of contention. The People Power Party argues for abolishing the system, citing increased construction costs, taxation of unrealized gains, and infringement on property rights. In contrast, the Democratic Party insists that maintaining the system is essential to curb speculation, ensure fairness in development projects, and secure local government funding for housing welfare. Lee Changmu, professor of Urban Engineering at Hanyang University, stated, "With profit margins already reduced due to rising construction costs, adding the burden of excess profit recovery could halt projects altogether," and added, "The housing price index used as a benchmark is set too low, which is highly controversial." Opponents of abolition point out that reconstruction excess profits are concentrated in high-priced apartments in Seoul and the surrounding metropolitan area. According to the Korea Real Estate Board, as of 2023, a total of 5.6 trillion won in reconstruction excess profits was generated at 34 sites, with 4 trillion won monopolized by the top five complexes.

Stabilizing youth housing and tackling the issue of rental fraud are also important campaign messages. Lee Jae Myung has pledged to reduce housing costs through measures such as expanding public dormitories, providing monthly rent support, and strengthening tax credits. He has also proposed expanding relief measures for victims of rental fraud, including improving guarantee systems and amending the Special Act on Rental Fraud. Regarding the "equity-type mortgage" promoted by financial authorities, he commented, "It seems better than nothing," expressing a positive view.

Third-party candidate Lee Junseok has announced real estate policies such as tax reductions tailored to different life stages, encouraging private-sector supply by increasing floor area ratios, abolishing regional housing cooperatives, and revitalizing the registration of unsold rental properties in provincial areas. His "Pause Loan" pledge, announced on May 6, aims to temporarily suspend principal repayments on home mortgage loans for single-homeowners, focusing on increasing households’ real disposable income.

Professor Han commented, "The candidates are repeating only basic pledges such as expanding supply and lowering pre-sale prices, while avoiding sensitive topics like taxes and regulations," adding, "It’s even being called an 'election without pledges.'" He continued, "Even for policies like increasing floor area ratios, it’s important to consider who ultimately benefits, and additional measures should be proposed to ensure that benefits reach those without homes."

Professor Lee stated, "The most important issue is how to normalize regulations on multiple homeowners," and added, "With population decline and limited increases in home prices, rental demand is rising, but if multiple homeowners exit the market due to tax burdens, the supply of rental properties could decrease."

Construction Industry Faces 'Worst Crisis Since 1998'... Surge of SOC Campaign Pledges

Democratic Party presidential candidate Lee Jae Myung, who embarked on a listening tour through the alleys of the Yeongnam Silla Belt, greeted merchants at the Gaya Traditional Market in Haman County, Gyeongnam, on the 10th. Photo by Yonhap News

Major presidential candidates are competitively including long-awaited regional projects in their pledges, proposing large-scale initiatives such as the Greater Metropolitan Express Railroad (GTX), new airports, and underground expressways.

These pledges aim to stimulate the economy and stabilize employment. The domestic construction sector has been facing its worst conditions since the foreign exchange crisis earlier this year. In the first quarter of this year, the value of construction work completed in Korea plunged by 20.7% compared to the previous year, marking the largest drop since the third quarter of 1998. As of March this year, the number of construction workers fell by 185,000, the largest decrease since related statistics began in 2013.

The new airport at Gadeokdo has effectively missed its 2029 opening target after the Hyundai Engineering & Construction consortium, the preferred bidder, recently stated that the construction period should be extended to nine years. The Ministry of Land, Infrastructure and Transport has begun procedures to halt the negotiated contract for site development with Hyundai Engineering & Construction. Political parties are responding quickly. The Democratic Party has announced plans to form a fact-finding team, blaming the Yoon Suk Yeol administration and the Ministry of Land for the situation. The project, already marked by exemptions from preliminary feasibility studies and shortened construction deadlines in the run-up to the election, is likely to reemerge as a major issue in the presidential race.

The core of transportation pledges, the GTX, is trending toward nationwide expansion. Kim Moonsoo has pledged to connect the five major metropolitan areas with the GTX, proposing new routes including the Daegu-Gyeongbuk section. He plans to implement the project through a mix of private and public funding. Lee Jae Myung of the Democratic Party also stated in April that he would "expand the GTX not only throughout the Seoul metropolitan area but also to Chungcheong, TK, and Gangwon, creating a one-hour economic zone." He has committed to increasing government funding and improving laws and regulations to enhance feasibility. During the 2022 presidential election, he pledged the GTX D, E, and F lines, and has recently reiterated his commitment to specific route extensions. A transportation industry official commented, "GTX projects that are not linked to urban development have low feasibility, and if the whole country starts competing for 'their own GTX,' it could simply increase the fiscal burden."

Kim Moonsoo, the People Power Party presidential primary candidate, is holding a press conference to announce a transportation pledge outlining plans to expand the metropolitan express railroad (GTX) nationwide at his campaign office in the Daehwa Building, Yeouido, Seoul, on the 21st of last month. Photo by Yonhap News

The construction industry is also raising its voice amid the political competition over SOC. The Korea Construction Association recently submitted an official proposal to the Democratic Party, calling for the 2025 SOC budget to be increased to at least 28 trillion won. Local governments, including those pushing for the expansion of the Incheon Free Economic Zone and the relocation of the Korea Development Bank headquarters to Busan, see this presidential election as their last chance to secure regional SOC pledges.

SOC pledges are a "regular item" every election season, but their feasibility is always under scrutiny. Many pledges include unrealistic conditions, and there are frequent cases where projects are abandoned during implementation. This is why there is constant criticism that "SOC is the key to balanced regional development, but infrastructure projects without a demand base only increase the fiscal burden."