"Shifting Quality Responsibility to the Private Sector? Out of Touch with Reality... LH Must Build Its Own Management Capability" [LH Private Participation Apartment]

③ Interview with a Former LH Executive
"Time to Restore the Philosophy of Public Corporations"

"The current problem with LH lies not in materials or brands, but in a 'lack of philosophy'-a fundamental failure to remember its raison d'?tre as a public corporation."

This is a sharp critique from a former high-ranking official at Korea Land and Housing Corporation (LH) regarding the Ministry of Land, Infrastructure and Transport's September 7 policy, which proposes that LH implement projects while entrusting housing quality to private construction companies. The official argues that no matter how good the materials are, without the operating entity's guiding principles and philosophy, quality improvement will remain elusive.

This former official, who requested anonymity, dismissed the government's plan to expand 'private participation projects' as "out of touch with reality." He stated, "On public construction sites, quality is not the top priority in the minds of construction company CEOs. The most important factor is whether they win the bid and the resulting profitability." He emphasized, "Unless LH, as the ordering party, establishes itself as the main agent of quality management, private construction companies will inevitably continue to prioritize cost reduction over quality, perpetuating a vicious cycle." In other words, simply using private materials does not automatically guarantee quality.

Korea Land and Housing Corporation (LH) Headquarters, Jinju, Gyeongnam. Photo by Yonhap News

He acknowledged, "Expanding private participation projects may have the effect of 'raising the baseline' for public housing quality to a certain level, and the worst cases may decrease." However, he added, "This cannot be the 'fundamental solution' to LH's quality issues." He explained, "Unless LH, as the ordering party, establishes a strong internal organization and professional workforce capable of directly controlling quality, reliance on the private sector will ultimately amount to 'outsourcing responsibility.'" He continued, "If LH intends to directly implement projects, it must first improve its internal staffing structure for quality control (QC). Simply handing things over to the private sector without doing so is meaningless."

When private construction companies build apartments as their own projects, the formula is 'highest quality → highest sale price → maximum profit.' Investing in quality directly translates into company profit. However, in LH's contract-based private participation projects, the construction company's profit is fixed as 'construction margin within the predetermined project cost.' In this structure, the formula becomes 'minimum cost → maximum profit.' Any additional effort to improve quality beyond the contract reduces the company's profit. Therefore, it is most advantageous to meet the minimum quality standards without harming the brand's reputation while minimizing costs as much as possible.

No matter how large the construction company, in LH projects, they must operate within the set construction cost cap, design specifications, and LH's guidelines. Bold investments in high-end materials or changes in construction methods, as seen in their own projects, are difficult. As a result, the final product is not a premium complex like 'Raemian' or 'Xi,' but rather a 'Raemian or Xi built to LH standards.' The former official added, "If LH's supervisory system is lax and staff lack expertise, private construction companies can easily exploit loopholes in the standards to cut costs."

He identified LH's fundamental inability to resolve quality issues as stemming from an identity crisis. After the merger of Korea Land Corporation and Korea National Housing Corporation, the profitability of development projects became the organization's top priority, pushing its original mission to the background. He said, "The development division has always led the decision-making in the early stages, while subsequent elements such as design, construction management, and quality control have consistently been relegated to lower priority." He emphasized, "The public has never demanded that LH 'make money by running successful businesses.' Instead, they want LH to 'build good homes so that people can live comfortably.'"

The former official stated, "When building housing for ordinary citizens, deficits are inevitable, but these are 'good deficits' for the benefit of the public." He added, "The state must take responsibility for these losses, and LH should not neglect its original role of building 'good homes' for this reason." He explained that the moment financial soundness is prioritized, the most fundamental values begin to collapse.

He also suggested that fundamental institutional reform is necessary. He said, "A 'National Housing Agency' should be established, bringing together experts in design, construction, and quality control to set national quality standards." He argued that a dedicated control tower like a National Housing Agency is needed to ensure both stable housing supply and quality that the public can truly experience.