"Back Then, the Democratic Party’s Re-election Report Was a ‘Real Estate Policy Answer Sheet’... Will Property Holding Taxes Be Raised Significantly? [Real Estate AtoZ]"

2023 Democratic Party Report, Policies Realized in Sequence
Report’s Proposals Reflected Throughout Three Policy Packages
Supervisory Body, Jeonse Reduction, Public Recapture: A “Planned Trend”
Concerns Over Risks When Ideology Prevails Ove

As the Lee Jaemyung administration unveils its third real estate policy, the Democratic Party’s “Re-election Strategy Report,” published two years ago, is drawing renewed attention. This is because the report’s core proposals-such as reducing the prevalence of jeonse (lump-sum rental deposits), pursuing public-led development, and establishing a real estate supervisory body-are being implemented one by one as government policy. Some have even dubbed it “an advance look at Lee Jaemyung’s real estate policy answers.” Notably, the report strongly advocates for increasing property holding taxes. While the October 15 policy package announced plans to commission a study on tax system rationalization, critics point out that this may be a preliminary step toward raising property holding taxes.

Democratic Party Re-election Strategy Report. Kyobo Bookstore.

In August 2023, the Democratic Party’s Euljiro Committee published a book titled “Democratic Party Re-election Strategy Report: Why Did We Fail, and What Will We Challenge With?” At the time, President Lee Jaemyung, then the party leader, wrote the foreword. The authors included policy practitioners both inside and outside the party, such as Professor Lim Jaeman of Sejong University (currently chair of the Korea Land and Housing Corporation Reform Committee). The document analyzed the causes of the party’s defeat in the 2022 presidential election and laid out a policy blueprint for regaining power.

The report’s central philosophy is that “real estate is a public asset, not a market commodity.” Its main proposals include the phased reduction or abolition of jeonse loans, encouraging a shift from jeonse to monthly rentals, public recapture at each stage of development, ownership, and disposal, the publicization of private rentals, the establishment of a real estate supervisory agency, strengthening property holding taxes while lowering transaction taxes, and expanding social-mix development projects. At the time, Lee Jaemyung emphasized, “The Democratic Party must acknowledge its failures and use public power to change the market’s unequal structure.”

On October 15, the government announced its “Housing Market Stabilization Measures,” which explicitly included the creation of a real estate supervisory organization. Led by the Office for Government Policy Coordination, a “Real Estate Supervision Task Force” will be established within the year, and a “Real Estate Illegal Activities Supervisory Agency” will be set up next year to monitor transactions, loans, and gifts. This is essentially identical to the “Real Estate Committee and Supervisory Agency” proposed in the report.

The September 7 supply measures reflected the report’s “public recapture” principle by expanding direct implementation by the Korea Land and Housing Corporation, restricting the sale of private land, and requiring public lotteries for rental units when floor area ratios are relaxed. The June 27 measures reduced the jeonse loan guarantee ratio in the Seoul metropolitan area from 90% to 80%, and the October 15 measures raised the debt service ratio (DSR) interest rate for jeonse loans from 1.5% to 3.0%. These steps align with the report’s direction of reducing jeonse and encouraging a shift to monthly rentals.

The report’s most critical task is strengthening property holding taxes. It includes a self-critical statement: “Liquidity released at low interest rates flowed into real estate, but we failed to introduce yield-adjustment mechanisms such as stronger holding taxes at an early stage.” Although the October 15 package did not specify concrete tax reforms, the government’s plan to commission related studies suggests a high likelihood of policy adoption. Deputy Prime Minister and Minister of Economy and Finance Koo Yooncheol stated, “We will review plans to rationalize taxes-including adjustments to property holding and transaction taxes and measures to alleviate demand concentration in specific regions-through research studies and discussions with relevant ministries’ task forces.” An official from a securities firm analyzed, “Since the re-election report effectively serves as the Lee Jaemyung administration’s real estate policy notebook, it is likely that this policy direction will extend to tax reforms as well.”

In summary, while all three policies have outwardly aimed for “housing price stability,” the report’s philosophy-that real estate should be controlled by the public sector-is evident throughout. The philosophy itself is not subject to right or wrong. However, some worry that if ideology is prioritized over the market, there is a risk of repeating the failures of the Roh Moo-hyun and Moon Jae-in administrations, which led to surging housing prices by insisting on demand suppression.

Lee Changmu, professor of urban engineering at Hanyang University, commented, “The very first step (the June 27 measures) was misguided, and the policy continues to blame external factors such as foreign speculation and ‘price manipulation through reporting high prices.’ If this continues, regulations will inevitably become stricter.” He also noted, “The real estate market will never stabilize simply through heavy-handed crackdowns. A policy approach focused solely on regulation could actually distort the market.”