Following Launch of Housing Market Stabilization TF
Full Review of Jaechohwan by Land Committee
Struggling to Contain Fallout from Series of Controversial Remarks
The Democratic Party of Korea has launched a Housing Market Stabilization Task Force (TF) in response to the October 15 real estate policy, and is now even considering easing or abolishing the Reconstruction Excess Profit Recovery System (commonly known as "Jaechohwan"), a measure previously pursued by conservative administrations. These efforts are seen as a response to the steep rise in housing prices in Seoul and the metropolitan area following the October 15 policy, growing calls for increased housing supply, and public backlash against controversial remarks such as "save money and buy a house when prices drop" and the claim that "1.5 billion won apartments are for ordinary people." As a result, both the government and the Democratic Party have seen a decline in public support.
According to the National Assembly on October 24, Democratic Party lawmakers on the Land, Infrastructure and Transport Committee are discussing the possibility of easing or abolishing Jaechohwan, emphasizing the importance of increasing supply. Bok Giwang, a Democratic Party lawmaker and the committee secretary, told The Asia Business Daily, "We are not definitively saying that we will ease or abolish Jaechohwan. The intent is that if it could have a positive impact on stabilizing the housing market and increasing supply, rather than benefiting specific parties such as construction companies or individuals, then it could be considered alongside discussions on property taxes." He added, "This is currently being discussed among ruling party members of the Land, Infrastructure and Transport Committee."
Jaechohwan is a system that recovers 10 to 50 percent of excess profits from reconstruction projects if the profit per cooperative member exceeds 80 million won. It was introduced during the Roh Moo-hyun administration, abolished, and then reinstated under the Moon Jae-in administration. Although it has yet to be actually imposed, it is cited as a major factor discouraging active reconstruction projects.
This move is interpreted as an attempt by the party to reverse the current atmosphere by proposing policy ideas amid growing public anxiety and a series of controversial remarks within the ruling bloc. After the announcement of the policy, apartment prices in Seoul actually continued to rise. According to the Korea Real Estate Board, apartment sale prices in Seoul rose by 0.5 percent in the third week of October compared to the previous week, and key Han River Belt areas such as Seongdong, Gwangjin, and Gangdong districts surged by more than 1 percent, marking the highest increase since 2013.
Furthermore, following the introduction of extremely strict loan regulations, First Vice Minister of Land, Infrastructure and Transport Lee Seongkyung came under fire for remarks about "gap investment" and "buy a house when prices fall," while lawmaker Bok was criticized for saying, "An apartment costing around 1.5 billion won is for ordinary people." Both have since issued apologies and explanations. In the case of Vice Minister Lee, calls for resignation or dismissal have come not only from the People Power Party but also from within the Democratic Party.
However, the Democratic Party's top leadership did not discuss Vice Minister Lee's position at its meeting that day. Park Soo-hyun, the party's chief spokesperson, told reporters, "There was no position on (the resignation calls) during the preliminary (closed-door) leadership meeting," adding, "If you look closely, the criticism from the public is largely the result of defending against excessive political attacks." Regarding lawmaker Bok, he said on SBS Radio that day, "I have already officially apologized for my careless choice of words, and I would like to take this opportunity to apologize again."
The People Power Party also welcomed the move. Kim Doeup, the party's chief policy maker, said at a parliamentary audit countermeasure meeting, "The Democratic Party, having faced public criticism and backlash after the October 15 policy announcement, is now finally considering the abolition of Jaechohwan, which the People Power Party has consistently advocated. Our lawmaker Kim Eunhye has already sponsored a bill for the complete abolition of Jaechohwan. Let's work together to pass the bill quickly in this regular session of the National Assembly."
However, since the easing or abolition of Jaechohwan has yet to be formally reviewed by the Democratic Party leadership or the party's Housing Market Stabilization TF, it is unlikely that bipartisan discussions will begin immediately. Park Soo-hyun, the party's chief spokesperson, said, "The party's real estate TF hasn't even held its first meeting yet, so it's difficult for the leadership to respond to individual lawmakers' opinions or committee-level ideas at this time. Representative Jeong Cheongrae has repeatedly emphasized that the party's policy is to quietly and firmly support the government on sensitive issues such as real estate. The TF will take the lead and discussions will proceed calmly and carefully."
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