Park Won-soon and Lee Jae-myung, Different Prescriptions for 'Real Estate Unearned Income'

[Asia Economy Reporter Yuri Kim] Seoul Mayor Park Won-soon, the epicenter of the rapid rise in housing prices, and Gyeonggi Province Governor Lee Jae-myung, who holds the key to expanding supply, competitively proposed solutions to the housing price issue at the beginning of the year. While both Mayor Park and Governor Lee agree that 'real estate unearned income' is a serious problem, their solutions show clear differences, such as the 'Real Estate National Sharing System' and the 'Land Holding Tax.' In the market, these proposals are criticized as premature suggestions lacking social consensus.

The core measures of Seoul City are the 'Real Estate National Sharing System (Sharing Fund)' and the 'Real Estate Price Public Announcement Support Center.' The National Sharing System is a concept to increase public ownership of real estate by reclaiming unearned income and development profits from real estate. The city plans to use these funds to purchase buildings to prevent gentrification (displacement of original residents) or to prepare public rental housing. Excess profits from reconstruction, development charges, and donation of land and buildings are mentioned as sources for the sharing fund. The city has begun reviewing the fund size and detailed resource procurement plans.

Mayor Park views the supply in Seoul as sufficient and considers speculative demand from multi-homeowners as the problem. He cited the fact that the homeownership rate dropped from 51.3% in 2010 to 48.3% in 2017 despite steady supply. Fundamentally, he believes that thorough reclamation of unearned income is necessary to solve this issue. In the same context, the Real Estate Price Public Announcement Support Center was proposed, aiming for installation in March. This is a measure to realize the official property prices, which currently do not properly reflect market prices, and to support autonomous districts in setting official prices closer to market values without being influenced by property owners' complaints.

Governor Lee also identifies real estate unearned income as the most serious current problem, aligning with Mayor Park's view. However, Lee proposes the Land Holding Tax as an alternative. This involves abolishing the comprehensive real estate tax imposed on excessive real estate holders and creating a land holding tax applied to all landowners. Notably, he is pushing for the reintroduction of the 'Middle-Class Rental Housing Project,' which aims to supply rental housing of about 74 to 84 square meters to middle-class non-homeowners.

However, experts point out that both Seoul City and Gyeonggi Province's proposals are excessively anti-market. Above all, proposals that restrict private property rights without social consensus and agreement are said to have many unconstitutional elements. Seoul City's claim that supply is sufficient has also been criticized as contradictory. Professor Kwon Dae-jung of Myongji University Graduate School of Real Estate said, "Supply volume should be comprehensively judged by permits, construction starts, sales, and move-ins, but just next year, the number of move-ins in Seoul will be halved to about 20,000 households."

This content was produced with the assistance of AI translation services.