"Regulations and Tax Policies Targeting Multi-Homeowners Must Be Reversed"

Professor Son Jaeyoung of Konkuk University Department of Real Estate and Research Fellow Hwang Sejin of KDI
'For a Paradigm Shift in Housing Policy'
Urging Government to Shift Real Estate Policy Through Letter to the Korean Economic Association

(From right) President Moon Jae-in, Minister of Land, Infrastructure and Transport Kim Hyun-mee, and nominee for Minister of Land, Infrastructure and Transport Byun Chang-heum are having a conversation. [Image source=Yonhap News]

[Asia Economy Reporter Lee Chun-hee] It has been argued that for housing policies to achieve practical effects, the government must roll back the regulations and tax policies it has implemented.

According to the Korean Economic Association on the 23rd, Professor Son Jae-young of Konkuk University’s Department of Real Estate and Senior Researcher Hwang Se-jin of the Korea Development Institute (KDI) recently urged a paradigm shift in government policy through an economic letter titled "For a Paradigm Shift in Housing Policy." They emphasized the need to normalize the numerous excessive regulations and tax policies introduced by the current administration to curb speculation.

They defined the current housing policy framework as the "Park Chung-hee?Chun Doo-hwan paradigm." The Park Chung-hee paradigm refers to "stabilizing real estate prices through speculation suppression" from the demand side, while the Chun Doo-hwan paradigm means "mass housing production through large-scale land development" from the supply side.

Both scholars viewed these paradigms as either failures or insufficient. They argued that although the government has tried to suppress speculative demand to curb real estate price increases, it has failed, stating, "Whether it is rapid economic growth, abundant liquidity, or supply-demand imbalance, if the underlying economic forces driving prices remain intact, prices will rise as they should." They also diagnosed that while the Chun Doo-hwan paradigm is a win-win game benefiting all participants, it is somewhat inadequate in addressing newly emerging issues as the absolute housing shortage has been partially resolved.

PIR Trends of OECD Countries (Provided by the Korean Economic Association)

In particular, they rebutted the claim that "housing prices in Korea are 'too high'" by stating it is not supported by domestic or international statistics. From January 1986, when housing price statistics began, to last September, the nationwide KB Housing Sales Price Index rose by 203%, while the Consumer Price Index increased by 235%, indicating that "the housing price increase rate lagged behind consumer price inflation."

They insisted on clearly defining the concept of "speculation" that can be objectively observed. They pointed out, "The most important reason why the goal of speculation suppression policies, which have lasted over 50 years, has not been achieved is that what constitutes speculation to be suppressed has not been defined," adding, "If acquisition, holding, and disposal of real estate aimed at capital gains are considered speculation, then all real estate activities by all citizens are speculation."

Regarding multi-homeowners, whom the current government identifies as representative speculative forces, they emphasized that "they supply the vast majority of rental housing in Korea." According to a 2015 survey, while institutional rental housing households numbered 1.94 million, 6.32 million households sought housing from non-institutional rental providers such as multi-homeowners, indicating that multi-homeownership investment plays a somewhat positive role.

They also expressed a negative view on curbing housing prices through tax increases. They stated, "Housing prices are determined by numerous factors, and taxation is just one of them," adding, "It is difficult to control housing prices by taxes alone while leaving factors such as market liquidity, interest rates, regional supply and demand, and changes in consumer preferences unchanged."

They proposed a new paradigm for housing policy. "The mission of housing policy is to guarantee minimum housing even for economically disadvantaged citizens," focusing policy on housing stability for low-income groups who cannot afford homeownership, supplying affordable sale housing for the middle class with financial and tax benefits, and neither supporting nor interfering with the high-income class.

They also argued for a change in the government’s unfavorable perception of urban renewal projects. They evaluated reconstruction and redevelopment as "efforts by the private sector to improve urban environments and living conditions without relying on government support, in other words, efforts to regenerate cities," and explained that these projects should be the foundation of urban regeneration. They added that government budget support should focus on housing for low-income groups and securing living bases.

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