The Core of Housing Supply Measures... How Will the Distrusted 'LH' Be Reorganized?

Repeated Speculation on Speculation... LH Organizational Restructuring Inevitable
Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport Begin Discussions This Week
Expanded LH... Possibility of Separation by Function

(Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] Calls for organizational reform of Korea Land and Housing Corporation (LH), which is facing national criticism over the 3rd New Town land speculation scandal, are growing louder. There are voices demanding a 'radical transformation' by dismantling the bloated 'dinosaur' organization into functional units, but experts analyze that this is not easy as it could disrupt future housing supply plans.

According to government sources on the 14th, plans for LH's organizational restructuring are expected to be actively pursued this week. Although no concrete plan has yet been formulated within the government, the restructuring is widely regarded as a foregone conclusion due to the widespread speculation allegations related to the new towns and increasing public criticism.

The Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, and the Office for Government Policy Coordination will begin reviewing LH's organizational restructuring plans this week. Prime Minister Chung Sye-kyun pointed out at the announcement of the first investigation results by the government joint investigation team on the 11th, saying, "LH must respond to the public's criticism questioning whether the institution is even necessary," and added, "Public trust has fallen irreparably."

The government plans to outline LH's organizational restructuring plan by consulting external experts. Industry insiders point out that LH, formed by the merger of Korea Land Corporation and Korea Housing Corporation in 2009, has grown excessively with 9,500 employees and assets worth 184 trillion won, effectively losing its internal control functions.

Therefore, many opinions suggest that LH should only handle overall tasks such as new land supply and new towns, while individual projects should be transferred to local public enterprises that better understand regional circumstances to reduce LH's share. Since LH has already lost public trust and finds it difficult to push large-scale development projects, there are also calls to divide the organization by function and effectively dismantle it.

[Image source=Yonhap News]

However, drastically downsizing LH immediately is unlikely to be easy as it could disrupt the 2·4 housing plan. The government had previously announced plans to increase housing supply through urban public housing complex projects and public institution-led redevelopment projects, in which LH plays a key role.

In particular, there are many concerns that the 2·4 plan has already been inevitably disrupted due to the LH employees' new town speculation scandal. The ruling party and government initially planned to pass related follow-up bills and revise enforcement decrees by this month to implement the plan before June, but these bills have not even been submitted to the National Assembly's Land, Infrastructure and Transport Committee plenary session.

The government plans to announce some candidate sites for development methods from the 2·4 plan this month based on applications from local governments and others, and to announce a second round of new public land next month. Pre-subscription for the 3rd New Town will also begin in July. However, as investigations into public officials' speculation allegations are ongoing, there remains a possibility that the plan's implementation could face setbacks.

If LH's organizational restructuring takes place under these circumstances, the government's burden could increase further. Nevertheless, the government intends to simultaneously pursue follow-up measures for the 2·4 plan and LH reform. On the 12th, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki emphasized in his opening remarks at the Real Estate Market Inspection Ministers' Meeting, "Along with thorough investigation and strong punishment intentions regarding the LH scandal, real estate policies, especially housing supply measures, must be pursued consistently without any wavering."

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