[Daechang-dong Aftermath] 'Hwacheon Daeyu Prevention Act' Seriously Discussed... Will It Be Legislated?

‘Profit Ceiling Limited to 6%’
Proposed by Lee Heun-seung, Land Committee Chair
‘Development Profit National Recovery System’
Lee Jae-myung Reviews Bill in Campaign
50% Profit Recovery in Public-Private Development
Lee Nak-yeon Presents Presidential Pledge

Kim Ki-hyun, floor leader of the People Power Party, and lawmakers attended an urgent briefing on current issues held at the National Assembly on the 29th, holding pickets demanding a special prosecution investigation into the Daejang-dong development scandal. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Koo Chae-eun] Supplementary legislation and political pledges to prevent a ‘second Hwacheon Daeyu incident’ are taking shape. In the opposition camp, a bill has been proposed to cap the profit margin that private developers can earn in public development projects at the ‘6% rule,’ while in the ruling camp, including Lee Jae-myung’s campaign, a ‘Development Profit National Recovery System’ that collects overall real estate unearned income is being discussed.

According to political circles on the 1st, Lee Heon-seung, a member of the People Power Party and chairman of the Land, Infrastructure and Transport Committee, along with 18 other party members, proposed a partial amendment to the Urban Development Act last month. The core of this amendment is that when a corporation established by the state, local governments, or other public entities undertakes an urban development project, the private developer’s investment share must be less than 50%, and the profit margin must be limited to within 6% of the total project cost. In the case of Hwacheon Daeyu, the structure was designed so that all excess development profits beyond the confirmed profit of ‘550.3 billion won’ could be taken, sparking controversy over a ‘money feast.’ Lee said, “We must legally restrict private developers to earn only reasonable profits to prevent a second Hwacheon Daeyu incident.”

Lee Jae-myung, governor of Gyeonggi Province and a key figure in the Daejang-dong preferential treatment allegations, has begun reviewing legislation related to the development profit recovery system. His campaign is discussing a plan where the public sector recovers any profits from real estate development projects that exceed a socially appropriate rate of return. On the 28th of last month, at a ‘Development Profit Recovery System Forum’ held at the Central Veterans Hall in Yeouido, Seoul, Lee said, “I originally wanted to propose this as a pledge, but I refrained fearing accusations of being a socialist state. However, I will push it forward this time,” adding, “We must create a system that returns all unearned income to the people.”

Former Democratic Party leader Lee Nak-yeon, who is competing with Lee Jae-myung in the Democratic primary, also proposed a ‘Hwacheon Daeyu Prevention Act’ as a pledge. Specifically, it includes ▲ expanding the development profit recovery rate up to 50% for private land development in public-private partnerships ▲ improving issues related to private developers’ sole-source contracts and development agency problems ▲ fundamentally prohibiting private participation in public land development. Lee said, “I have already stated that we will block unfair real estate profits through the three land monopoly regulation laws (amendments to the Land Ownership Limit, Development Profit Recovery Act, and Comprehensive Real Estate Tax Act),” adding, “We will break the hereditary capitalism using real estate and definitely resolve asset inequality caused by real estate.”

Within the Democratic Party, there appears to be a strong possibility of additional legislative proposals or member-initiated bills regarding the development profit recovery system. Park Wan-joo, chairman of the Democratic Party’s Policy Committee, expressed support on the 28th of last month, saying, “Regardless of which candidate from either party wins, the National Assembly can sufficiently discuss unreasonable real estate profits.”

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