Controversy Over the 'Daejangdong Prevention Act'... Lee Jae-myung Calls It "Cheonggaeguri Attitude"

Full-Scale Push for Government-Party Development Profit Recovery System
Restricting Private Gains to Prevent a Second Daejangdong
Industry Points to 'Supply Disruption' and 'Insufficient Consultation'
Lee Jae-myung Hits Back at Opposing Media as "Cheonggaeguri"

Democratic Party presidential candidate Lee Jae-myung is giving a speech at the launch ceremony of the Democratic Party's 20th presidential election campaign committee held at the KSPO Dome, Olympic Stadium, Songpa-gu, Seoul, on the afternoon of the 2nd.
[Image source=Yonhap News]

The Democratic Party of Korea has set a policy to swiftly pass a bill that significantly restricts private sector profits in the urban development process during this regular session of the National Assembly, raising concerns within the industry. While institutional improvements to prevent a 'second Daejang-dong incident' are necessary, there are observations that the law is being hastily amended without proper fact-finding or opinion gathering under this pretext.

Following reports reflecting these industry concerns, mainly in some media outlets, Lee Jae-myung, the Democratic Party presidential candidate, directly criticized, saying, "I don't understand this contrarian attitude." Right after the Daejang-dong incident broke out, he criticized Seongnam City for "failing to recover 100% of development profits, thus giving excessive profits to the private sector," but now, as the ruling party pushes for a development profit recovery system, he is raising issues that "private profits should not be restricted."

Setting Upper Limits on Private Profit Rates... Preventing a Second Daejang-dong

According to political circles and the government on the 6th, the Democratic Party has decided to promote legislation related to the recovery of development profits, which has come to the forefront following the Daejang-dong incident, as a major legislative task in the regular session. The Ministry of Land, Infrastructure and Transport also announced on the 4th a plan to "strengthen the public nature of urban development projects" and pledged to support the legislative process in the National Assembly. The ruling party and government have thus initiated the enactment of the 'Daejang-dong Prevention Act.'

The core of the 'Daejang-dong Prevention Act' is to limit the private sector's profit rate to 6-10% in urban development projects jointly invested and implemented by the public and private sectors, and to apply a price ceiling system when the public investment ratio exceeds 50%, significantly reducing development profits. There is also a plan to increase the development charges imposed on the entire development project from the current 20-25% to around 50%.

A real estate agency in a sparsely populated apartment complex in Seoul. Photo by Hyunmin Kim kimhyun81@

Lack of Fact-Finding... Insufficient Industry Opinion Gathering

Within the industry, there are criticisms that despite the significant impact of the development profit recovery bill on housing supply and the construction industry, the ruling party and government are focusing on a one-sided legislative approach, riding on the public backlash against the 'Daejang-dong incident.' In fact, a bill proposing a profit rate cap of 6-10% has already been submitted to the National Assembly, but the Ministry of Land, Infrastructure and Transport, the competent authority, has not even grasped the current average private profit rate.

Since the current private profit rate is unknown, it is impossible to predict the extent of the 'development profit restriction' effect or the side effects of 'private supply hindrance' when setting the cap at 6% or 10%. Some within the Democratic Party argue that "since the average profit rate in the construction industry is only 4.2%, setting the cap at 10% will not shrink development projects," but even within the Ministry of Land, Infrastructure and Transport, voices say this is "an inaccurate basis."

There are also criticisms that the opinion-gathering process from the construction industry was insufficient during the drafting of the 'Daejang-dong Prevention Act.' A Ministry of Land, Infrastructure and Transport official said, "We have not conducted simulations on the bill's effects," and "We plan to gather opinions during the National Assembly's deliberation process." Shim Kyo-eon, a professor in the Department of Real Estate at Konkuk University, said, "Since situations differ among large corporations and small businesses, as well as between the metropolitan area and provinces, a detailed fact-finding survey must precede."

Lee Jae-myung Calls Concerns Over 'Development Profit Recovery' a "Contrarian Attitude"

On the same day, candidate Lee Jae-myung fired a direct shot at opinions expressing concerns about development profit recovery. Through Facebook, he said, "I don't understand this contrarian attitude," emphasizing, "The conservative media that criticized me for 'failing to recover 100% of development profits and thus giving excessive profits to the private sector' are now raising issues that 'private profits should not be restricted' as the 'development profit recovery system' is being promoted."

He added, "They are leading opposition with all sorts of frightening words like supply cliff, market dysfunction, and populism," and said, "They only think about how to quietly funnel development profits to construction forces, never intending to return them to the people in the first place."

Referring to Lee Heon-seung, a member of the People Power Party, who proposed a bill to limit private development profits, he said, "If it was not proposed just to ride on attacks against Lee Jae-myung without intention to pass it, I hope they will take the lead in institutionalizing the development profit recovery system," and warned, "If they withdraw it slyly with excuses while watching the situation, they will face the stern judgment of the people for focusing only on political offensives without creating alternatives."

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