"'Ban on Mortgage Loans Over 1.5 Billion Won' Constitutional Court Unconstitutionality Dispute: 'Necessary Measure' vs. 'Property Rights Violation'"

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[Asia Economy Reporter Kim Daehyun] On the 16th, a debate took place at the Constitutional Court over whether the Moon Jae-in administration's regulation banning mortgage loans on apartments exceeding 1.5 billion KRW (the 12·16 real estate measures) is unconstitutional. It has been about two years and six months since the constitutional complaint was filed in December 2019.

That afternoon, the Constitutional Court held a public hearing on the partial unconstitutionality confirmation lawsuit regarding the Ministry of Strategy and Finance's housing market stabilization measures.

The respondents, including the Financial Services Commission, argued that since the housing market was overheated at the time and the government’s measures were limited in location and target, the minimal infringement of rights was recognized, thus justifying the measures themselves. They also emphasized that the 12·16 measures were administrative plans or administrative guidance (guidelines) and therefore could not be considered an exercise of public authority.

Shin Yongsang, a senior researcher at the Korea Institute of Finance and a government witness, pointed out that Korea’s household debt ratio relative to GDP was 95.2%, one of the highest globally, so it was necessary to adjust the price surge trend. He also presented analysis results showing actual effects, such as a significant calming of the rapid price increase after the announcement of the 12·16 measures.

On the other hand, the petitioner (Attorney Jeong Hee-chan) stated, "At the time of the announcement, there were ways to minimize damage by strengthening existing LTV and DTI or by phased methods, but the government banned all mortgage loans on apartments over 1.5 billion KRW in speculative and overheated districts." They also argued that since the government regulated loans based on its authority to approve and supervise financial institutions, the requirements for constitutional complaints?self-relatedness and exercise of public authority?were met.

Professor Sung Joong-tak of Kyungpook National University Law School, a witness for the petitioner, explained, "The 1.5 billion KRW standard was set without any legal basis," and added, "Reducing the LTV to 20% clearly violates the principle of minimal infringement." The Constitutional Court plans to continue deliberations based on the arguments presented that day.

Previously, the Moon Jae-in administration introduced the 12·16 measures in 2019, which fundamentally blocked speculative demand by completely banning mortgage loans for apartments exceeding 1.5 billion KRW and reducing the loan-to-value ratio (LTV) for mortgages on homes valued at 900 million KRW or more from 40% to 20%. Accordingly, it became impossible to even apply for mortgage loans intended to purchase apartments priced over 1.5 billion KRW.

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