[Policy Pulse] It's Time to Turn Our Attention to Regional Housing Issues

Supply Affordable and Comfortable Regionally-Specialized Housing
Achieve Stability in the Metropolitan Area and Improve Regional Residential Welfare

The housing issue in South Korea essentially boils down to the sharp rise in housing prices in Seoul and the greater metropolitan area. Whenever prices in these regions have surged, the government has scrambled to announce supply expansion plans and demand suppression measures, focusing on putting out immediate fires. However, the problems of housing shortages and rising prices in the metropolitan area remain unresolved.

The Lee Jaemyung administration has been no different. All of the policies announced over the past six months-such as the "June 27 Household Debt Management Reinforcement Plan," the "September 7 Housing Supply Expansion Plan," and the "October 15 Housing Market Stabilization Measures"-have targeted the metropolitan area. Yet, housing prices in Seoul continue to reach record highs, and the price gap between the metropolitan area and other regions is widening. Ultimately, President Lee Jaemyung has emphasized that there is no clear solution to the rise in home prices in Seoul and the metropolitan area, and that fundamental regional balanced development is necessary.

It is time to reconsider what should be set as the top priority. While policy focus has been on suppressing prices in Seoul and the metropolitan area, the issue of residential welfare in other regions has been neglected. Just because housing prices are stagnant and inventories are high in these regions does not mean the housing problem is solved. There may be enough houses, but there are not enough livable homes. Most old houses lack proper insulation and seismic design. Support from public rental housing or residential welfare centers is also insufficient.

If affordable and comfortable housing were available, many people would willingly choose to live in these regions. For example, for parents who have chosen rural schools for their children, finding a livable home is an urgent issue. I have personally heard the desperate story of parents with two children who lived in a greenhouse for six months while waiting to move into affordable public housing provided by the Goesan County Office in North Chungcheong Province.

Unless there is innovation in policy, the regional housing problem cannot be solved. Under current conditions of low prices and construction costs similar to those in the metropolitan area, the profitability of construction projects is too low. The massive deficits generated in housing projects, whether public or private, are unsustainable. Even the Korea Land and Housing Corporation (LH) and local public enterprises find it difficult to supply housing in the regions due to deficits and debt burdens.

There are also no viable development models for supplying housing in small and medium-sized cities or rural centers. In these areas, it is difficult to expect the activities of redevelopment associations or private construction companies. Without securing surrounding land, even vacant houses and empty lots cannot be connected to housing construction projects. Public redevelopment projects or urban public housing complex projects are only being implemented in Seoul and its surrounding areas.

Extraordinary measures are needed to resolve the regional housing problem. Systems must be established so that the enormous unearned income generated from land development, housing sales, various redevelopment projects, and real estate ownership and transfers in the metropolitan area can be used to offset deficits in regional residential welfare and housing construction projects. Only when so-called cross-subsidization between metropolitan development profits and regional housing supply is achieved can the housing problems of both the metropolitan area and the regions be solved simultaneously.

Simply supplying enough quality housing in Seoul and the metropolitan area is not enough to stabilize prices. According to research by the Korean Regional Studies Association, even among the 89 local governments designated by the Ministry of the Interior and Safety as having declining populations, the number of people aged 40 to 74 moving in exceeds those moving out. Sufficient supply of affordable and comfortable housing in the regions can encourage people to return to rural areas and reduce housing demand in the metropolitan area. The "Housing New Deal," which was envisioned in the February 4 measures as a way to supply large quantities of regionally specialized housing through cross-subsidization of development profits, should be relaunched.

Byun Changheum, Professor of Public Administration at Sejong University and former Minister of Land, Infrastructure and Transport