Government’s new housing measures are far from perfect

The Moon Jae-in administration announced Thursday the “Feb. 4 housing supply measures,” its 25th housing plan, which aims to build 836,000 homes by 2025 across the nation. President Moon pledged to introduce extraordinary measures that are “beyond market imaginations” in his new year’s speech, and the new package shows the extent the government has gone to deliver the promise. It brings together all measures that can be deployed except for easing restrictions on reconstruction of old apartment complexes in Gangnam, Seoul and on building new homes on Green Belt land.

The government’s plan is to lead the effort to provide 93,000 homes through redevelopment and reconstruction projects and 78,000 homes by building more homes near subway stations. It says it will build 323,000 new homes over the next four years in Seoul, which amount to the total number of apartments in three main districts in Gangnam – a complete change of direction for a government that was adamant that there was enough supply. However, there remain doubts as to how much momentum can be built for mid- and long-term measures when the president has only one year left in office.

The government suggested that Korea Land and Housing Corporation and Seoul Housing and Communities Corporation lead redevelopment and reconstruction projects and finish them in five years as opposed to the usual 13 years if two thirds of residents support them going ahead. It says residents will benefit from a higher floor area ratio, will not have to live at least two years once the work is done and will be allowed to keep the returns if they agree to have state-owned agencies lead the projects. This can help remove hurdles in some areas, such as disagreements among residents or delays caused due to the lack of viability of projects, that have been slowing down the redevelopment efforts.

With more residents opposing redevelopment plan of their community, however, there will be more people who feel as if their assets are forcefully taken away from them. It is also not easy for the government to resolve issues when different groups of people’s interests conflict as it tries to build more homes near stations and in semi-industrial land and areas with low-rise buildings. This is many housing projects get delayed or even cancelled if the government fails to secure private land.

Given the sheer volume the government promises to deliver, the new measures could help ease the anxiety of those who are trying to get on the property ladder. Unfortunately, the package misses any measures that can help tenants who are struggling to find places they can rent with lump-sum deposit. The government should formulate measures that can encourage multiple home owners to sell their properties such as by reducing transaction taxes so that there will be more supply in the market.


Joong-Hyun Park sanjuck@donga.com