Value context and insight. lkm@koreatimes.co.kr
Conflict deepens over 'bungled' real estate policy
Deputy Prime Minister and Finance Minister Hong Nam-ki speaks during a meeting held to monitor irregularities in the real estate market at Seoul Government Complex in Gwanghwamun, Wednesday. Yonhap
By Lee Kyung-min
Real estate policy yet again rapped for lacking market principles, consistency
By Lee Kyung-min
Deputy Prime Minister and Finance Minister Hong Nam-ki said the government's plan to build new housing in Seoul and the surrounding Gyeonggi Province will be pushed ahead as planned, Wednesday, railroading the opposition raised by the Seoul Metropolitan Government for what the city government considers “excessive government intervention” that distorts market principles.
The city government together with the finance and land ministries announced a plan Tuesday to ensure the supply of 132,000 new homes in Seoul and the surrounding Gyeonggi Province.
They plan to promote redevelopment by easing construction rules through the increase of floor area ratios -- building area divided by lot area -- by to up to 500 percent. They also plan to raise the current height restriction limit of 35 stories for apartment blocks to 50.
This will lead to up to twice as many homes in areas with aging apartments where the government plan takes effect. But the catch is that the government will only allow the plan on the condition that up to 70 percent of the newly increased land be used to build government-rented homes on long-term lease for low-income earners.
This is why the city government says the plan will not attract as many private firms, almost all of which balk at the idea of handing over profits to the government.
Another major stumbling block is that the redevelopment plan requires the approval via a two-thirds vote of the current occupants of the apartments to be redeveloped. Their collective opposition has a similar basis in that they do not want their property value to be controlled by the government.
A few hours after Tuesday's briefing, the city government held a separate presser, saying it “does not agree with the central government's plan.”
“The city government does not give its full support to the ministry's plan,” a city official said during a briefing. “We will seek ways to resume the private construction that due to no fault of their own remains halted for years. The government seeking to lead what should be determined by market principles will only lead to a highly distorted, unbalanced market.”
A few more hours later, however, the city government issued a statement saying, “the city government does not have any disagreements with the central government,” in what was largely seen as caving in to the push jointly organized by the ministries, Cheong Wa Dae and the ruling Democratic Party of Korea.
Seoul National University economist Lee In-ho said the discord is a clear indication of government failure, with the public caught in the crossfire.
“Government policy should be consistent, which those set up by the current administration have been anything but. The poorly thought-out and even more poorly implemented plan will only hurt nearly half of the Korean people whose stable housing needs are increasingly put under threat.”