ED Shift of housing policy

Government should supply more homes tailored to consumers' needs

“The government will not hesitate to work out measures for residential stability, and swiftly map out various plans to expand the supply of new housing.” President Moon Jae-in made this pledge in his New Year address Monday. It marked a turnaround in the government's housing policy from curbing speculative demand to expanding supply. Moon's remark came after new Land, Infrastructure and Transport Minister Byeon Chang-heum said he would unveil a plan to supply new homes in Seoul's urban areas before Lunar New Year Day in mid-February.

Unlike his predecessor who focused on the fight against speculative investors in real estate, Minister Byeon is stressing the need to increase supply to stabilize housing prices. He says the government can provide a sufficient number of apartments in the inner city by developing subway station areas and semi-industrial districts, and redeveloping low-rise flats into high-rise apartments. Byeon also presented new types of public housing for families too financially insecure to buy housing with one payment, allowing them to pay half of the price down and the rest through a long-term installment plan.

If the new minister's ideas turn into reality and increase the housing supply, this will stabilize prices. There is a caveat though ― the government should supply housing that consumers want and in ways that consumers can accept. Unless the two preconditions are met, the resultant mismatch between demand and supply will lead to another waste of time and money. Besides, the public sector's housing supply will run into limitations without participation by the private sector. The government needs to relax regulations to induce private contractors to participate on the condition of retrieving and redistributing undue profits.

Despite the Moon administration's consistent anti-speculative measures, such as curbs on mortgages and heavy taxation, housing prices have shown no signs of a slowdown. Even the government's long-term supply plans failed to stabilize housing prices because it takes at least three to five years to turn them into action. In his New Year message, President Moon said, “I feel very sorry for disappointing many people with housing problems.” His administration should follow up with a sustainable housing supply plan to stabilize prices.