The government has decided to supply more than 230,000 additional homes in the Seoul metropolitan area and to spur private redevelopment projects, aiming to stabilize soaring home prices and the rental market. On the 13th, the Ministry of Land, Infrastructure and Transport (MOLIT) announced a housing supply package that includes expanding public land supply, shortening the time to start construction, increasing the supply of ordinary housing such as multi-unit and multi-family homes, and easing rules on the rebuilding and redevelopment of aging complexes. It is the third supply plan, following last year's Sept. 7 package, which called for starting construction on 1.35 million homes in the metropolitan area over five years, and this year's Jan. 29 package, which called for supplying 60,000 homes on idle urban sites. The government, which had fallen into a belief in all-purpose regulation while declaring that "no market beats the government," has now acknowledged the failure of its property policy and shifted toward expanding private supply. This comes late, but it is the right direction.
The core of this Aug. 13 package is a "speed battle" on supply. President Lee Jae-myung also ordered faster supply that day, saying the government "must shorten various permit and approval procedures as much as possible and secure land boldly, without being bound by existing rules, to move ahead with supply." First, the government will designate new housing sites for 27,000 homes in the metropolitan area and put forward additional candidate sites capable of supplying 73,000 homes within the year. It will also sharply cut the time from a site announcement to the start of construction, from 68 months to 37 months. It is especially encouraging that the government, which had been lukewarm about private redevelopment projects, has declared a policy of promoting them. It will support the start of construction on 234,000 homes through such projects and greatly increase project financing (PF) guarantees to an annual average of 28 trillion won. The government, keenly aware of the loss of public support stemming from the property market, appears to be staking everything on expanding supply.
It is also fortunate that the government has eased the "loan bottleneck" for owner-occupier buyers, in order to stop the loan runaround in which borrowers shut out of bank lending circulate through secondary financial institutions. It will double this year's household loan growth target from 1.5% to 3.0%, allocating about 30 trillion won to relocation costs and balance-payment loans. It is the right attitude for the government to have belatedly grasped the side effects of excessive loan restrictions and begun to correct its view.
The government must not expect that a single additional package will calm home prices and soothe angry public sentiment over property. It should reflect on the policy failure of the Moon Jae-in administration, which triggered surging home prices even after issuing 26 property measures while churning out half-baked policies. Building on this Aug. 13 package, the government must move to ease restrictions on the transfer of membership in redevelopment associations, adjust the ratio of rental housing required in redevelopment projects, and revise the system that recaptures excess profits from rebuilding projects, so that private redevelopment — which accounts for 80% of housing supply in the metropolitan area — can be spurred further. In particular, because cooperation with local governments is essential to expanding housing supply, there must not be a single gap in policy coordination. The government must never be complacent enough to think that "normalizing the property market is far easier than clearing out a valley."
