A home is not merely an investment asset. When you live in one place for 10 or 20 years, that neighborhood becomes your hometown. You gain neighbors, settle on a clinic and a market you frequent, and build up memories of your life along a single walking path. A home is therefore both an asset and the foundation of daily life, a space that preserves the continuity of one's existence.
Seen in that light, the government's recent direction on housing taxation raises a curious question. Is the "residence-centered housing policy" the government emphasizes one that helps people live stably in one place, or one that pressures them to leave homes they have lived in for a long time?
For a long time, Korea's housing tax system has upheld the principle of exempting a single home owned by one household. Even for high-priced homes, it has granted a special long-term holding deduction to those who have lived in them for many years.
This is less a simple tax break than an institutional safeguard, one that keeps the housing capital built up over many years from being severely eroded merely because a home is sold, and that allows people to preserve their existing base of daily life even when they move.
It is also an expression, in tax terms, of the state treating housing not merely as a matter of asset holding but respecting it as the foundation of daily life needed to sustain a decent existence and the stable continuity of one's life.
Under this government's proposal, however, the special long-term holding deduction is to be replaced by a long-term residence income deduction, and a cap is to be set on the deductible amount. The new system differs sharply in character from the existing one, in that a ceiling will apply to the amount a single-home household can deduct even if it has actually lived there for many years.
The problem is the reality of Seoul. It is no longer unusual for a home bought 15 or 20 years ago to now be worth several billion won. Yet that does not mean the owner engaged in short-term speculation. They simply lived in one home for a long time.
Over that period, prices rose, land values and construction costs climbed, and the value of the city itself increased as transportation, education, medical and cultural infrastructure expanded.
Treating the entire gap between today's home price and the past acquisition price as the owner's real investment gain is therefore far removed from economic reality. The capital gain calculated under tax law does not adequately reflect the long-term rise in prices and the decline in the value of money, and it deducts as necessary expenses neither the cost of acquiring a replacement home nor the loan interest borne to buy the home nor the comprehensive real estate tax paid during the holding period.
Capital gains under tax law cannot be regarded as an economic benefit actually earned. In such circumstances, placing a cap on the deduction for long-accumulated gains means that even owner-occupiers who have lived in one home for a long time can be taxed as if they had realized a large investment gain all at once.
As a result, rather than living long in one place and accumulating housing wealth, people may be driven into a "gradual shrinkage of housing" — lowering their housing standard one step at a time as taxes and various institutional costs chip away at their housing capital each time they move. This is not simply a question of tax fairness but a fundamental issue of housing policy: to what extent the state will recognize and protect the housing capital and base of daily life that people have built up over a lifetime.
In the end, long-term owner-occupiers are forced to choose between hastily selling their home before the tax rules change or staying put while bearing an increased tax burden. Is this truly a policy that protects owner-occupiers?
Even harder to understand is the fate of the so-called "national standard size." For a long time, an apartment in the mid-30s in pyeong — with three bedrooms and one living room — has been regarded as the representative family home, one where a family can enjoy adequate housing utility. Yet if such a home, its physical space and function unchanged, is suddenly classified as an "ultra-high-priced home" and made to bear a high comprehensive real estate tax simply because prices in the area have risen sharply, one cannot help but ask what the logical basis for that taxation is.
If the substance of the housing is unchanged yet the tax burden rises steeply merely because the price has gone up, is that tax a levy on property holding, a levy on the wealthy, or a tax that burdens the ability to keep living in that area?
The problem is especially acute for elderly owner-occupiers with a single home for their household. Their income has fallen after retirement, yet if they must bear a large holding tax every year merely because the price of the home they have long lived in has risen, it is effectively the same as demanding: "If you want to keep living here, keep generating that much cash income."
Nor is moving a free option. In the Seoul metropolitan area and regulated zones, mortgage restrictions apply strongly. The higher the home price, the more sharply the loan amount is limited, so even owner-occupier buyers who want to sell their existing home and move to another struggle to obtain sufficient financing.
Recently, as buyers find it harder to raise funds, so-called "seller financing" has even emerged, in which the seller lends part of the purchase price directly and registers a mortgage on the property. In the end, holding taxes make it burdensome to stay in a home one has long lived in, while lending restrictions make it hard even to move to a new place. It is a structure in which it is hard to stay and hard to move.
Whose city will Seoul become? Is it acceptable for residents who have lived long in one area to be pushed out by rising home prices, and for Seoul to become a place only those with high incomes or large assets can afford? Housing policy can curb speculation. It can regulate excessive leverage. Demanding more tax on large assets is also within the realm of social choice.
But speculation and residence must be distinguished. When people who have lived in one home for 10 or 20 years keep living there, or move to where they need to be as their life stage changes, that is not speculation. It is the course of life.
If the government says "a home is not something to buy but a place to live," it must now take that proposition one step further. The freedom to choose where to live, the freedom to stay long, and the freedom to move to a comparable place when needed must also be respected. If people must leave because of taxes and find it hard to move because of lending restrictions, that can hardly be called a policy for owner-occupiers.
As a government of popular sovereignty, rather than effectively restricting people's residential choices through taxes and financial regulation, it should let people decide for themselves where to live and when to move, in line with their own lives and circumstances. Seoul is not a city only for those with capital. It must be a city where those who have long made it the ground of their lives also have the freedom to stay, and the freedom to move when needed.
