Opposition within South Korea's ruling party to the government's property tax overhaul is intensifying, even as the government prepares to unveil housing supply and financing measures on the 13th to stabilize the real estate market. Song Young-gil, a candidate in the Democratic Party's leadership race, publicly opposed the plan, saying the common view is that property taxes should be left untouched, while concerns are mounting within the party that heavier tax burdens on owners of a single home they do not live in could stir the lease market. As a result, work to minimize market shock during the legislative process is expected to gain momentum.
According to political sources, the Democratic Party held the first meeting of its "Housing Market Stabilization Task Force" at the National Assembly members' office building on the 12th, reviewing the government's housing supply and financing measures. Han Byung-do, acting party leader and floor leader, referred to the housing supply plan and comprehensive financing measures set to be announced, saying, "What matters more than announcing measures is the speed and execution that the public can actually feel." Han added, "We will review the entire scope of real estate policy — supply, taxation and financing — together with the government."
The Democratic Party repeatedly stressed rapid housing supply. "As we need an innovative reduction in the time it takes to supply housing, the party and the government will work closely together," the floor leader said. "We will also prepare short-term supply measures to stabilize the lease market."
The Democratic Party's view is that non-apartment housing and modular homes, which take less time to build, should be actively used to increase supply over the short term. The party aims to ease regulatory obstacles blocking the supply of non-apartment housing such as studio-style urban-living units and officetels — studio units used as either homes or offices — and to expand modular construction, in which major structural components are fabricated in factories and assembled on site, in order to shorten the time from groundbreaking to move-in. In Seoul, where the supply shortage is severe, participants reportedly agreed that close policy coordination is needed, as supply speed hinges on cooperation between the Seoul Metropolitan Government and the Ministry of Land, Infrastructure and Transport (MOLIT), which hold permitting authority.
The government's tax overhaul was left off the task force's official agenda, but demands poured in for supplementary measures. In particular, some argued that reasonable grounds for owning a single home one does not live in should be recognized more broadly.
Kim Young-bae, a lawmaker representing Seongbuk-A in Seoul, told reporters after the meeting, "I conveyed the concerns being raised over taxation, including on a single home one does not occupy, and especially the voices of young adults." Kim added, "On supply and financing as well, the focus must be precise on how much of owner-occupier buyers' worries can actually be resolved."
Song, the leadership contender, took direct aim at the government's tax overhaul. On KBS radio, Song said, "The common view is that property taxes should be left untouched," adding, "The comprehensive real estate tax and capital gains tax on single-home households come to just 1 trillion won at most." Song then asked, "With an additional 50 trillion won in tax revenue coming in, why stake everything on 1 trillion won?"
Song was especially critical of tightening the actual-residence requirement for the long-term holding special deduction, calling it a system out of step with reality. "Someone could leave their one home in Seoul and be in Incheon because that's where their job is — how can you strip the long-term holding deduction just because they don't live there?" Song said, arguing that exceptions should be granted for single-home owners who live elsewhere for unavoidable reasons.
Behind the growing concern within the ruling party lies a worry that the ripple effects on the lease market could be considerable. If the tax burden on owners of a single home they do not live in rises, landlords may move in themselves or sell to reduce that burden, potentially cutting rental supply. There are also concerns that if the increased tax burden is passed on to rents, it could push up lease prices.
Kang Deuk-gu, a Democratic Party lawmaker, made the same point at the National Assembly's Land, Infrastructure and Transport Committee the previous day. "If we regulate a single home that is not occupied, the owner must either live in it or sell it," Kang said. "If existing tenants come out into the market, demand for leases rises and prices are bound to go up relatively."
The Democratic Party plans to move quickly on legislation supporting the government's supply and financing measures. On supply bills such as the Urban Redevelopment Act, Han Jung-ae, chair of the party's policy committee, declared, "In August, no matter what, whether we filibuster or whatever it takes, we will pass the relevant bills without fail."
