Lee Han-jun, president of Korea Land & Housing Corporation (LH), appealed that financial support from the government is urgently needed, saying that worsening financial soundness is inevitable if the government's announced plans to directly implement the supply of dwellings and expand the supply of public dwellings are to be carried out. Lee also argued that policies such as cutting or abolishing the transaction tax and delegating redevelopment project permitting authority to district constituencies are necessary.
At a National Assembly Land Infrastructure and Transport Committee audit held in Yeouido, Seoul, on the 14th, Lee said in his opening remarks, "We will halt the method of selling portions of public housing sites to the private sector to supply dwellings through private entities, and instead LH plans to directly implement the projects," adding, "Regardless of fluctuations in the real estate market, we will establish a system in which the public sector takes responsibility and supplies a set quantity of dwellings stably every year."
In the subsequent Q&A, when several lawmakers pointed out that the market is worried about whether LH has the capacity to push for stronger public-interest roles while its liability is heavy, Lee said, "From now on, because we will implement directly, an opportunity has been created for LH to shake off the stigma of being a land peddler," but added, "Due to a surge in loss-making rental dwellings and reduced revenue from housing site sales, we are expected to be unable to maintain the cross-subsidization structure that has driven public dwelling supply and balanced regional development projects. Expanded government fiscal support and backing for the corporation's organization and workforce are desperately needed."
Yoon Jae-ok of the People Power Party also raised LH's liability issue, noting that as of June this year LH's liability stood at 165 trillion 206 billion won with a debt ratio of about 222%, and pointing out that by 2029 it is necessary to consider the possibility that liabilities could exceed 300 trillion won. In response, Lee explained, "If the land to be sold to the private sector is directly implemented by LH, the supply will increase by 53,000 units, and to break ground it will cost a little over 20 trillion won in total at 400 million won per unit," adding, "Overall, liabilities are expected to increase by about 25 trillion won over five years, but because land sales are not happening, our own revenue structure disappears, so we are discussing how to resolve this with the LH Reform Committee."
Regarding the structure in which LH incurs losses when the price ceiling system is applied to public dwellings and sale prices fall, Lee explained, "Practically, the price ceiling system causes problems, so we are asking (the government) to make standard construction costs realistic, and within the scope of the price ceiling system, to raise the general pricing ratio from around 90% to 100%."
On concerns that private construction companies would be reluctant to participate in direct implementation, he answered, "The loss-making portions are attributed to LH, while in the case of private firms, they take on the work under contract and take construction profits," adding, "For private participating entities, it is not a structure where they incur losses just because sales do not proceed."
He added, "Looking at the results of private-participation projects so far, A-grade brands among the top 10 construction companies in Korea have participated significantly."
On concerns about public-led dwelling supply, Kim Gyu-cheol, head of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport, also said, "The public-led direct-implementation policy is a realistic alternative that can enhance supply stability and effectiveness," adding, "To achieve the goal of supplying 1.35 million households, a parallel strategy involving LH and private companies, expansion of personnel and organization, making the price ceiling system and standard unit costs realistic, and securing fiscal soundness are all necessary."
In addition, when Eom Tae-young of the People Power Party mentioned Minister Kim Yun-duk of the Ministry of Land, Infrastructure and Transport's remarks on "strengthening the ownership tax" and asked, "Shouldn't we lower the transaction tax instead of strengthening the ownership tax?" Lee answered, "By cutting or abolishing the transaction tax so that properties come onto the market, transactions can circulate positively and adjustment mechanisms can work," adding, "A policy that allows properties to come onto the market freely is desirable." The transaction tax refers to taxes paid when buying and selling real estate such as dwellings, meaning acquisition tax or capital gains tax.
Previously, Minister Kim Yun-duk of the Ministry of Land, Infrastructure and Transport said at a press briefing on the 29th of last month, "In my personal view as the individual Kim Yun-duk, not as Minister, I think the ownership tax should be increased."
Lee added, "Supply should also consider properties already on the market; it is a very wrong idea to think that only newly developed dwellings count as supply," and "As my usual belief, people living in high-priced apartments should pay the corresponding ownership tax."
Regarding the criticism that supply in the greater Seoul area, especially in Seoul, is slow and that the urban public-dwelling complex project is not being properly promoted, he answered, "Redevelopment and reconstruction, and urban complex projects need a foundation-laying process," adding, "If the Seoul mayor's redevelopment and reconstruction permitting authority is delegated to the 25 districts, the permitting period could be shortened by at least about two years." He added, "In Gyeonggi Province, there is already a case where authority was delegated to front-line cities."
He also promised to improve the quality of public dwellings supplied by LH. Lee said, "We will apply non-discriminatory exteriors and finishes between rental and for-sale dwellings," adding, "We will expand the minimum floor area of rental dwellings to at least 26 square meters in the greater Seoul area and 31 square meters in regional areas—more than 1.5 times the existing size—to enhance residents' quality of life and pride."