[EDITORIALS]Housing Policy Is Adrift

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[EDITORIALS]Housing Policy Is Adrift

The government's housing policies are becoming more inconsistent and contradictory. Low-income households are victimized by such irresponsibility.

The government has announced 22 new housing policies since the 1997 financial crisis. On average, a new policy was issued every two months, leading to questions about their utility.

Not long ago, the government said it would revive the rule requiring developers to make small units 20 percent of its new apartment complexes. The intent was to overcome a shortage in rental apartments. Now, though, the government says it will liberalize the prices of newly built small apartments as an incentive to developers. The freeing of new apartment prices is a good mechanism for efficient resource allocation, but liberalizing prices of new apartments will lead to increases in overall housing prices and may trigger speculative investments in real estate while interest rates are low. Consider the results of deregulating prices of standard and large apartment units: construction companies have raised prices in this suppliers' market, pushing up prices of new apartment units by as much as 40 percent.

Government policies on semi-agricultural land, which is primarily farm land but can be developed, are also confused. In 1998, the government lifted many regulations on development of such land to expand the amount of available land. The move precipitated reckless land developments, especially in Yongin, Kyonggi province. Observing such ill-effects, the government last year reversed its polices, which again led to a shortage of land usable for housing in the metropolitan area.

The tendency toward stopgap measures is more obvious since the financial crisis. The government has few measures available to boost the economy, so it has been clinging to stimulating construction. Those makeshift measures may create jobs temporarily, but will delay restructuring in the housing industry in the long run.

Changing policy direction for political reasons or for limited gains does not work. Stable housing supplies are more important than economic stimulation. The government needs policies based on market realities.
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