Houses built on quicksandThe government presented another real estate measure yesterday. It was called “a measure to enhance the role of the public sector in order to stabilize the housing market and improve housing welfare.”
The government’s earlier measure, released on Jan. 11, was aimed at increasing regulation of initial sale prices for apartment units and thus increased worries that the public sector’s supply of homes would shrink drastically. This time, the government plans that the public sector will drastically increase the supply of publicly financed rental units and other houses for sale.
The government said it will create a fund with an average annual deposit of 7 trillion won ($7.4 billion). It will grow to almost 100 trillion won by 2019. The fund will be created from a variety of sources. The government will contribute 500 billion won per year.
The government said that under the measure, families with a monthly income of 3 million won or less will be qualified to rent publicly financed apartment units, and the average size of long-term rental apartments will increase to 100 square meters, or around 1,100 square feet. This means that the public sector will supply homes to the middle-class, too. For the project, a task force to find building sites will be set up under the Office for Government Policy Coordination.
Under the measure, the government plans to build rental houses by creating a fund, instead of spending its budget. But such projects must guarantee profitability to those who contribute to the fund, so taxpayers’ money will be used in the end. The plan to create a fund is only a trick. The government’s finances, already in deficit, will worsen even more.
It is the government’s duty to improve housing for people with low incomes. But whether taxpayers’ money should be used to provide houses for the middle-class should be decided by consensus.
These days, the global trend in housing policy is to let the private sector take the risks and the rewards while the public’s money is kept at a distance from the quicksands of the real estate market.
In Great Britain in the 1980s, for instance, the administration of Margaret Thatcher privatized state-owned houses. That was because public housing areas had problems and some had become like ghettos because of difficulties in providing maintenance.
The Korean administration is going against the trend, freezing out the private sector. We wonder if its real estate policy is actually a version of socialism.