Bureaucrats’ gold mine, our lossPublic servants moving into the new administrative municipalities of Sejong and other areas can buy apartments at below market prices. The discount is a kind of reward to public officials who have to move out of their homes in the capital into a new place because of a major relocation and shift in government services. They are not allowed to resell the apartments for a certain time to prevent bureaucrats from trying to earn money through real estate. The Ministry of Land and Transportation and local governments, in agreeing to the arrangements, may have considered themselves clever for coming up with such an incentive, imagining there would be few public officials abusing it. But they were clearly wrong. Hundreds of civil servants have abused the incentive system and law to rake up profits of up to 100 million won ($93,283) each.
In Sejong City, about 200 public officials sold their rights to apartments bought at discounted prices. Of them, 25 work for the Ministry of Land and Transportation - the ministry in charge of the policy. Public servants who earned money through the special real estate package were evenly spread out in government offices relocated in Sejong. The sales had become a popular means to make money among government officials who moved to the area. They may argue that they have done nothing wrong because they sold their homes after the restriction period was lifted. But reselling the houses at market prices is nonetheless a speculative act. On the streets of Sejong banners hang saying that signing contracts listing false reduced prices is illegal. Apartments near the park and man-made lake are sold at a premium of 100 million won over the original prices.
Irregularities in the new innovative district in Busan went even further. Of 1,240 public officials who bought apartments in the district at prices dramatically lower than the market price, 398 have sold their units. Twenty-two even broke the law and sold them before the holding period was over to pocket profits of up to 30 million won. Representative Kim Jae-won of the Saenuri Party claimed that some of them drew up contracts with false prices in order to avoid taxes.
The district’s development has been controversial from the start. Government agencies that were scheduled to move into the district demanded that the one-year ban on sales of real estate be lifted. Their motives had been questioned and have now been proven underhand. Generally, if ownership to new apartments is sold before the restricted period, the seller can face up to three years in prison or up to 30 million won in fines. The new district was made an exception to these punitive provisions. The real estate incentive had been offered to public officials to help them better settle into their new homes. The government must check these illegal profits and recover the money, and punish those abusing the original, benign purpose.