The author is a columnist of the JoongAng Ilbo.
The 24th set of real estate measures has even lost favor with the progressive front. The Kyunghyang Shinmun questioned if “mid- to small-sized public rents in unpopular districts can help meet the growing demand for jeonse (long-term lease) apartments.” The Hankyoreh also found it lacking due to a shortage of offerings in good neighborhoods. A survey by Realmeter showed 54.1 percent of the respondents doubted the efficacy of the latest off-track supply measure.
President Moon Jae-in has assured us that “crazy” rent prices disappeared under his government. But the rent market is at its worst. Despite all the clampdowns on multi-home owners over the last four years, people who own more than one home surged to 2.28 million in 2019 from 2.11 million in 2017. Public sentiment has reached a boiling point. Those without homes are outraged that they have been treated as “beggars” and those living in rentals complain that they have become scapegoats in the government’s relentless real estate experiments. Former centrist lawmaker Yoo Seong-min, who usually is genteel in use of language, bluntly criticized the president as being “incompetent and cowardly.”
Real estate policy has entirely been guided by ideology. Market experts have long advised the government to increase supply since 2017, but supply dried up in Seoul after former Mayor Park Won-soon barred reconstruction and redevelopment in the city over the past 10 years. Moon took the same path to thwart expectations for unearned income. As a result, new supply in inner Seoul is running short.
The ruling Democratic Party (DP) regarded the warnings of supply shortages as reasoning by profit-seeking builders. They argued that apartment supply was sufficient, and pushed for tough regulations, such as surcharges on multiple home owners and property values to punish multi-home owners and speculators. The past 23 sets of real estate measures all served that purpose. The result was disastrous. Dani Rodrik, a professor at the John F. Kennedy School of Government, at Harvard University, said populist policymakers tend to exclude experts as they distrust them. Instead, they prefer a simpler and easier approach to economic problems from political reasoning rather than taking a complex reality into account as in some Latin American countries.
The Citizens’ Coalition for Economic Justice (CCEJ), a progressive civic group, last week issued a statement recalling the president’s promise to rein in the real estate market and showed confidence in solving the housing problems a year ago. But the average apartment prices in Gangnam, southern Seoul, went up to 2.1 billion won ($1.9 million) and rents to 730 million won. Moon has not addressed the housing issue since he reaffirmed the government’s commitment to stabilize the market and prevail over speculative forces during his speech at the National Assembly last month. He still refuses to see any fault in the policy.
No measures can help ease the overheated housing market as long as the president stays stubborn. Some speculated Land Minister Kim Hyun-mee could be replaced when DP head Lee Nak-yon said he had in-depth talks with the president on a wide range of issues. But the following day, the Blue House denied the speculation and reiterated that the president had confidence in Kim.
The president believes the measures are serving their purpose, said one Blue House staff. He firmly thinks the market will stabilize once the new property tax becomes effective next year. Minister Kim also pleaded for patience, claiming the rent disaster has not been caused by the new rent-related laws. If the president does not have faith in Kim, he would have sacked her a long time ago, the aide said.
Kim Sang-jo, Moon’s policy chief, also observed that the housing market was stabilizing and rent would soon follow suit. But he did not look so confident. His predecessor Kim Soo-hyun jokingly confessed that if he had to be investigated and arrested for wrongdoing in the future, that will not be due to his real estate policy but because of the Blue House’s interference in the Wolseng Unit 1 nuclear reactor closure. The Blue House staff also may be aware of the consequences from the government’s real estate failures. Long as the president does not change his mind, the real estate market will never be stabilized.