Don’t overdo it
The author is the economic and industry news director at the JoongAng Ilbo.
It takes time for hot water to work its way through plumbing to the shower head. If you don’t wait and just yank the switch to hot, you can get scalded. If you go instantly back to cold, you may get a flood of cold water.
The “fool in the shower” is a metaphor used by Nobel laureate Milton Friedman to describe the hastiness in fiscal or monetary action. If financial authorities act too quickly upon the early signs of a recovery or slowdown, they may be trotting out overdone or rash policies that could do more harm to the economy. The sentiment has been shifting from cold to hot towards the scandal involving Korea Land and Housing Corp. (LH) employees buying land at cheap prices before the site was designated for development.
On the Blue House website, a petition calling for withdrawal of the third New Town Project where LH employees had gone on a land shopping spree drew over 110,000 clicks for support. Runaway housing and rent prices from repeated real estate policy failures have generated a flood of rent refugees and a number of bewildered homeowners faced with high taxes for unrealized riches. Yet public employees have been found to have engaged in unjust and unfair speculation. People anguished by insecurity in housing and heavy taxes are outraged by the betrayal.
The Moon Jae-in administration will likely go down in history as a failure because of its real estate flops. In an interview with the JoongAng Ilbo early last year, Kim Sang-jo, Moon’s policy chief, said no achievements would matter if housing policy fails. The government committed its utmost weight to fight housing speculation. But anti-market and all-regulatory policies have only aggravated the housing instability as they were focused on suppressing demand. The Moon administration has made the same mistake of the liberal Roh Moo-hyun government in the real estate policy mess, but it has made the mistake in a bigger way.
The government and LH cannot avoid responsibility. Since the LH scandal, the third New Town project is being stalled due to resistance from landlords and residents. The Feb. 4 package promising 300,000 apartments in Seoul and 800,000 nationwide has hit a deadlock. With its credibility at risk, who would want to hand over their land ownership — and a massive housing project — into the hands of LH? Prime Minister Chung Sye-kyun vowed an overhaul since LH at this stage has lost public confidence beyond repair. Some even proposed a breakup of LH, which merged state authorities on land and housing projects. But Chung denied the division.
The government cannot dismantle LH as it does not want to risk the breakdown of the New Town project, which is central to the government’s housing policy. Supply measures must go on as planned. Selfish profiteering by civil servants must be regulated. But LH’s public role in the housing market should be sustained. There is no other entity that can replace LH’s role of urban development and housing supply.
There are many people around the capital region waiting for their chance in the subscription for the third New Town project which would start from July. If the housing project is delayed, they would have to survive in rentals for a longer period. Some of those who had won the public apartments under the Lee Myung-back administration were able to move into their homes 10 years later due to delays in compensation negotiations with landlords. Authorities must not become the fool in the shower and hastily fold the housing project.
The government and ruling party are mulling the expansion of requirements on public employees of fourth grade or higher and police and fire-fighters of seventh grade or higher to report their assets. This too is an overreaction. In that case, registration subjects would jump to over 1.5 million from current 220,000. Management will get out of control and administrative costs will soar.
There is a call for tougher oversight on farmland purchases by outsiders so that they are not abused by speculators. The Constitution restricts farmland to farmers and farming aspirants. But excessive regulation on farmland purchase could infringe on the rights of older farmers to divest their land. The sharply-thinning rural population and rapidly-ageing farmers leave much lands and many fields idled. In the meantime, there is sufficient demand for retirees to retreat to rural areas or for ownership of rural retreats for gardening and farming hobbies. Flexibility must be exercised to allow reasonable utilization of idled rural land.
The LH crisis must be strictly addressed. Yet rage must not overrule reason. A definitive action that can calm rage needs to be questioned as it can be an overreaction leading to higher costs later. The damage mostly could land on people without homes.