Grand compromise is needed
The author is a columnist of the JoongAng Ilbo.
The market reacts fast to outside factors. After the opposition People Power Party’s (PPP) Seoul mayoral candidate Oh Se-hoon gained a comfortable lead over the ruling Democratic Party’s (DP) candidate Park Yong-sun in polls, residents in areas for redevelopment — such as along the Han River and Gangnam district and Mok-dong — retracted sales offer from realtors on the expectations for a lifting of the reconstruction or redevelopment ban. Experts again express concern about the possibility that such expectations will stoke an increase in housing prices that have just begun showing signs of stabilization after an unprecedented surge despite the Moon Jae-in administration’s 25 sets of measures to drag them down.
The liberal government’s housing policy only backfired. It started with haughty confidence in the beginning, but its policy lacked substance and a sense of reality. As a result, apartment prices in Seoul skyrocketed 80.3 percent on average over the past four years, according to a survey by the KB real estate team. The PPP is reaping gains easily. But the party cannot dismiss criticism. Ultimately, enough supply will stabilize the market. But the question is how to manage human greed until the PPP reaches the goal of market stabilization. The party must find effective ways that will not turn its faith in the market into a capitulation to the market.
Keywords of real estate policy are stimuli and control, and supply and regulation. Past housing policies have oscillated between the two countervailing points like a pendulum. As a result, housing prices always rose — except for a brief period of stabilization or stagnation. If speculators chose to persevere all the heavy tax levies and regulations with strong conviction that this also would pass, their endurance eventually paid off with humongous compensation for their land. If they skillfully ride on zigzagging government real estate policies, they suddenly became rich. Otherwise, they became bankrupt.
The Moon administration’s property measures also were holding onto the pattern. After sticking with regulations obsessively, it eventually returned to expanding supplies. An unrealistic policy from the start cannot be sustained. Professionals with superb tentacles had preoccupied prospective land already. A large swath of land in the Gwangmyeong-Siheung New Town project straddling the two cities around Seoul was designated as an area for massive apartment construction under the Lee Myung-bak administration, but the designation was lifted by the Park Geun-hye administration. Even without secretive information or splendid tentacles, the area was obviously a prospective speculation target. As expected, the Ministry of Land, Infrastructure and Transport in February designated the area as the site of the third New Town project to ease housing shortages and rein in soaring housing prices in the Moon administration. The massive LH scandal of public corporation employees using inside information also took place while hastily trying to fix policy failures of the government. Such a tragic incident as a ship sinking after changing its course too fast is not confined to the sea.
Every administration knows the importance of its policy consistency. But when elections come, votes count most each time. Whenever a government faces a crisis, it changes its policy. But makeshift policies trigger unwanted side effects, not only for this government. What is needed is a policy frame that can be used for long, but no past administration thinks about it other than to devise ways to win the next election. That marks a sharp contrast with European countries trying to reach a social consensus on major policy based on coalition.
Our society is still stuck in the myth of “invincible property market.” In the fourth industrialization revolution era characterized by post-labor industry and super-connectivity, the axis of social conflict has shifted from conventional labor-management disputes to livelihood issues such as housing and welfare. In that respect, establishing a farsighted philosophy on our real estate policy can be a prelude to devising a future frame of our society. How about commissioning the presidential Economic, Social & Labor Council — an entity aimed at achieving grand compromise among concerned parties — to work to address our real estate challenges? How about allowing the council to determine real estate taxation, long-term housing supply and regulation principles?
Of course, I’m not proposing the council establish a strict and rigid frame for the goal. It must have space for weaving elastic policies to reflect economic changes. But if the distance between the private and public sectors — and between the market and regulation — can be narrowed, would the conflict and cost decrease that much?
Somehow it could be a pipe dream particularly given the political circles engrossed with winning a victory in the winner-take-all contest. And yet, wouldn’t the DP try to recover from the disgrace of never-ending real estate blunders even just a bit? At the same time, wouldn’t the conservative PPP want to shake off its image as a worn-out party for the rich?