A strange fixThe government has announced a reform plan on state-run Korea Land and Housing Corporation (LH) three months after some of its employees were suspected of having used inside information to purchase lands sites for new town projects. Under the overhaul, LH’s authority in researching and selecting sites for public housing programs that will go to the Ministry of Land, Infrastructure and Transport to prevent leaks of inside information. Some of its role will also be transferred to other public organizations, local governments, or private enterprises to reduce about 20 percent of the payroll, or 2,000 LH employees. All staff are required to report their assets. They will be prohibited from purchasing land or homes if they do not reside in them.
The reform outline, however, has failed to get to the essence of the scandal that led to the ruling Democratic Party (DP)’s crushing defeats in the April 7 mayoral by-elections in Seoul and Busan. LH did not specify how it plans to identify speculative activities by its employees. An organizational overhaul was avoided due to differences between the government and the DP. Former Prime Minister Chung Sye-kyun vowed a complete makeover tantamount to the dissolution of LH. President Moon Jae-in ordered a thorough investigation to identify if the practices were committed by some employees or stemmed from a deep-rooted corruptive structure.
The scandal underscored the problems in the state-led housing program. The government and public organization had exclusive authority and access to the housing program, giving rise to temptation for profiteering through inside information.
State-led housing program failures have been witnessed even before the latest case. The government had to cancel its plan to build 4,000 units of housing on the idle land of a former government complex in Gwacheon in the face of a strong protest from residents. Residents in other locations in Seoul chosen by the government for large-scale public housing also are taking collective actions for fear of lowering apartment prices in their neighborhoods.
Speculation based on inside information and residents’ opposition result from the unilateral state-led housing program. A government role must be restricted to stimulating market activity by removing regulations. While the government stumbles with policy failures, runaway housing prices have spilled beyond Seoul to affect all across the capital region. At this rate, ordinary people cannot even afford to pay taxes on their homes let alone buy new ones. If its flop does not stop, the government could face the same results in the March 9, 2022 presidential as in the by-elections.