Lee Jae-myung, President of the Republic of Korea, Directs Fundamental Improvement of Land Supply System
President Lee Jae-myung has directed a fundamental improvement of the current land supply system.
According to the minutes of the 26th Cabinet Meeting held on June 19, which were made public on the 3rd, President Lee mentioned to former Minister of Land, Infrastructure and Transport, Park Sang-woo, "What if we change the fundamentals of the land supply system after discussing it with the policy office?"
President Lee raised questions about the current structure in which construction companies bid to build houses on land developed by Korea Land and Housing Corporation (LH).
He noted, "In order to construct housing, the public land is mostly expropriated, or to put it negatively, forcibly taken away. We tend to take it for granted that the developed land is created and sold to the private sector with a certain profit added to the price of that land."
He continued, "Due to the large difference between the supply price and the market price, a lot of false construction companies have been created, leading to bidding processes with several hundred contestants. We developed the land at 5 million KRW per pyeong, but in reality, it becomes 10 million KRW, leading to an incredible uproar."
Improvement of Land Supply Method and Exploration of Development Profit Recovery Measures
As an alternative, President Lee proposed that LH directly build houses and only provide construction contracts to construction companies.
In response, former Minister Park explained that "it is very difficult for private construction companies to secure land themselves. Therefore, a system has been established where a public institution like LH develops public land, builds some public housing directly, and sells some land to the private sector for private housing supply."
President Lee stated, "I hope that system can be fundamentally reconsidered with the policy office. Since it is a public project, the difference between the land supply price and the actual price leads to what is so-called swarm bidding and lottery allocations, which results in many issues."
He added, "Lottery allocations cause substantial differences from actual market prices due to price ceiling restrictions, leading to skyrocketing housing prices in the surrounding areas."
Furthermore, he expressed, "If we find a method to recover a significant part of the development profits in the public sector, it may prevent such chaos in the market."
Lee Jae-myung, during his campaign for the 20th presidential election in 2022, pledged to implement a large-scale supply centered on basic housing along with the development profit recovery system.
The development profit recovery system is a policy where the government recovers a certain amount of profits gained from land price increases when developing land for residential projects, tourist sites, urban redevelopment, hot spring developments, and so on.
This system aims to contribute to the fairness of the tax system by recovering windfall profits and suppressing real estate speculation, leading to price stability.
However, there are also concerns that such systems could dampen real estate development and encourage quality degradation in the existing market.
Image source: Lee Jae-myung, President of the Republic of Korea / News1, Korea Land and Housing Corporation / News1, reference photos for understanding the article / gettyimagesbank
