Housing supply plan reaches greenbelt, but trust and execution are key

The government on Thursday announced its most recent housing package, centered on rapid housing supply to stabilize rental and sales markets. It is the Lee Jae Myung administration’s third supply measure.

The plan accelerates the previously announced 1.35 million homes in the greater Seoul area while adding more than 230,000 through 100,000 homes on new sites, faster construction in third-generation new towns, urban public housing projects and more non-apartment housing. More than 120,000 units are to break ground by 2030.

Yet none of the 1.58 million homes in announced supply plans will be completed during the current administration. The supply cliff will therefore persist for some time, raising questions about the policy’s effectiveness.

The inclusion of greenbelt land shows how far the government is stretching to secure supply. Of 100,000 homes on new sites, 27,000 will initially be provided in areas including Namyangju and Gwangju in Gyeonggi and Yeomchang-dong in Gangseo District, western Seoul. Another 73,000 or more will be announced this year.

The problem is time. Little new housing will be completed over the next four to five years. Housing starts this year in Seoul and the capital region are only around 20 percent of government targets.

Ultimately, credibility and execution will determine success. The Lee Myung-bak administration eased market anxiety through reservations for Bogeumjari public housing. The government must similarly show how many homes will be supplied and where, including through redevelopment and reconstruction, giving buyers confidence that they need not rush into debt-fueled purchases.

More fundamentally, regulations on private redevelopment and reconstruction, which account for roughly 80 percent of capital-region housing supply, should be boldly eased. Rather than relying solely on public development led by the Korea Land and Housing Corporation, whose presidency remained vacant for eight months, the government should ensure uninterrupted supply by revitalizing redevelopment and reconstruction. The National Assembly should quickly pass pending legislation to accelerate housing supply.

Keeping the existing market functioning is just as important. Before taking office, President Lee said he would not “control housing prices through taxes.” Yet next year’s proposed tax changes are already freezing the market. At Wednesday’s Democratic Party caucus, lawmakers called for withdrawing tax increases on single-home owners who do not live in their properties and easing the comprehensive real estate holding tax threshold.

The government also announced a higher ceiling on household loan growth. But that alone will not dispel public distrust fueled by punitive taxation and controversial housing policies. Bolder changes are needed. Stabilizing the property market ultimately depends on convincing the public that housing supply will continue.