Tax-driven housing policies under former Presidents Roh and Moon failed to curb prices, hurting ordinary buyers and renters. They now pose a political risk for current President Lee Jae-myung.
The photo shows apartment complexes in Gangnam District as viewed from Lotte World Tower in Songpa District, southern Seoul, on August 3.Yonhap News
Ahn Hai-ri
Ahn Hai-ri
The author is an editorial writer at the JoongAng Ilbo
“We will strengthen taxation on excessive real estate ownership and thoroughly recapture speculative gains. […] The era in which ordinary citizens without homes bear the burden will come to an end.”
Those were not the words of President Lee Jae Myung but of former President Roh Moo-hyun in 2005 after introducing the Aug. 31 Real Estate Measures, which sharply expanded the Comprehensive Real Estate Holding Tax— widely viewed as a de facto punitive property tax.
Two months later, in his 2006 New Year’s address, during the fourth year of his presidency, he expressed confidence: “We will definitely bring housing prices under control.”
The government’s logic was straightforward: By imposing significantly higher property holding taxes, owners of expensive homes in Seoul’s affluent Gangnam District would be pressured to sell, increasing housing supply, lowering prices and enabling genuine homebuyers with limited cash to purchase homes at more affordable prices.
A year later, however, Roh apologized for failing to curb housing prices after Seoul apartment prices jumped 24.1 percent in 2006 and his approval ratings collapsed.
“I’m sorry housing prices have risen. I’m sorry for confusing the public and for failing to bring prices under control at once.”
It was the Roh administration’s first public acknowledgment that its real estate policy had gone wrong.
Why did a policy that initially won public support by targeting wealthy property owners produce such a different outcome?
The government’s “tax bomb” was indeed aimed only at the wealthiest 2.4 percentof homeowners. But the results diverged sharply from policymakers’ expectations. Instead of increasing supply, many owners simply held onto their homes. Demand shifted elsewhere, higher taxes were passed through into rents and rising prices expanded the number of households subject to the tax. Housing costs climbed while homeownership became even less attainable. The failure of a real estate policy built around taxation ultimately imposed costs on the broader public — and contributed to the government’s electoral defeat.
“You cannot control housing prices through taxes.”
Korean voters appeared to learn that lesson. Yet the Moon Jae-in administration seemed to draw little, if any, lessons from the Roh government’s experience.
The Moon administration repeated the same strategy on a larger scale. Over five years, from 2017 to 2022, it announced 24 real estate policy packages, raised holding taxes and capital gains taxes.
During the fourth year of his presidency, in 2020, then-President Moon declared, “The government’s determination is firm. [...] We will never lose the war against real estate speculation.”
Exactly one year later, in his 2021 New Year’s address, he too apologized.
“I feel deeply sorry to those who have suffered because of housing problems.”
According to data released last year by the Citizens’ Coalition for Economic Justice, apartment prices in Seoul rose 119 percent during Moon’s five-year presidency — far exceeding the 80 percent increase recorded during the Roh administration.
In addition to higher taxes, the Moon administration enacted the Three Lease Laws, including contract renewal rights, rent increase caps and mandatory lease transaction reporting. Critics argued that the combination further distorted both the housing and jeonse (lump-sum deposit) markets.
The cumulative effect was widespread public dissatisfaction and, ultimately, another transfer of political power.
During his presidential campaign, Lee Jae Myung initially appeared to recognize the failures of the two previous Democratic Party administrations.
In May of last year, he stated, “Previous Democratic Party governments tried to suppress demand, raise taxes, and restrict ownership, but the market and demand ultimately prevailed.”
He added, “We will no longer try to control housing prices through taxation.”
Yet in March he described taxation as “a nuclear weapon,” signaling renewed consideration of tax-based policy tools. Then, on Monday, his administration unveiled a tax reform proposal that critics argue revives many of the same policies that failed under both the Roh and Moon governments.
The proposal’s individual flaws are too numerous to address here. One broader point, however, bears repeating: Whenever Korean governments have used taxation as the primary instrument for intervening in the housing market — and in the process distorted that market — voters have ultimately held them politically accountable.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
