[Proposal for the 22nd National Assembly] Farmland Transaction Deregulation Act

Revised Farmland Act Aimed at Curbing Speculation Is Stifling Transactions, Triggering a Wave of “Land Poor” Side Effects

• The Farmland Act was significantly tightened following the LH employee speculation scandal

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Stricter acquisition requirements and the revival of the Farmland Committee have sharply reduced transactions

• As regional extinction and the outflow of the farming population worsen, rural areas will face even greater hardship if demand for farmland from outsiders also declines

• To revitalize returning-to-farm and returning-to-rural migration, weekend experiential farms, as well as leisure and workation uses of farmland, the Farmland Act needs to be revised

◈ Ahead of the 2024 general election, the Center for Free Enterprise (CFE) proposes 22 legislative tasks for the 22nd National Assembly to pursue based on liberal values across a wide range of fields, including the economy and business, as well as politics, society, education, culture, and foreign and security affairs.

■ Introduction

People whose lives are made difficult because their money is tied up in land they own—the so-called “land poor”—are emerging as a social problem in rural communities. The term refers to those who can no longer farm due to old age, health issues, relocation to a city, or other reasons, or who urgently need a large sum of money but cannot dispose of the rice paddies and fields they own. Complaints are mounting among farmers over farmland that does not sell even when they want to sell it.

After the so-called “LH employee speculation” scandal broke in March 2021, the government and the National Assembly moved to amend the law to make farmland transaction requirements much stricter, and the revised law has been in effect since August 2021. However, even before the 21st National Assembly ended, calls to revise the Farmland Act again had already begun surfacing not only in the National Assembly but also in local councils.

As the nationwide crisis of regional extinction deepens, the argument that stagnant farmland transactions must be revitalized is gaining traction. It is worth examining why farmland transactions have become blocked and what direction legal revision should take.

■ Current Status and Problems with the Existing System

At the heart of recent public criticism surrounding the contraction in farmland transactions is the Partial Amendment to the Farmland Act passed by the National Assembly in July 2021. The legislation was pushed by the government and the National Assembly after it was revealed that employees of the Korea Land and Housing Corporation (LH) had purchased land in advance for speculative purposes in areas designated for third-generation new towns, including Gwangmyeong-Siheung New Town, Changneung New Town, Gwacheon New Town, and Daegu Yeonho District, in an attempt to reap enormous capital gains.

The reason the Farmland Act was amended was that a large portion of the land those employees bought turned out to be farmland, and it was discovered that the requirements and standards for farmland purchases set out in the Act had not actually been applied. Public opinion worsened rapidly as various schemes came to light, such as densely planting high-end saplings to receive more compensation and listing crops on submitted documents despite not actually engaging in cultivation.

In political circles, farmland-related issues have long been a hot-button topic in the vetting of election candidates and cabinet nominees. Controversy over ethics repeatedly arose when people were found to own farmland without actually cultivating it or to have used farmland for purposes other than farming. Against that backdrop, the revelation that government agency employees had abused inside information to buy farmland for speculative purposes led to a sweeping tightening of legal provisions. Some of the key revisions to the Farmland Act are as follows.

To make matters worse, in July 2023, the National Assembly further amended the Farmland Act to strengthen regulation. If a farmland owner who finds self-cultivation difficult wishes to lease his or her land for weekend or experiential farm use, or entrust it to the Korea Rural Community Corporation or another entity so that it may be leased to farmers who need it, the law was tightened so that leasing or entrustment is allowed only for farmland that has been owned for at least three years. Where a single parcel is jointly owned by several people, every owner must have held it for at least three years.

A prior reporting system for farmland improvement was introduced in December 2023. Starting in January 2025, anyone seeking to improve farmland by piling up soil (fill) or digging it out (cut) must file a prior report with the competent authority, and violations of farmland improvement standards or reporting rules may result in orders for restoration to the original state, penalties, and other sanctions.

Why, then, are regulations on farmland ownership and leasing so strict? Article 121 of the Constitution states: “The State shall endeavor to ensure that the principle of land-to-the-tiller is achieved with respect to farmland, and tenant farming shall be prohibited.” Under this principle, the Farmland Act contains the detailed rules on farmland lease contracts and entrusted management delegated by the Constitution. The main justifications offered in defense of the land-to-the-tiller principle are the eradication of farmland speculation and food security.

■ Existing Legislative Discussions and Alternatives

Since the Farmland Act took effect, however, farmland transactions have steadily contracted. According to July 2023 figures compiled by the Korea Real Estate Board, only 16,771 parcels of farmland were traded, about half the level recorded just before the stricter farmland acquisition requirements took effect in April 2022. According to “2022 Annual Nationwide Land Price Change Rates and Land Transaction Volume,” released by People Power Party lawmaker Cho Haejin, the volume of paddy and field transactions in 2022 fell 24% from 2021, and the number of farmland acquisition qualification certificates issued in the Farmland Information System also declined by 21.7%.

A reduction in farmland transactions naturally leads to a decline in the asset value of farmland. Unless there is a very clear investment upside, the incentive to purchase farmland while satisfying stringent requirements falls accordingly. This is precisely what is contributing to the “land poor” phenomenon mentioned above.

Calls to revise the Farmland Act again have repeatedly emerged, especially in rural areas.

In the National Assembly, Rep. Cho Haejin has moved to amend the Farmland Act. Cho said, “Although regulations were strengthened to prevent real estate speculation, in areas far from cities and with no development prospects, where speculation is irrelevant, transactions have shrunk because of regulation, and the damage is being borne not by speculators but by farmers who actually own farmland in rural areas.” He added, “The contraction in farmland transactions leads to declines in farmland prices and the asset value of farmland owners, worsens the finances of urban-rural integrated cities, and also has a negative impact on the growing trend of returning to farming and rural communities.” The key elements of Cho’s amendment bill are as follows.

Agricultural promotion areas include both agricultural promotion zones and agricultural protection zones; agricultural protection zones are areas needed to secure water sources and preserve water quality for agricultural promotion zones. Rep. Cho Haejin’s position is that ownership for weekend and experiential farming purposes should be allowed in agricultural protection zones. In addition, his bill reflects provisions to abolish the Farmland Committee, which was revived 12 years after being abolished in 2009, and to eliminate the Farmland Committee review system that likewise disappeared in 2002. In rural communities, there are complaints that it is difficult even to find qualified people locally to serve on the reintroduced Farmland Committee.

■ Proposal for the 22nd National Assembly

Is the constitutional principle of land-to-the-tiller still valid in South Korea today? In Korean society, which long maintained an agriculture-centered economy and where many people still retain nostalgia and memories associated with rural life, arguing for the abolition of the land-to-the-tiller principle would be politically burdensome. For that reason, the principle has remained in place from the founding Constitution of 1948 through the current Constitution of 1987.

However, there needs to be a serious discussion about whether restricting the rights to own and use farmland—thereby ultimately suppressing demand itself for rural living and farmland acquisition—is truly the right solution for farmers and the rural economy. Given the rapid aging of the farming population and the accelerating outflow of rural residents, encouraging people to seek farmland even for non-agricultural reasons could in fact benefit people living in rural areas.

The decline in Korea’s agricultural productivity is a longstanding problem. Kim Eunkyung, Senior Research Fellow at the Gyeonggi Research Institute, has pointed out that as of 2021, the value added created by agriculture, forestry, and fisheries accounted for 2.0% of total value added, while the number of workers employed in agriculture, forestry, and fisheries stood at 1.526 million in 2022, or 5.4% of total employment. It has long been an uncomfortable truth that the land-to-the-tiller principle paradoxically keeps domestic agriculture trapped at a small-scale, subsistence level.

At a time when the number of “tillers”—that is, farmers themselves—is declining, the 22nd National Assembly should revisit from first principles whether restricting ownership of paddies and fields to tillers alone has any real effectiveness. There is no need to abolish the land-to-the-tiller principle itself. Repeated speculative acquisition of farmland can also be prevented through a variety of legislative devices.

Indeed, the argument is heard even more actively in rural communities that allowing outsiders to acquire farmland and use it not only for agriculture but also as country homes for weekend rural living or as workation accommodations could actually contribute to balanced national development. Rural areas are lined with vacant homes and aging housing, and the number of neglected farm huts has also increased under tighter regulation. Rep. Wi Seonggon of the Democratic Party of Korea pointed out that “trying to prohibit overnight stays and lodging in farm huts and limiting rest space to 25% of floor area fails to reflect changing times and is deskbound administration that seeks to solve problems only through regulation.”

Above all, it should not be overlooked that stricter farmland acquisition requirements are restricting the property rights of farmland owners. For many elderly rural residents whose only asset in old age is the farmland they own, and who must dispose of it to access medical services and cover living expenses in retirement, the Farmland Act is effectively little different from a law freezing their property. In a market economy that should guarantee private property rights and free economic transactions, the current Farmland Act can be seen as yet another anti-market institution.

A vague longing for fresh nature and broad fields must not obscure the desperate and bleak reality of rural communities. There is bitter criticism of the current Farmland Act as “burning down the whole house just to catch a bedbug.” Only when more people seek farmland can the land-to-the-tiller principle, food security, and rural development become truly possible.

The 22nd National Assembly must act with courage and decisively liberalize the Farmland Act.

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Original title: [22대 국회를 향한 제안] 농지거래 활성화법

Author: Ju-jin Yoon

Date: 2024-01-09

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=bill&pn=1&idx=26363