To Normalize Real Estate Regulations

The government is considering whether to lift the regulation banning loans for homes priced above 1.5 billion won. Since this was such an unreasonable regulation imposed by the previous administration, it would be desirable to remove it swiftly. There is a need not only for the government to reflect on how such a poor-quality regulation came to be made, but also to conduct a full review of the tangled web of real-estate-related regulations.

Countless real estate regulations have been announced over the years. The Moon Jae-in administration alone introduced a total of 28 policy packages. Since these measures are usually referred to by their announcement dates, we have nearly run out of unused dates. Before long, it may be necessary to attach the year in front of the date as well.

The problem is that the substance of these regulations is deeply flawed. They sought to freeze market prices or suppress demand on an ad hoc basis, leaving the rules of the market in tatters. The regulations are so convoluted, and the systems overlap in double and triple layers, that both transaction parties and brokers have no choice but to be dissatisfied.

It would be one thing if the confusion were short-lived. But the real problem is that once a regulation was created, it was never removed; instead, additional layers of regulation were piled on top of it. As a result, real estate prices became distorted, housing costs rose, and quality of life declined, ultimately causing even greater harm to the public.

Advanced-country governments do not indiscriminately churn out demand-suppression measures as ours has done. Rather, they introduce policies that help people buy homes and pursue housing stability and improvements in service quality for the public. If so, why has our government so recklessly imposed misguided regulations and allowed housing standards to fall behind? A major reason is the arrogance of believing prices can be controlled, along with an interventionist mindset that sees real estate as an object of control.

Then how should real estate regulation be normalized again? Above all, the direction of housing policy must be set properly. More than anything else, policy should be aimed at improving the quality of housing. To that end, the first priority should be expanding infrastructure and improving the residential environment.

Housing supply should be increased to an ample quantitative level, while housing spaces should also be improved qualitatively so as to enhance quality of life. It is right to overhaul regulations in line with these policy goals.

It is also very important to reexamine past demand-suppression policies from the ground up. Regulations on multiple homeowners and heavy taxation on real estate should be addressed first. The priority is to dismantle the regulations currently being enforced by the policy authorities. Restrictions on reconstruction, redevelopment, and aging facilities should be eased. Furthermore, the National Assembly should also take an active role in legislative efforts to remove related regulations.

Financial regulations should gradually be improved in ways that accord with the realities of our financial market. Unilateral emergency-action measures by the government, such as the ban on loans for homes priced above 1.5 billion won that should now be lifted, must never happen again.

The government must now stop suppressing the real estate market with misguided regulations. It should reflect on the policy failures that have lowered the public’s housing standards and focus on correcting them. It must roll back demand-suppression measures and improve the institutional environment so that housing services that enhance the people’s quality of life can be provided through the market.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 부동산 규제를 정상화하려면

Author: Sung-no Choi

Date: 2022-09-05

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=24945