Housing Supply Chain Disrupted, Expert Urges Government Action

On July 23, during a national real estate forum chaired by President Lee Jae-myung, experts highlighted the disruption in the housing supply chain, which has been severed from permitting to construction, completion, and occupancy.

Jin Mi-yun, a professor at Myongji University, emphasized the need for government-level financial and tax support to quickly reopen the blocked housing supply channels.

During her presentation, Professor Jin stressed the urgency of housing supply for residential stability and proposed seven key policy tasks to restore the broken supply pipeline.

She noted, "Since 2022, there has been a sharp decline in both permitting and construction, particularly in the volume of new construction. This will lead to a decrease in future completions and occupancy, ultimately increasing the housing cost burden on low-income and middle-class families."

Jin added, "Following the jeonse fraud incidents, tenant trust has eroded, resulting in a significant drop in non-apartment new constructions, which are crucial housing options for young single-person households and newlyweds. It is urgent to restore the housing supply pipeline from permitting to construction and from construction to completion and occupancy."

To alleviate supply bottlenecks, she emphasized the need for selective financial and tax support to recover new construction supply. "We need to improve the environment so that projects that have secured land and permits can proceed to construction, prioritizing support for feasible projects. However, since easing regulations or support may raise prices or expectations, it should be selectively and differentially applied rather than universally," she stated.

She also stressed the need to resolve bottlenecks at all stages of private redevelopment projects. "Redevelopment projects are a long-term housing supply route that needs to be opened up, but merely easing floor area ratios has its limits. We must continuously manage bottlenecks related to construction costs, financial support, contributions, and conflicts among associations, and ensure that regulatory easing translates into actual supply," she pointed out.

Additionally, Jin suggested integrating risk factors across planning, compensation, land development, and transportation into a comprehensive management system, while enhancing collaboration between the central government, local governments, and public entities. She emphasized the importance of providing affordable prices and diverse types of housing so that citizens can feel they have access to homes they can move into.

She also highlighted the need for planned mixed-use development of underutilized and idle land. "With changes in industrial, employment, and consumption structures, we need to flexibly convert commercial and industrial areas that are not being utilized into residential areas. However, this should be done through prioritized, selective, and planned mixed-use development rather than blanket easing," she explained.

Furthermore, she called for the cultivation of specialized rental entities to expand the intermediate rental market. "We need to nurture landlords with expertise to fill the significant gap between strict public rentals and the private rental market, enabling new and long-term rental operations. However, this must be linked to obligations for public compliance, transparent management, and tenant protection," she added.

Jin concluded by stating, "The public sector should take on the role of a market creator that defends against downward supply during economic downturns, going beyond merely providing a housing safety net. We must strengthen the role of a housing ladder that lowers the entry barriers for first-time homebuyers." She also urged improvements to the overlapping and complex regulatory systems in adjustment target areas, speculative overheating zones, and land transaction permission areas, stating that while maintaining the ability to respond to market instability, efforts should be made to reduce public burdens and inconveniences.

After the presentation, President Lee Jae-myung asked Jin about the structural reasons behind the sharp decline in housing permits and construction since 2022.

Jin responded, "The impact of interest rate hikes that began at the end of 2022 has been significant. The delays in construction in the industry are due more to external factors such as global supply chain disruptions, material procurement issues, and rising construction costs that arose during the COVID-19 pandemic rather than policy factors."

Regarding the current situation and future outlook, Jin noted, "This trend continues. While large corporations are returning to the market through private reconstruction contracts, the market involving small and medium-sized housing construction companies, which account for over 90% of the industry, remains significantly depressed."

She also pointed out ongoing challenges such as sustained high interest rates, difficulties in material procurement, and the lack of improvement in the project financing market, predicting, "Considering the objective economic situation, it is highly likely that the trend of declining permits and construction will continue for the time being."