Tripled Property Tax, Reduced Jeonse Loans... Are Tougher Regulations the Answer to Housing?

At the National Grand Debate on Real Estate Policy, the government’s vision and direction for real estate policy emerged with relative clarity. The idea is to raise the burden of homeownership and scale back jeonse loans, while applying taxes and financial regulations differentially depending on housing prices, the number of homes owned, whether the owner actually resides in the property, and the region. Taken together with limits on the number of capital gains tax reductions and an expansion of high-quality public rental housing, this reads as a strategy to curb real estate investment returns and speculative demand by combining tax, financial, and supply-side policies.

The president’s diagnosis of the problem has some merit. If the burden of holding tax is low while taxes at the transaction stage are excessive, the incentive to keep holding onto a home rather than selling it grows, which can dampen housing transactions and mobility. Jeonse loans, which were expanded to support ordinary people’s housing needs, have also had the effect of raising tenants’ ability to pay and thereby pushing up both jeonse prices and home sale prices. It is also worth examining whether policy financing should be extended even to people who already own a home but live in another region under a jeonse arrangement.

However, the fact that part of the diagnosis is valid does not justify the government’s proposed prescription. The president said that bringing holding taxes up to the level of advanced countries would require raising them by about three times from the current level, but that actually doing so could trigger “something close to a riot.” This amounts to the president himself acknowledging that a sharp increase in holding taxes would be unsustainable both economically and politically.

It is also inappropriate to make simple cross-country comparisons of holding tax burdens. Countries with high holding taxes generally lower transaction taxes such as acquisition tax and capital gains tax, thereby facilitating housing mobility and transactions. In a situation like Korea’s, where various taxes and heavy additional tax schemes overlap at the acquisition, holding, and transfer stages, sharply raising only holding taxes would not amount to tax normalization but rather an increase in the overall tax burden on real estate. Strengthening holding taxes should be pursued on the premise of lowering transaction taxes and streamlining complex additional taxation schemes.

The idea of finely segmenting tax rates based on housing prices, the number of homes owned, actual occupancy status, and whether the property is in the Seoul metropolitan area or a non-capital region also requires caution. Some households leave their own home and live in another area because of job transfers, children’s education, or caring for parents, and some people temporarily hold a housing share through inheritance. In non-capital regions, there are quite a few homes that cannot be sold even when their owners want to sell them. The more differential treatment and exceptions there are, the more complex the system becomes, and the greater the judgment and discretion of administrative agencies inevitably become.

When taxes become complicated, people choose housing not according to their residential needs but according to tax advantages and disadvantages. Just as the past heavy tax on multiple homeowners strengthened demand for “one smart home,” new differentiated taxation is also likely to create other tax-saving behavior. The basic principle of real estate taxation should not be to induce housing arrangements the government deems desirable, but to create a broad tax base and low, predictable tax rates.

The direction of managing jeonse loans more strictly must also be examined in terms of its impact on the rental market. Even if jeonse loans have had the effect of supporting jeonse prices, uniformly reducing loan limits could curtail the housing choices of homeless tenants before it affects home prices. If households pushed out of the jeonse market move into the monthly rent market, the monthly rent burden and housing costs of young people and newly married couples are instead likely to rise.

Reforming jeonse loans should proceed not by reducing the total loan volume, but by changing the structure of public guarantees. It is necessary to lower guarantee ratios for high-priced jeonse contracts or households with sufficient repayment capacity, and to differentiate guarantee fees in proportion to risk. Support should be concentrated on young people, newly married couples, and homeless end-users based on income, assets, and housing prices, while groups requiring exceptions should preferably be supported through transparent housing welfare policy rather than financial regulation.

Above all, rising home prices should not be interpreted solely as a demand problem created by holding taxes and jeonse loans. Housing supply in Seoul and the Seoul metropolitan area has not increased sufficiently due to redevelopment and reconstruction regulations, delays in permits and approvals, rising construction and financing costs, and the concentration of transportation, education, and jobs. In a situation where supply does not respond properly to changes in demand, suppressing only demand through taxes and loans may reduce transaction volume, but it will not resolve the shortage of quality housing in the areas people actually want.

If the government is serious about real estate reform, it should first remove transaction taxes, supply regulations, and complex heavy additional taxation schemes, rather than tripling holding taxes or minutely controlling loan eligibility. Holding taxes should be adjusted gradually according to a long-term schedule, and increased tax revenue should be linked to local public services that residents can tangibly feel. The goal of real estate policy should not be for the government to determine an appropriate home price and appropriate level of lending, but to create a market in which housing is supplied sufficiently where needed and people can freely buy, sell, and rent according to their own circumstances.

Gwang yong Go, Policy Director, Center for Free Enterprise (CFE)

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Original title: 보유세 3배· 전세대출 축소··· 더 강한 규제가 부동산 해법이...

Author: Gwang yong Go

Date: 2026-07-24

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=1&idx=29314