"Concerns Over Shrinking Rental Housing Supply" "Unclear Whether Aim Is Redistribution or Price Stabilization"...Academics Voice Criticism

Concerns have been raised in academic circles regarding the government's 2026 tax reform plan for normalizing real estate taxation. Although the reform is presented in the name of fair taxation, critics argue that the policy objectives lack clarity and warn of potential unintended consequences, such as a reduction in the supply of rental housing and limitations on the freedom of residential mobility.

Summary of the 2026 Tax Reform Plan Published in Real Estate in the Gangnam Area of Seoul. August 5, 2026, Yonhap News Agency

The Korea Association of Public Finance held an expert panel discussion to review the government's direction for real estate tax reform at the Korea Chamber of Commerce and Industry in Seoul on August 5. Participants questioned whether the proposed changes to comprehensive real estate holdings tax, capital gains tax, and the special long-term ownership deduction would truly promote fair taxation.

Hyejeong Sim, former Director of Tax Analysis and Review at the National Assembly Budget Office, stated, "Although the government emphasizes equitable taxation, there is no clear standard for what level of holding tax is considered fair. It is essential to clarify whether the policy goal is income and wealth redistribution, or if it also aims for housing price stability."

Woochul Kim, president of the Korea Association of Public Finance and a professor at the University of Seoul, also expressed concerns, saying, "While the reform is purportedly for fair taxation, there are worries that the policy direction is so skewed in one direction that it could puzzle many citizens."

There has also been criticism that the reform focuses solely on suppressing demand without expanding supply. Myungjae Sung, professor at Hongik University, remarked, "The fundamental cause of rising housing prices is insufficient supply, yet the tax system is focused on curbing demand. This could ultimately result in a further contraction of housing supply."

Professor Sung also addressed the impact of scaling back the special long-term ownership deduction and strengthening incentives for actual self-occupancy on the rental housing market. He stated, "The fact that the homeownership and occupancy rate is around 55% means that the remaining 45% reside in homes owned by others. If policies focus exclusively on encouraging home occupancy, the supply of rental housing could become insufficient." He further explained, "The special long-term ownership deduction incentivized homeowners to supply rental homes for extended periods, even if not occupying the property themselves. By eliminating holding deductions and favoring only self-occupancy, protection may be ensured for homeowners who live in their properties, but the burden caused by reduced rental supply could shift to tenants."

Heonjae Song, a professor at the University of Seoul, noted potential side effects on the labor market as well. He commented, "To boost economic efficiency, workers need to be able to move freely between regions. If tax disadvantages limit residential mobility, the efficiency of the labor market could also decline."

Dawn Jeong, research fellow at the Korea Institute of Public Finance, added, "While the government describes the reform as fair taxation, there is no clear definition of what fairness means. There are also concerns that the system was designed on the premise that all owners of multiple homes are speculators." She stressed, "Since a sizable portion of multiple-home ownership serves rental business purposes, it is necessary to scrutinize the policy impact in greater detail."

The panel also criticized measures aimed at curbing inheritance and gift tax avoidance, so-called 'stock price suppression' tactics. They argued that presuming tax avoidance simply because the price-to-book ratio is low or because stock prices drop after certain company activities is likely an excessive interpretation.

This content was produced with the assistance of AI translation services.