After tax hike, government shifts to housing supply push — Lee says 'speed matters,' Koo vows greenbelt releases

The government moved swiftly to accelerate housing supply immediately after announcing its 2026 tax reform package, which tightens property holding taxes on high-value homes owned by non-residents and ultra-expensive single-home owners.

The rapid pivot to supply measures appears aimed at containing market anxiety before it spreads. As sentiment grew that the reform amounted to a tax increase designed to cool home prices, concerns mounted over potential instability in the jeonse and monthly rent market and the risk of distorting housing demand.

According to the presidential office, President Lee Jae Myung returned Monday from an 11-day trip to the United States and South America and went directly to Cheong Wa Dae, where he chaired a closed-door review meeting on the real estate and stock markets. The session, attended by Prime Minister Han Seong-sook, ministers from related ministries and working-level officials, ran from 3 p.m. to 10:30 p.m. — roughly seven and a half hours.

At the meeting, Lee said housing supply shortfalls that have persisted since 2022 had created a "supply cliff" situation. "Supply, and the speed of that supply, is critically important to overcoming this," he said.

He directed officials to "secure the maximum possible volume of housing units and deliver them as quickly as possible, and to identify every available administrative, financial, fiscal and deregulatory tool to make rapid supply a reality."

Lee also asked Prime Minister Han and the related ministries to "conduct a full review of existing supply measures and pursue them thoroughly, taking a multifaceted look at what people actually need." He further ordered that additional briefings on housing finance and supply, along with follow-up review meetings, be arranged by Sunday and Monday.

Deputy Prime Minister Koo Yun-cheol, who also serves as minister of the Ministry of Economy and Finance, raised the possibility of releasing parts of the greenbelt and repurposing military facilities.

Appearing on KBS News on Monday, Koo said the government was "preparing the most comprehensive supply measures possible under the Lee Jae Myung administration — including releasing parts of the greenbelt, and tapping available sites near subway stations and various military facilities held by the state."

He added that the government would "soon be able to report back to the public," signaling that a formal supply package announcement was imminent.

Koo explained that the tax reform package was designed to reduce the comprehensive real estate tax burden on owner-occupied homes valued below 3 billion won ($2.1 million) and to exempt those valued below 2 billion won from the tax altogether, while increasing the burden on ultra-expensive homes valued at 4 billion won or more. "Tax burdens were too low relative to home prices in the past — this is a normalization," he said.

On the decision to include a temporary easing of the multi-home capital gains surtax through 2028 — even as the surtax was reinstated in May — Koo said the government had heard from multi-home owners asking how they were supposed to cope with both a tax increase and a continued surtax. "We gave them a grace period to reflect public opinion," he said.

The government's decision to immediately emphasize supply after announcing the tax overhaul is widely seen as an effort to get ahead of market concerns. Officials have described the reform as an effort to build a sustainable, owner-occupier-centered tax system. But the market has largely read it as a policy aimed at cooling home prices through higher taxes on non-resident high-value homes and ultra-expensive properties. Concerns are also growing that the reform could distort the market in unintended ways — particularly because measures to stimulate transactions, such as further cuts to transaction taxes or adjustments to lending rules, were left out while the holding tax increase took center stage.

The most frequently cited risk is instability in the jeonse and monthly rent market. If more owners move into their properties to establish residency, the supply of rental units could shrink and higher tax burdens could be passed on to tenants through higher rents. Analysts also warn that demand could concentrate in homes priced in the 2 billion to 3 billion won range — properties that would see reduced or eliminated tax burdens under the new rules, sometimes described as a "less premium but still solid single home" strategy for tax savings.

The government appears aware of these concerns and has moved to explain the intent of the reform and its follow-up direction. The Ministry of Economy and Finance said Monday in a press reference document that the tax overhaul "is not a short-term measure aimed at stabilizing the real estate market, but the result of deliberation on a sustainable and rational property tax system," adding that it was "pursuing parallel efforts to stabilize the real estate market, including expanding housing supply and rationalizing housing finance." It also said it would "work simultaneously on fundamental measures, including expanding housing supply, to stabilize the lease market."