Gov't eyes additional tax breaks to boost housing supply

The government is considering additional tax support measures to underpin housing supply as it prepares to unveil a Greater Seoul supply package as early as next week, according to officials. The new tax steps would be separate from the 2026 tax reform package announced Monday and tailored specifically to the supply expansion drive. Discussions have picked up pace since President Lee Jae Myung ordered a full mobilization of supply measures, with industry calls to ease the tax burden on small-scale residential construction and sales operators among the items under consideration.

Related ministries said Thursday the government is examining tax relief for housing suppliers alongside financial support and deregulation as it finalizes the supply package. The Ministry of Land, Infrastructure and Transport recently gathered fresh input from the construction and development industry, and any tax-related requests that emerged from that process are being reviewed for possible inclusion in the supply package through inter-ministry consultations.

"This is not about revising the tax reform package we just announced — it is about looking at additional tax support needed as we put together the supply measures," a government official said. "When suppliers flag tax support they need as the supply plan takes shape, the Ministry of Land, Infrastructure and Transport passes those requests to the relevant ministries, which then review them together," the official added.

On what types of tax relief could be on the table, the official said past supply packages had included requests for tax exemptions on purchase-rental and public-support projects, as well as adjustments to the value and floor-area thresholds for rental housing. "If new supply methods are introduced, the corresponding tax support requests can be considered alongside them," the official said, adding that specifics had not yet been decided and would be determined in light of the supply package timeline and legislative schedule.

Within the industry, the acquisition tax surcharge on small-scale residential construction and sales operators stands out as a key tax reform issue for boosting supply. As demand grows for expanding non-apartment housing supply, the current regime is increasingly cited as a constraint on private-sector activity.

Operators who supply fewer than 20 villas or similar units per year can register with a tax office alone — unlike registered housing construction businesses that go through the Ministry of Land, Infrastructure and Transport — but face an acquisition tax surcharge of up to 12 percent if they fail to meet certain conditions. The disparity in tax treatment between businesses with the same supply purpose but different registration types has consistently raised equity concerns.

Under the current Local Tax Act, an acquisition tax rate of up to 12 percent applies to purchases of three or more homes in regulated areas and four or more in non-regulated areas. Registered housing construction businesses are exempt from the surcharge on homes acquired for supply purposes. Small-scale construction and sales operators, by contrast, can avoid the surcharge only if they demolish the acquired property within one year, complete new construction within three years and sell within five years — the same business purpose, but a different tax treatment.

The government amended the Local Tax Act enforcement decree in May last year, relaxing the previous "build and sell within three years" requirement to "build within three years, sell within five years." But with the non-apartment pre-sale market still in a prolonged slump in the wake of jeonse fraud, even the relaxed deadline remains a burden, critics say. Calls are growing for further systemic fixes that reflect market conditions, as simply extending the sales deadline is seen as insufficient.

The Ministry of Finance and Economy had already incorporated some supply-oriented tax support into the 2026 tax reform package announced Monday. It plans to raise the capital gains tax reduction rate applied when land is transferred to public housing construction businesses from the current 10 percent to 15 percent, and to extend the special provision's deadline by one year to Dec. 31, 2028.

In addition, the government will expand the scope of comprehensive real estate tax exclusions for land acquired by housing construction businesses for residential development. Previously, only land designated for new home construction among comprehensively taxed parcels qualified for the exclusion; going forward, separately taxed land such as land attached to commercial buildings will also be excluded from the tax base for five years after acquisition, easing the tax burden on suppliers.

Meanwhile, President Lee is set to hold a second real estate supply review meeting Friday to discuss ways to expand housing supply in the Greater Seoul area. On Monday, the day he returned from state visits to the United States and South America, he chaired more than seven hours of real estate and stock market review meetings, ordering related ministries to conduct a full reassessment of existing supply measures and secure the maximum available supply volume as quickly as possible.

Cheong Wa Dae communications chief Seong Gi-hong said in a CBS Radio interview Thursday that "the government is approaching this with extraordinary resolve" on the housing supply package, adding that while the timing had not been finalized, the announcement would come "as soon as possible." Seong doubled down on the urgency, saying the government planned to present policies covering supply issues to the public "as soon as possible."