‘The Den of Thieves’: South Koreans Are Furious Over Housing Scandal
President Moon has spent years trying to curb runaway housing prices. Now several officials in his government are under investigation for contributing to the problem ahead of important elections.
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Housing complexes in Seoul. Apartment prices in the city have soared by 58 percent during the tenure of President Moon Jae-in.
Housing complexes in Seoul. Apartment prices in the city have soared by 58 percent during the tenure of President Moon Jae-in.Credit...Kim Hong-Ji/Reuters
Choe Sang-Hun
By Choe Sang-Hun
March 23, 2021
SEOUL — The 10 people bought $8.8 million worth of land in an undeveloped area southwest of Seoul, registering it for farming and planting numerous trees. It’s a common trick used by shady real estate speculators in South Korea: Once the area is taken over for housing development, the developers must pay not only for the land, but the trees, too.
A national outrage erupted this month when South Koreans learned that the 10 people were officials from the Korea Land and Housing Corporation (LH) — the government agency in charge of building new towns and housing — suspected of using privileged information to cash in on government housing development programs.
The incident has thrown President Moon Jae-in’s government into crisis mode just weeks before key mayoral elections that are largely seen as a referendum on him and his party ahead of next year’s presidential race. Young South Koreans are saying they are fed up with corruption and the president’s failed policies on runaway housing prices. The LH scandal is now set to become a critical voter issue in Mr. Moon’s final year in office.
“When my girlfriend and I discuss how we are going to find a house in Seoul for the family we are going to start, we can’t find an answer,” said Park Young-sik, 29, an office worker. “The LH scandal shows how some people in South Korea make a quick fortune through real-estate foul play, while the rest of us can barely buy a house even if we toil and save for a lifetime.”
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President after president has promised to make housing more affordable in South Korea, but real-estate prices have kept soaring, undermining public trust.
Rising housing prices have long been one of the country’s most intractable policy headaches, especially in Seoul and the surrounding Gyeonggi Province, where nearly half the country’s population lives, crammed into everything from gleaming apartment towers to urban slums.
ImageA protest in Seoul outside offices for the Korea Land and Housing Corporation, the government agency in charge of building new towns and housing.
A protest in Seoul outside offices for the Korea Land and Housing Corporation, the government agency in charge of building new towns and housing.Credit...Yonhap/EPA, via Shutterstock
Real-estate speculation has become something of a national sport, but the suspicion of insider trading among public officials made the LH story stand out. Anger spread quickly, especially among young South Koreans who have been crushed by the country’s dwindling job opportunities.
“The den of thieves!” read one of the many signs young protesters plastered on the doors of an LH office in Seoul this month.
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Voters in South Korea’s two largest cities — Seoul and Busan — go to the polls on April 7 to choose their mayors, and many observers said the elections could reflect poorly on Mr. Moon’s performance. Survey results showed that the LH news was dragging down approval ratings for both him and his party, most sharply among South Koreans in their 20s.
“I am sorry for worrying the people greatly, and for deeply disappointing those people who have lived honestly,” Mr. Moon said last week, vowing to eliminate “real estate corruption widespread in our society” as a priority of his last year in power.
Apartment prices in Seoul have soared by 58 percent during Mr. Moon’s tenure, according to data from the government-run Korea Real Estate Board. Some of the units in popular residential districts in Seoul have nearly doubled in price in the same period.
Rising housing costs have been blamed for creating a vicious cycle in which families believe real estate investments are foolproof, despite being warned otherwise by the authorities. Experts believe the soaring housing costs have also contributed to the country’s declining fertility rate, one of the lowest in the world, by discouraging young Koreans from starting a family.
The insidious divide among young people in South Korea has become a popular topic in K-dramas and films, including Bong Joon Ho’s “Parasite.” The “dirt-spoons” struggle to manage an ever-expanding income gap while the “gold-spoons,” the children of the elites, glide through a life of privilege. The problem also featured prominently in the real-life downfall of the former president, Park Geun-hye, and the jailing of the Samsung Electronics vice chairman, Lee Jae-yong.
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Police investigators removing items confiscated from a Korea Land and Housing Corporation office in Gwacheon, south of Seoul.
Police investigators removing items confiscated from a Korea Land and Housing Corporation office in Gwacheon, south of Seoul. Credit...Yonhap/EPA, via Shutterstock
When Mr. Moon took office in 2017, he promised a “fair and just” society. His government has introduced dozens of regulatory steps to curb housing prices, including raising capital-gains taxes on house flipping and property taxes on multiple-home owners.
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None of these measures have worked.
Last month, the Moon administration announced plans to supply more than 836,000 new housing units in the next four years, including 70,000 homes to be built in the area southwest of Seoul at the center of the LH scandal. Two civic groups were the first to report that 10 LH officials bought land there months before the highly secretive development plan was announced, accusing the officials of capitalizing on insider information for personal gain, a crime in South Korea.
The government has identified 20 LH officials who are suspected of using privileged information to buy land in various areas before projects were slated to begin there. The investigation has been expanded to target government employees outside of LH, including members of Mr. Moon’s staff. As the dragnet grew larger, two LH officials were found dead this month in apparent suicides. One of them left a note confessing to an “inappropriate deed,” according to the local media.
“LH officials had more access to information on public housing projects than any other, but sadly, we also learned through our investigation that they were ahead of others in real estate speculation,” said Lee Kang-hoon, a lawyer at the People’s Solidarity for Participatory Democracy, one of the two civic groups that uncovered the corruption among the LH officials.
Mr. Moon’s political enemies have been quick to fan the flames among angry voters.
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The Changneung district in Goyang, east of Seoul, where the government plans to develop a new town to help alleviate the housing crunch.
The Changneung district in Goyang, east of Seoul, where the government plans to develop a new town to help alleviate the housing crunch. Credit...Yonhap/EPA, via Shutterstock
“Stealing public data for real estate speculation is a crime that ruins the country,” the former prosecutor general, Yoon Seok-youl, told the conservative daily Chosun Ilbo this month while criticizing the government’s handling of the situation.
Mr. Yoon has become a darling among the conservative opposition, and recent surveys showed him to be one of the most popular potential candidates in next year’s presidential election. He recently clashed with Mr. Moon over the president’s effort to curtail the power of prosecutors, and resigned early this month.
Lee Jae-myung, the governor of Gyeonggi Province, is another potential candidate in next year’s race. The liberal governor hopes to represent Mr. Moon’s party in the election and has promoted a “basic housing” policy in which the government would provide cheap and long-term rentals for South Koreans.
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He recently urged Parliament to enact a comprehensive law banning conflicts of interest among public servants. “If you want to clean the house, you must first clean the mop,” he said. “If you want to make South Korea a fair society, you must first ensure that those who make and implement policies act fairly.”
Inequality and Corruption in South Korea
For Seoul’s Poor, Class Strife in ‘Parasite’ Is Daily Reality
Feb. 29, 2020
Coddling of ‘Gold-Spoon’ Children Shakes South Korea’s Political Elite
Oct. 21, 2019
Notorious Figure in South Korean Scandal Is Extradited
May 31, 2017
As Scandal Roils South Korea, Fingers Point to Mixing of Politics and Business
Jan. 2, 2017
Choe Sang-Hun is the Seoul bureau chief for The New York Times, focusing on news on North and South Korea.
A version of this article appears in print on March 24, 2021, Section A, Page 12 of the New York edition with the headline: South Koreans Furious Over Housing Scandal. Order Reprints | Today’s Paper | Subscribe
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Ryu Hyun-seok commented March 24
R
Ryu Hyun-seok
Singapore
March 24
The sad situation of South Korea is that no matter what the administration some corruption scandal always arises. Even if the president is innocent their administration isn't always so. This won't be good for elections and although as someone who supports Moon this is painful.
But this is also what happens with every administration change. Whether it be the conservatives or liberals one side who's not in government will accuse and criticise until the situation flips.
Although it may be too early to say, if the conservatives do retake the presidency and perhaps even the legislature, another scandal will likely come about.
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Michael Green commented March 24
M
Michael Green
Brooklyn
March 24
South Korea has one of the lowest fertility rates of any country and doesn't allow any immigration. Is today's housing shortage a short term issue as seniors age and die and the population balances out or is there still some long term shortage of housing. The housing shortage in the United States is totally the result of immigration policies. If not for immigration, we would be seeing deflation in housing.
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J. von Hettlingen commented March 23
J. von Hettlingen
J. von Hettlingen
Switzerland
March 23
President Moon Jae-in's public support plunged to an all-time low following a dispute between his justice minister and the head of the prosecution last year.
Given the current outragel, he would hardly be able to win his reelection bid next year, even if the constitution allowed him to run for a second term.
But he has failed to deliver during his single term of office.
In the run-up to the May 2017 general election, he vowed that if elected he would put an end to the corruption that has been tarnishing South Korean politics, and which had brought a premature end to the tenure of his predecessor, Park Geun-hye.
Earlier this year South Korea’s top court upheld a 20-year jail term for Park over a vast corruption scandal that led to her downfall. She was originally sentenced to 30 years in prison, but the term was reduced upon appeal.
No wonder young South Koreans who have to struggle to get by are so angry with this new housing scandal in which once again government officials were involved.
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1 REPLY
Hyun-seok Ryu commented March 24
H
Hyun-seok Ryu
Singapore
March 24
@J. von Hettlingen Slight correction, Korean presidents cannot run for reelection and even if the law is changed Moon has said he will not run for reelection. Just a heads up.
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thomas bishop commented March 23
T
thomas bishop
LA
March 23
"Experts believe the soaring housing costs have also contributed to the country’s declining fertility rate, one of the lowest in the world..."
like baby subsidies, there are also housing vouchers, which could be made more generous. this would likely contribute to public debt (when the tax base might already be shrinking), future housing construction, housing price inflation, speculation, and possibly, thievery or other kinds of malfeasance (the risks of relying on human nature). also, this would be yet another government-planned program, when governments already have many other responsibilities and little tax revenues to pay (hence, more debt).
related issues: homelessness (or lack thereof), sub-standard housing (ex., "slums"), and and the rigidities of housing finance relative to other countries (see other comments). lower interest costs, lower down payments or lower financing costs in general act as an implicit subsidy.
possibly coming soon: a K-drama on housing finance.
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Former exchange student commented March 23
F
Former exchange student
WI
March 23
In addition to the rising cost of buying a house, many apartments in Seoul are rented through a process called jeonse, in which the renter puts down a large amount of cash (usually hundreds of thousands of dollars) before moving in. Usually no or very little monthly rent is paid. Instead, the landlord invests the initial deposit and keeps the interest, and the cash is returned to the renter upon moving out. For young people with short credit histories and little cash, finding a reasonable apartment can be like finding a unicorn.
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1 REPLY
Jared Wood commented March 23
Jared Wood
Jared Wood
Baltimore
March 23
@Former exchange student This. I mentioned this in a comment that has yet to be published. Also, the more common wolse key deposit is 1-2 years worth of rent, another staggering figure which keeps young people in one-room villas and goshiwons.
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T commented March 23
T
T
Ad astra
March 23
Real estate speculation has become a global sport, not just a national sport in Korea. Once upon a time, the tools for this activity were only available to a small group of wealthy investors. These days, however — as with everything, it seems — anyone with an internet connection can look up trends, prices, buying processes, and laws governing foreign purchase of properties. They can contact brokers to move a deal through after they’ve done their homework, or with enough money a broker can do it for you. Everything can be done with a search engine or, all too often, with an app that consolidates all the information for you, right down to detailed neighborhood demographics. Then you can read some news articles about areas that are “up and coming” and, voila, there you have your property speculation recipe for John Q. Public.
I don’t know it for a fact, but I highly suspect that this, along with VRBO markets in highly desirable areas, is deranging housing markets across the globe and driving up prices. I live in a cosmopolitan urban area. The stories my neighbors share with me about their families back home coping with rising housing costs are all the same, be they from Lagos, London, Hong Kong, or Sydney.
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JOHN commented March 23
J
JOHN
San Francisco, CA
March 23
Sounds like South Korea has an openly functioning society to be able to raise such issues in public. Perhaps the effort America made in the Korean War was not for nothing. Their society sounds much like our own, with problems, public discussion, and political consequences.
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Paul Duggan commented March 23
P
Paul Duggan
Bryan, Ohio
March 23
Nothing on the current cost for housing? What are the numbers? How do they compare w/ NYC?
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1 REPLY
Anton commented March 24
A
Anton
Singapore
March 24
@Paul Duggan The average price for an 83 square metre (900 sq ft) apartment in Seoul is KRW1.2bn (roughly USD1mn).
I think the percentage of apartments in Seoul costing more than USD1mn is somewhere around 30-35%.
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shyegye commented March 23
S
shyegye
LA
March 23
It would be helpful to know some of the prices--per square meter, for instance. I'm pretty sure a lot of real estate in this country has gone up 58% during Mr. Moon's tenure as well.
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