Seoul mayor warns of 'tax hell' in housing overhaul plan

Seoul Mayor Oh Se-hoon sharply criticized the government's proposed real estate tax overhaul on Tuesday.

“The government repeatedly emphasized ‘a supply increase,’ but its latest plan shows no sign of increased supply but only stronger tax codes,” Oh wrote on Facebook. “The issue is that raising taxes doesn’t automatically mean stable housing prices — it actually makes the housing market more volatile.”

Oh added the government appears to expect that higher taxes will encourage homeowners to put more properties on the market, but argued the opposite is more likely to happen.

"Many homeowners will simply keep their properties and pay the higher taxes, while others may resort to only a limited number of distressed sales," Oh said. "That means far fewer homes are likely to come onto the market than the government expects."

The mayor's comments follow the government's 2026 tax reform proposal, approved on Monday, which he argues will significantly increase the tax burden on owners of multiple homes, ultra-high-value homes and certain homeowners who do not reside in their sole property.

Under the proposal, owners of high-value multiple homes could see their annual holding tax increase by three to four times beginning next year.

Oh also warned that the proposal could reduce the supply of rental housing.

"Homeowners may find it more advantageous to ask tenants to leave and move into the property themselves to reduce capital gains taxes," Oh said. "That would reduce the supply of jeonse [lump-sum deposit] and monthly rentals and drive up rent prices. Ultimately, the biggest burden will fall not on homeowners but on ordinary people and young adults looking for rental housing."

Oh also criticized the proposal as overly complicated.

"What is a homeowner with a single home supposed to do if work or family circumstances require them to live in another region?" Oh said. "How far will the exceptions extend? A system that even experts struggle to understand will only create more confusion and distrust."

Oh also argued that the proposal could produce unintended consequences.

"The government says [the tax code] is targeting ultraexpensive homes, but the market is already shifting its demand toward homes priced below 3.2 billion won [$2.2 million]," which is just below the tax threshold, he said. "Instead of moving in the direction the government intended, the market is finding new ways to reduce tax burdens."

Under the new proposal, owners of ultra-high-value single homes would also face sharply higher holding taxes, raising concerns that some salaried workers and retirees may be forced to sell homes they have lived in for years because they can’t afford the increased taxes.

The proposal would also reduce long-term capital gains tax deductions for high-value homes with large investment gains. Homeowners selling those properties from 2029 onward could face capital gains taxes three to four times higher than under the current system.

"If this continues, the housing problem will remain unresolved while 'tax hell' — where people are taxed whether they buy or sell a home — will only get worse," Oh added.

Oh also referred to remarks by President Lee Jae Myung, who has said the government's goal is not to lower housing prices but to normalize the real estate market.

"If that is the goal, the solution must also follow market principles," Oh said. "The most effective way to stabilize the market is not through taxes but through increasing housing supply."

Oh stressed that the market will stabilize only when people believe that new housing will continue to be supplied.

“The key is expanding supply through redevelopment and reconstruction projects,” Oh added. “Even now, the government should move away from stopgap tax measures and shift toward fundamental housing policies centered on increasing supply."

BY CHO MUN-GYU [[email protected]]