Landowners, developers and the rising land cost for housing, the case of Seoul, 1970-1990
A sharp rise in house prices became a political issue in Korea in the late 1980's. It opened a heated debate among scholars and experts on the causes of house price rises. In the debate, a common belief was that high land prices had been one of the main causes of high house prices. In fact, the proportion of land cost in new house prices has steadily increased as the latter has risen in Korea during the past two decades. This research calls into question the notion underlying that common belief that land prices exist independently of housing development. Most policy measures are sought on the basis of this notion. This research argues that land prices are an outcome of conflicts between landowners and developers in the process of housing development. In exploring the idea that the determination of land cost for housing is a result of conflicts between landowners and developers, the research came to the question of what the source of conflicts is, a question of why and how the two actors enter into conflictive relations. It was a suggestion of Marx's concept of rent that surplus profits are the material source of conflicts; the ability of developers to create higher surplus profits provides possibility of landowners to demand more payments for their land; landowners' appropriation of increasingly larger portions of surplus profits then conditions the way developers produce housing; thus both enter into a conflictive and contradictory relationship. It was thus hypothesised that the rising land cost for housing has been primarily a result of that conflicting and contradictory interaction, which is permanently operating in housing development. However, how far and in what forms the conflict affects housing development and the determination of land cost are affected by social mediation of the interaction. Thus the research, the test of the above hypothesis, comprises two parts: the identification of the material aspect of the process by which landowners and developers entered into conflicting relations resulting in increasing land prices for housing as suggested in Marx's concept of rent; and the examination of political and economic circumstances in which social relations between the two actors were conditioned to leave that material process unregulated. This hypothesis was tested with reference to the case of housing development in Seoul during the 1970's and 1980's. The empirical examination disclosed that the rising land cost for housing in Korea has been due to the conflictive nature of the relationship between landowners and developers. Developers have created large surplus profits by exploiting rapidly growing speculative demand for housing and government housing programmes relying on private development; this have provided room for landowners to raise land prices such that increasingly larger portions of new house prices have been allocated to land cost; increasing government intervention have been unsuccessful in controlling this conflictive and contradictory process and the consequent spiral rises in land cost and house prices because of its inability to break from its self-financing housing development strategy; this inability has been due to historical circumstances which, characterised by strong state and weak labour relations and the subordination of finance to industrial capital, have conditioned housing development to be driven by the private appropriation of development gains.