'Relocating to the provinces will only create more non-resident homeowners' — civil servants rattled by 'personnel risk'

Government tax reform ripples through the bureaucracy

Reasons for non-residency vary — reconstruction, education and more

Sticking to residency principle piles on housing, career and tax burdens

Pedestrians in Sejong's Eojin-dong are obscured by intense heat rising from the road surface. [Newsis]

"Will owning a home you don't live in become a problem for promotions or personnel decisions from now on?"

A director-level official at a central government ministry posed that question when the government's tax reform plan came up in a recent conversation. It reflected a growing anxiety in bureaucratic circles: if owning multiple properties has long been the defining real estate concern for civil servants, whether someone actually lives in their one home may now be emerging as a new standard.

The concern stems from the government's decision to maintain, even in its revised tax reform package, a clear distinction between "owner-occupiers with one home" and "non-resident single-homeowners."

At a Cabinet meeting Tuesday, the government approved raising the basic deduction threshold for the comprehensive real estate tax for owner-occupiers from a publicly assessed value of 1.2 billion won ($883,000) to 1.4 billion won. For non-resident single-homeowners, it dropped an earlier plan to lower the threshold to 900 million won and instead kept it at the current 1.2 billion won.

The gap in basic deductions between resident and non-resident single-homeowners narrowed from 500 million won to 200 million won, but the government kept the overall direction of giving greater benefits to owner-occupiers — including a shift from holding-period-based tax credits to residency-period-based ones.

Lee Hyung-il, nominee for deputy prime minister and minister of economy and finance, said Wednesday that "establishing a housing market centered on actual residence is the direction the government has in mind," adding that "a distinction between owner-occupiers and non-residents must be maintained."

Government Complex Sejong in Eojin-dong, Sejong. [Newsis]

What has the bureaucracy on edge is less the tax burden itself than the fact that "residency status" appears to be emerging as a separate policy criterion. President Lee Jae-myung directed in March that people who own expensive homes they do not live in, as well as those holding excessive real estate, be excluded — alongside multi-homeowners — from discussions, drafting, reporting and approval processes related to real estate policy.

No formal policy has been announced targeting non-resident single-homeowners for specific personnel or work exclusions. But because multi-homeowning civil servants were previously subjected to personnel measures that spread across the public sector, those who own a single home they do not occupy are now anxious they could be next — on top of those who already own expensive non-primary residences.

Civil servants working at government ministries based in Sejong are particularly sensitive to the issue. A significant number own a single home in Seoul or Gwacheon in Gyeonggi Province and moved to Sejong when their ministry relocated, living there on jeonse and monthly rent contracts.

The tax reform package includes a provision allowing up to three years of non-residency to count as residency for tax purposes when the move was unavoidable — covering cases such as a child's schooling, a job change or transfer, medical treatment or recuperation, overseas postings, or caring for elderly parents. The provision is intended to reflect the reality that non-residency cannot always be judged simply by whether someone lives in a property.

Job transfers, in particular, offer a relatively clear-cut reason for non-residency, meaning many civil servants may have grounds to argue they fall outside the tax reform's target of "non-resident single-homeowners." The problem, however, is that the label — "non-resident single-homeowner" — does not easily disappear until the person proactively explains the circumstances behind it.

A section-chief-level official at a central ministry said: "Some people casually suggest just selling the Seoul home and buying one in Sejong, but can you really dispose of what is essentially your entire net worth — your one home — without even consulting your family? People are saying it's a fast track to destroying your household."

The reasons civil servants end up as non-resident single-homeowners vary widely. Some cannot live in their existing home because of reconstruction work; others are separated from their registered property by a child's schooling needs, an elderly parent requiring care, a spouse's workplace, or an existing lease contract. Those who moved within Seoul or the greater metropolitan area face a particular grievance: unlike civil servants transferred to Sejong, whose reason for non-residency is self-evident, their circumstances are far less visible.

A government official said: "If the reason is clear — like a Sejong posting — it can be explained. But when someone's registered home and actual residence are in different parts of the metropolitan area, the situations are all different. People are asking whether you can really separate investment motives from unavoidable circumstances just by looking at the outcome of non-residency."

Against this backdrop, the government announced Thursday a plan to relocate administrative and public institutions to the provinces. The move will inevitably produce more "non-resident single-homeowner" civil servants: any government employee or public institution worker who owns one home in the greater metropolitan area and relocates for work will become a non-resident single-homeowner.

If the government continues to push regional relocation while holding firm to the residency principle, civil servants will face mounting pressure on all three fronts simultaneously — housing, career and taxes.

A central ministry official said: "The multi-homeownership controversy initially looked like a problem for real estate policy officials, but it ultimately became something the entire civil service had to worry about. Whether non-resident single-homeownership will actually become a new personnel standard remains to be seen, but the atmosphere has shifted — people are now anxious not just about how many homes they own, but whether they actually live in them."

y2k@heraldcorp.com