Just Compensation in Korea’s Land Takings

Abstract

This paper reviews grounds for just compensation and the market value standard in compulsory land acquisition, and then identifies limitations in the Korea’s practices on compensation appraisal. In addition, the actual compensation level in Korea is empirically examined using available data. Results show that the appraisal of land compensation tend to fall short of the level of market-value-based compensation. The main reasons in terms of methods are two-fold. First, compensation is calculated on the basis of Officially Assessed Land Prices (OALP), which is estimated to be 40~50% of observed market price. Second, the compensation amount is set at the ‘past’ and not the ‘current’ market value by excessively excluding development surplus arising from the project to be promoted. As an ultimate remedy, this paper discusses a change in land compensation appraisal method, that utilizes market transaction prices more directly rather than relying on the OALP. As a supplementary measure in the transition period, an institutional framework is recommended to allow active adjustments to the primary compensation appraisal according to circumstances of the target land.