"Amendment to the Housing Lease Protection Act: To Protect Tenants... More Detailed 'Exceptions' Are Needed"

Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Yuri Kim] An analysis has emerged that amendments to the Housing Lease Protection Act aimed at protecting tenants need to include precise exception clauses to preserve the original intent. There are concerns that provisions changed to ensure tenants' stable housing could backfire if they lead to preemptive rent increases.

According to the real estate industry on the 11th, the Ministry of Justice recently announced its work plan for this year, stating it will push forward amendments to the Housing Lease Protection Act, which includes tenants' right to request contract renewal, and commercial tenants' rights to priority occupancy and eviction compensation claims. In particular, with the introduction of tenants' right to request contract renewal, tenants who wish to continue residing can demand the landlord to renew the contract, allowing them to live for at least four years.

The market sympathizes with the intent but is concerned about instability in the lease market during the initial phase of the policy package. Early market instability could actually hinder tenants' stable housing. According to last year's Ministry of Justice commissioned study, if the rent ceiling system and the right to request contract renewal are introduced simultaneously, landlords' loss avoidance mechanisms would activate, resulting in an estimated initial rent increase rate of 8.32%.

Experts assess that rent control measures are positive from the perspective of protecting tenant rights but emphasize the need for a cautious approach by anticipating side effects and simulating exceptional cases in advance. According to the Korea Research Institute for Construction Industry, overseas rent control has negatively impacted the supply of rental housing and facility improvements, leading to the allowance of various exceptions to prevent such issues.

Germany recently introduced a regulatory policy freezing rents for five years in Berlin, where housing rents surged sharply, but recognizes exceptions for new housing supply and facility improvements. Newly built rental housing constructed after 2014 is exempt from the five-year rent freeze. Additionally, if landlords carry out housing modernization projects meeting two or more regulatory conditions, they can add part of the costs to the rent as construction cost sharing. Since the domestic lease market has the Jeonse system, differing from overseas markets centered on monthly rent, and market dynamics can change with fluctuations in sale prices, it is analyzed that referencing overseas cases with exception clauses is necessary.

Domestically, the statutory lease period was extended from one year to two years in December 1989. Nationwide Jeonse prices rose 37.9% over the two years before and after the extension (1989?1990), a steeper increase than the previous two years (22.8%). The price increase in 1990, the first year when the extended two-year lease contracts came into effect, reached 20.6%. Seonghwan Kim, a senior researcher at the Korea Research Institute for Construction Industry, said, "Considering the pace of economic development, homeownership rates, and housing supply rates, it is difficult to directly apply and interpret the rent fluctuations seen as a policy response at that time to the current situation," but added, "Policies that consider side effects in advance are necessary."

This content was produced with the assistance of AI translation services.