Amid Confusion Over the Three Lease Laws, 'Standard Rent' Formalized... Market Reacts Coldly

Confusion in the Market Following the 'Imdaechabeop 3 Laws' Not Yet Resolved
Even Frontline Local Governments Question the Effectiveness of the Proposed System
"Will Further Expand Market Instability," Numerous Criticisms Follow

The right to request contract renewal and the rent ceiling system to protect tenants passed the interim Cabinet meeting on the 31st and went into effect immediately. There are forecasts that a surge in jeonse prices and a shortage of jeonse will occur widely, especially in Seoul. The photo shows a real estate agency in Gangseo-gu, Seoul on the day. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Yoo In-ho] As the government has officially formalized discussions on direct control of jeonse and monthly rent prices through the introduction of a standard rent system, concerns about excessive market intervention are growing. Even before the market confusion caused by the implementation of the 'Three Lease Laws'?the Jeonse and Monthly Rent Cap System, the Contract Renewal Request Right System, and the Jeonse and Monthly Rent Reporting System?has fully settled, frontline local governments are considering introducing systems whose effectiveness they themselves question, further expanding market instability.

According to the Ministry of Land, Infrastructure and Transport (MOLIT) on the 12th, the ministry stated in explanatory materials released the day before, "The (housing) standard rent system is being reviewed for its necessity by referring to advanced overseas cases." This follows President Moon Jae-in's statement at the senior secretaries and aides meeting on the 10th that "In major cities, there are many cases where rent increases are limited through systems such as standard rent or fair rent," marking the start of an official government-level review.

The standard rent system is a system where, similar to the official housing price, local governments select a standard housing unit considering regional prices and economic conditions, and announce a benchmark rent. However, industry experts commonly point out that the standard rent system has more drawbacks than benefits and lacks practicality. The biggest obstacle is the difficulty in setting rent prices. Even for apartments, there are significant variations not only by district and neighborhood but also by complex; within the same complex, factors such as floor, area, direction, view, interior, and remodeling level vary greatly, making it unrealistic to set a uniform standard. Even frontline local governments hold negative views on the system's introduction. An official from a Seoul local government said, "Standard rents would need to be set for various types of housing at intervals of at least one year, or as short as six months, which would incur considerable administrative costs," adding, "Considering the complaints that would arise, it is an impractical policy."

There are also concerns about a decrease in rental supply in the market. If the standard rent system is realized, many landlords may give up rental businesses due to reduced rental income. Seo Jin-hyung, president of the Korea Real Estate Society (professor at Gyeongin Women's University), said, "Jeonse and monthly rent prices vary greatly depending on the condition of the housing, the economic circumstances of tenants and landlords, and the timing of the lease," adding, "If a standard rent is introduced, landlords facing reduced profits may have less incentive to repair or maintain properties, potentially leading to an overall decline in the quality of rental housing."

In the market, criticism is also raised that the government is trying to solve the side effects caused by the reckless introduction of the Three Lease Laws with another 'patchwork solution.' One expert said, "The problem itself is that the government is considering another supplementary measure less than a week after implementing the lease-related laws," pointing out, "It is another loophole and trick to evade government regulations and may only exacerbate conflicts between landlords and tenants."

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