[Exclusive] Increasing Supply by Converting Purchased Rental Housing to Jeonse... Additional Jeonse Measures to Be Announced Next Week

Government's 'Additional Jeonse Measures' Core Plans
Short-term Increase in Supply Expected
Standard Rent Introduction Unlikely

Banpo Apartment, Seocho./Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporters Joo Sang-don and Jang Se-hee] It was confirmed on the 23rd that the government is seriously considering converting Korea Land and Housing Corporation (LH) purchase and construction rental housing into jeonse rental housing as one of the key measures in the 'additional jeonse measures.' Unlike construction rental housing, which takes several years until move-in, jeonse rental housing can increase supply in a short period and is cheaper than purchase rental housing, allowing for a relatively significant increase in supply volume.

On the day, a government official said in a phone interview with Asia Economy, "We are currently reviewing measures focused on increasing supply immediately, as the recent jeonse shortage is attributed to a lack of supply," adding, "One of the core parts of the additional measures is converting purchase and construction rental housing into jeonse rental housing."

Purchase rental housing refers to housing that LH buys and supplies at a low cost, while construction rental housing is built and supplied directly by LH. The government plans to allocate part of the existing budget to jeonse rental housing, where eligible low-income residents in urban areas can find housing they wish to live in within their current living area, and LH signs a jeonse contract with the homeowner and then subleases it.

There are two main ways to convert purchase rental housing into jeonse rental housing. One is to change the move-in requirements of purchase rental housing to those of jeonse rental housing. This means applying the existing jeonse rental move-in requirements to the housing purchased by LH. Another way is to use the budget planned for purchase rental housing as subsidies for jeonse rental housing. Both methods can immediately increase the supply of jeonse housing.

Another government official explained, "Existing purchase rental or public rental housing has limited budgets, so there are limits to increasing supply immediately," adding, "However, if the purchase rental budget is used for jeonse rental housing, supply expansion is possible." He further explained, "If it costs 300 million won to supply one purchase rental unit, jeonse rental housing can be supplied at 150 million won, allowing for two units to be supplied."

The government draws a line on political discussions about introducing a 'standard rent' system that sets jeonse and monthly rent prices based on a standard housing type's use, area, and structure, and applying rent caps to new housing. This is because direct price controls face strong opposition and are judged to be of little help in stabilizing the jeonse market immediately. On the same day, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, responded to a question from Jeong Il-young of the Democratic Party at the National Assembly Planning and Finance Committee comprehensive audit, saying, "We have never reviewed the standard rent," and "We have also never reviewed rent caps on new supply."

Separately from the additional jeonse measures, the government is also considering property tax reductions for single-homeowners. This is in response to concerns that property taxes for single-homeowners, unrelated to speculation, have steadily increased due to the recent rise in housing prices and the realization of official property prices used as the basis for tax calculation. A Ministry of Economy and Finance official said, "Considering the realization of official property prices, it is necessary to provide property tax relief for single-homeowners," adding, "We are reviewing the reduction."

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