Rent and Lease Measures D-1... Still No Visible Solution

[Asia Economy Reporters Yuri Kim and Mune Won] The government has entered the final review stage a day before announcing measures for the jeonse and monthly rent market. With the supply target outline of '100,000 households + α' revealed, adjustments are reportedly underway through effectiveness reviews. However, the prevailing view is that the details disclosed so far mostly involve housing for low-income groups or 1-2 person households, offering no effective solution to the jeonse crisis.

According to related ministries including the Ministry of Economy and Finance and the Ministry of Land, Infrastructure and Transport on the 18th, the government will hold a real estate market inspection meeting chaired by Deputy Prime Minister and Finance Minister Hong Nam-ki on the 19th to announce the 'Housing Stability Plan for Low-income and Middle-class Households.' The core of this plan is to supply ▲the housing that demanders want ▲as much as possible ▲immediately. This is to resolve the immediate housing instability caused by the sharp decline in jeonse supply and soaring jeonse prices following the implementation of the two lease laws: the rent ceiling system and the contract renewal request system.

The government is considering not only purchase rental and jeonse rental methods, where public entities such as Korea Land and Housing Corporation (LH) and SH Corporation buy vacant houses to rent or lease them again as jeonse, but also a purchase agreement method to secure houses that are either pre-construction or under construction in advance. Additionally, the plan includes remodeling urban hotels, commercial buildings, offices, and factories that have come onto the market for residential use and supplying them.

However, the market evaluates that the contents revealed so far are insufficient to resolve the jeonse difficulties faced by the middle class, who are struggling with soaring prices and a lack of listings. The biggest problem is the disconnect from demand. A significant portion of purchase rental and jeonse rental units are for housing stability for low-income groups, such as row houses, multi-family houses, and multi-unit houses. In fact, more than 4,000 vacant units supplied by LH have remained empty for over six months.

Hotels, commercial buildings, offices, and factories are acquired through a 'negotiated purchase' method, and the approval period for changing their use is considerable, making it difficult to secure quantity in the short term. These measures are also deemed unsuitable to meet the immediate housing instability of 3-4 person families facing jeonse in small to medium-sized apartments that have increased by hundreds of millions of won. Professor Shim Gyo-eon of Konkuk University’s Department of Real Estate said, "It might have some short-term effect, but it is not a short-term supply measure. For example, if an entire floor of a commercial building is vacant, that would be helpful, but usually, that is not the case," adding, "Even the approval process takes at least a year at best." A maintenance project official pointed out, "The biggest problem right now is apartment jeonse, and supplying hotels for single-person households is just filling numbers in this plan."

Ultimately, the key to this 'Housing Stability Plan for Low-income and Middle-class Households' is whether the government can include effective middle-class housing supply measures in the announcement. The government is focusing on this a day before the announcement, but there is practically no immediate solution. Even the medium-sized public rental housing that somewhat meets middle-class demand will inevitably take a considerable time before actual supply, so it is not a measure to immediately put out the urgent fire.

Because of this, coordination among government ministries ahead of the jeonse measures announcement is reportedly not easy. A government official said, "At the final stage of review, there is work to add and remove supply volume plans," and "It is also being reviewed whether the volume promised at the time of the announcement is truly achievable."

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