"Lease Law is Growing Pains"... Hollow Policy, Government Out of Touch with Public Sentiment

<Support Measures for Housing Stability of Low- and Middle-Income Classes>

Core Elements Like Apartments Desired by Consumers Missing
Government Perception and Judgment Out of Touch with Public Sentiment Also Problematic

Ministry of Land, Infrastructure and Transport: "Lease Law Is a Growing Pain to Endure"
Public Opinion Cold... Experts Also Say "Direction Is Wrong"

[Asia Economy reporters Yoo In-ho and Moon Je-won] '3,561 cases' is the number of apartments purchased nationwide last month by young people aged 20 and under, as compiled by the Korea Real Estate Board. This volume is 25% higher than the 2,848 cases recorded the previous month. Last month’s apartment purchases by people in their 20s accounted for 5.4% of the total transaction volume of 60,174 cases, marking the highest proportion since the Korea Real Estate Board began compiling related statistics in January last year.

The industry points out that the expansion of panic buying among young people despite successive real estate measures is a clear example showing the deepening distrust in government policies. Hwang Han-sol, a research fellow at Economic Man Lab, diagnosed, "As house prices remain stubbornly high and the jeonse (long-term lease) crisis worsens, it seems young people are rushing to buy homes as a last chance."

The 'Support Plan for Housing Stability for Low- and Middle-Income Classes,' which supplies 114,000 jeonse-type housing units nationwide, is also criticized for fueling market anger due to its weak substance and insufficient realistic assessment. Although the Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, and other related ministries painstakingly gathered the volume at a level described as 'all-in,' the actual volume desired by demanders was only a fraction, failing to alleviate their anxiety.

Moreover, the realistic recognition by Minister Kim Hyun-mi and First Vice Minister Yoon Sung-won of the Ministry of Land, Infrastructure and Transport that the cause of the jeonse crisis lies in structural factors such as low interest rates rather than the three lease laws adds fuel to this anger. In fact, the day before, Minister Kim referred to the three lease laws as a "precious social agreement," and Vice Minister Yoon also described the laws as a "growing pain" that the public must endure, drawing heavy criticism from public opinion.

35,300 units in Seoul... Even apartments are 'rental housing for low-income groups'

Even in Seoul alone, where 35,300 units are allocated, criticism pours in regarding the location, volume, feasibility, and quality of the supplied housing. In Seoul, newly built purchase agreements accounted for the largest share with 20,000 units, followed by remodeling of non-residential buildings such as commercial buildings and hotels (5,400 units), public jeonse housing (5,000 units), and vacant public rental housing (4,900 units). Among these, the only volume currently held by Korea Land & Housing Corporation (LH) and others that can be supplied starting next year is the smallest portion, the vacant public rental housing.

For newly built purchase rentals and public jeonse, actual volumes can only be confirmed after purchase agreements are signed between LH and construction companies in the future, and non-residential remodeling also depends on the support of owners of commercial buildings, hotels, and offices. About 86% of Seoul’s total volume is thus uncertain. The government explained, "There are currently many waiting businesses for purchase agreements, so supply capacity is sufficient, and the calculated volume was determined after reviewing feasibility," but since these are only estimates, exact quantities can only be known after further review of location suitability and support.

A bigger problem is that most public rental housing units are multi-family or row houses. Even the approximately 2,000 apartment units supplied in Seoul are built as permanent or national rental housing for low-income groups, with exclusive areas under 60㎡. Although the government’s announcement materials explained that the cause of the jeonse crisis is "the increase in demand for housing upgrades leading to rising apartment jeonse prices," most of the volume is actually planned to be supplied as multi-family housing.

Government perception drifting away from public sentiment... Are the lease laws growing pains?

Minister of Land, Infrastructure and Transport Kim Hyun-mi is announcing the jeonse policy on the 19th at the Government Seoul Office in Jongno-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

There are many criticisms that the government’s unchanged perception and diagnosis of the real estate market despite the boiling public sentiment is also a problem. Minister Kim Hyun-mi said during the announcement of the measures the day before, "The three lease laws are a precious achievement made through social consensus that a home is a place where people live." The market strongly criticized this, questioning when such social consensus was reached. The government abruptly implemented the three lease laws at the end of July, and market anxiety has continued for four months, making Minister Kim’s claim of social consensus absurd.

At the time, the market and experts warned that the introduction of the three lease laws by the government and ruling party would cause a jeonse and monthly rent crisis, but the original plan was pushed through as is, ultimately causing great market confusion.

First Vice Minister Yoon Sung-won shares a similar perception. On the same day, appearing on MBC Radio’s 'Kim Jong-bae’s Focus,' he rebutted criticism that the three lease laws are the 'culprit' of recent jeonse market instability, saying, "That is not true." He added, "With a per capita income exceeding $30,000, the three lease laws are a growing pain the economy must go through." Although many ordinary people suffer from the jeonse crisis, the government belittled it by calling it 'growing pains.'

Jang Jae-hyun, head of Real Today, pointed out, "There are various causes of the jeonse crisis, but the core is the new lease laws," and criticized, "It is unrealistic to see the increase in single-person households due to household fragmentation as a major cause."

Experts: "Private sector role should be strengthened rather than public intervention"

[Image source=Yonhap News]

Experts point out that the government continues to fail in policy because it cannot present the cards that people actually want. While claiming to implement policies for real demanders, it regulates loans and, while announcing jeonse measures, suggests living in abandoned villas or failed hotels, which is disconnected from reality.

Seo Jin-hyung, president of the Korea Real Estate Society (professor at Gyeongin Women’s University), said, "Looking at this jeonse market measure, it means that people without money should live in permanent rental housing until they die," and asked, "Are they constantly telling people to live like beggars?" Yang Ji-young, director of R&C Research Institute, also emphasized, "The government focuses on supply volume and misses fundamental solutions a lot," adding, "The main culprit of the jeonse crisis is not single- or two-person households, but the fact that supply is concentrated on hotels and commercial buildings for such households is problematic."

Experts advise that the public sector, including the government, should stop interfering so much and instead strengthen the role of the private sector. They explain that housing desired by real demanders and the market should be continuously supplied. Park Won-gap, senior real estate specialist at KB Kookmin Bank, said, "The government probably had no choice but to rely on vacant multi-family and multi-unit houses to find a way to supply quickly," adding, "The current demand segment only looks for apartments, and for success, the three elements of desired location, sufficient volume, and timely supply are necessary."

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