[Opinion] The Halted Housing Stability

Professor Changmoo Lee, Department of Urban Engineering, Hanyang University

No government has confused the public’s sentiments about the real estate market with premature remarks from government and ruling party officials as much as the current administration. Yet, the very protagonists of these controversies are quite frustrated that their enlightening perspectives are not adequately conveyed to the public. This is despite the fact that these views are seriously at odds with the public’s choices. Examining the root causes of the repeated failures of the current government’s real estate policies often reveals that the cause lies in an enlightening belief based on a narrow understanding of the real estate market. The instability in the jeonse and monthly rental market caused by the recent implementation of the three lease laws stems from ignoring the chain of housing mobility strongly linked to the existence of jeonse and prioritizing the prevention of involuntary housing moves as the highest value, which proved to be a fatal mistake.

The concept of 'dynamic housing stability' refers to a state where individuals can appropriately adjust their housing consumption at desired times and optimal locations throughout their life cycle. Such dynamic adjustment of housing consumption involves housing mobility, and one’s housing move becomes possible only when connected with the housing moves of other consumers. Dynamic housing stability is not an independent choice made by an individual alone but is achieved only when linked to the rational adjustment processes of other households’ housing consumption. For society as a whole, keeping citizens in one home for a long time may not be the desirable approach to achieving housing stability.

An interesting fact related to the housing mobility of tenant households can be gleaned from the Ministry of Land, Infrastructure and Transport’s housing survey. Only 5-10% of households move due to truly involuntary reasons such as landlords refusing to renew contracts or jeonse prices rising too much. In contrast, 50-60% move voluntarily due to reasons like job changes or wanting larger living spaces, and the rest move for overlapping reasons. As a result of these combined individual household moving reasons, 20-30% of the total housing stock changes occupants annually in the domestic housing market, reflecting a process of dynamic housing consumption adjustment. The survey results related to housing mobility imply that the high mobility rate in the domestic housing market cannot be dismissed as an irrational phenomenon caused by involuntary moves due to the two-year limit on jeonse contracts.

The current government holds the belief that by preventing involuntary moves, it can achieve the public’s 'static housing stability,' and to realize this, it rushed to legislate the three lease laws, immediately implementing the rent ceiling and contract renewal request rights. The result was the anticipated uncontrollable instability in the jeonse and monthly rental markets. Minister Kim Hyun-mi of the Ministry of Land, Infrastructure and Transport cited a 10% increase in the rate of tenants staying in their existing homes due to the contract renewal request right as evidence of the success of the three lease laws. However, the serious side effect of this is revealed in the case of Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki, where even those planning to move out are exercising their contract renewal rights out of fear that they will not be able to find a jeonse home. A phenomenon akin to 'panic buying' has materialized as 'panic staying.' The problem is that this anxiety-driven change in choices by households causes arterial sclerosis in the housing market’s chain of housing mobility, leading to a sharp decrease in jeonse listings, a surge in jeonse prices, and volatility in monthly rents and sales prices, resulting in a comprehensive crisis.

The government has recklessly opened a 'Pandora’s box' that should not have been tampered with. It is time for the current administration and ruling party to acknowledge their failure and make efforts to close Pandora’s box as soon as possible to mitigate the accumulating side effects even slightly.

Chang-Moo Lee, Professor, Department of Urban Engineering, Hanyang University

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