Eviction of Tenants in 5-Year Public Rental Housing to Be Prevented

On the afternoon of the 9th, a plenary session is being held at the National Assembly in Yeouido, Seoul. [Image source=Yonhap News]

[Asia Economy Reporter Lee Chun-hee] Acts by private businesses to evict tenants for market price gains and sell to third parties in 5-year public rental housing with sale conversion will be fundamentally blocked.

On the 9th, according to the National Assembly and the Ministry of Land, Infrastructure and Transport, the "Special Act on Public Housing" containing such provisions passed the plenary session of the National Assembly on the same day.

The 5-year sale conversion public rental housing system allows tenants to live in public rental housing for 5 years and, if desired, have priority to purchase the housing. However, if the priority sale conversion does not occur, the regulation allowing the sale of the housing to a third party has been abused by construction companies or rental businesses, public rental housing operators, attempting to revoke tenants' qualifications, causing ongoing controversy.

This is because the sale price at the time of sale conversion is set at an affordable level averaging the supply cost and appraisal value, whereas sales to third parties can be made at market prices. In particular, this problem was more frequent in 5-year public rental housing compared to 10-year public rental housing, where the sale price is set slightly below market price.

This amendment fundamentally resolves this issue. It clearly stipulates that sales to third parties must be made at a price below the priority sale conversion price. From the operator's perspective, since there is no profit difference between the priority sale conversion price and the third-party sale price, the incentive to attempt third-party sales disappears.

Related regulations such as sale conversion qualifications have also been significantly revised. Basically, the qualification for sale conversion is defined as a non-homeowner who continuously resides from move-in to the sale conversion point. In cases where tenants were selected on a first-come, first-served basis, sale conversion is allowed if the housing ownership criteria among the qualification requirements at move-in are met.

Additionally, at the time of priority sale conversion, rental businesses are obligated to directly verify the tenant's residence status. Tenants must submit documents prescribed by the Ministry of Land, Infrastructure and Transport to confirm continuous residence in the rental housing, and public housing operators are required to verify this.

Along with this, a regulation requiring rental businesses to mandatorily report to the local government where the housing is located when selling construction rental housing to another operator will be introduced. This was regulated due to frequent cases where rental housing was sold to other rental businesses after construction to gain market price profits. The local government head receiving the report will decide on acceptance based on the appropriateness with the purpose of the Special Act on Public Housing.

View of Seoul city apartments from Yeongdeungpo-gu 63 Square.
[Image source=Yonhap News]

Meanwhile, the "Special Act on Private Rental Housing" also passed the National Assembly plenary session on the same day.

The amendment includes matters related to sale conversion qualifications in the dispute mediation scope of the Rental Housing Dispute Mediation Committee, allowing individual tenants to apply for dispute mediation. This is a measure to resolve numerous legal disputes between tenants and rental businesses regarding tenants' priority sale conversion qualifications during the sale conversion process of public rental housing.

According to the Ministry of Land, Infrastructure and Transport, as of the end of last year, there are 60,822 households of 5-year rental housing nationwide. Of these, 55,885 households are managed by private construction companies, 2,946 households by Korea Land and Housing Corporation (LH), and 1,991 households by local governments as project entities.

The new Special Act on Public Housing is scheduled to be enforced three months after promulgation. It will apply to rental housing where the sale conversion process has not been completed as of the enforcement date. It also applies to public construction rental housing supplied by private rental businesses subject to the old Rental Housing Act. The Special Act on Private Rental Housing will be enforced immediately upon promulgation.

A Ministry of Land, Infrastructure and Transport official said, "We expect that disputes between rental businesses and tenants arising during the sale conversion process of 5-year public rental housing will be resolved through the amendments to the Special Act on Public Housing and the Special Act on Private Rental Housing," adding, "We will continuously cooperate with related local governments to thoroughly protect good-faith tenants."

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