Constitutional Court: "Calculation of Sale Conversion Price Based on Lease Period Does Not Violate Fundamental Rights"

[Image source=Yonhap News]

[Asia Economy Reporter Baek Kyunghwan] The Constitutional Court has ruled that the regulation requiring different calculation methods for the sale conversion price of public rental housing based on the mandatory rental period does not violate the Constitution.

On the 9th, the Constitutional Court announced that it made a unanimous decision upholding the constitutionality of the former Rental Housing Act Enforcement Rules, which specify the criteria for calculating the sale conversion price of public rental housing, in a constitutional complaint claiming it infringed on the right to equality.

Mr. A won a public rental housing subscription in 2006, signed a lease contract, and has been residing there since 2009. Later, after the mandatory rental period of 10 years passed, an issue arose during the process of selecting the price for conversion to sale. The relevant legal provision applies different methods for selecting the sale conversion price depending on the mandatory rental period.

Mr. A filed a constitutional complaint arguing that the criteria for calculating the sale conversion price of rental housing with a mandatory rental period of 10 years infringed on the right to equality because, unlike the 5-year rental housing, only a price ceiling was set. In fact, if the mandatory rental period is 10 years, the sale conversion price cannot exceed the appraised value. For 5-year rentals, the price is based on the arithmetic average of construction cost and appraised value and must not exceed the amount after deducting depreciation during the rental period.

However, the Constitutional Court judged that 10-year rental housing is supplied at rents lower than the surrounding market prices for a long period, so it is necessary to set only a price ceiling at the time of sale conversion to partially guarantee the profitability of rental businesses. The Court explained, "From the business operator's perspective, as the mandatory rental period lengthens, uncertainty increases, so there are fewer incentives to supply long-term rental housing," and "applying the same sale conversion price calculation method to both 10-year and 5-year rental housing would result in a decrease in the supply of 10-year rental housing."

It added, "The above legal provision relaxed the criteria for calculating the sale conversion price to expand the supply of 10-year rental housing," and "setting only a price ceiling for the sale conversion price of 10-year rental housing guarantees a certain level of profitability to business operators who bear uncertainty through long-term rental operations," the Court ruled.

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