Aftermath of Registered Rental Abolition... Decline in Policy Trust, Concerns Over Jeonse and Monthly Rent Instability

The area around Eunma Apartment in Daechi-dong, Gangnam-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Moon Jiwon] The Democratic Party of Korea's decision to abolish the purchase rental system to stabilize housing prices is causing growing confusion in the industry. The Korea Housing Landlord Association plans to submit a collective petition to the Constitutional Court on the 1st of next month, and some in the industry express concerns that the rental market could become even more unstable if the system is abolished.

According to the industry on the 29th, the Korea Housing Landlord Association, composed of registered rental business operators and general landlords, plans to hold a "National Petition Press Conference for Constitutional Appeal by Rental Business Operators" in front of the Constitutional Court in Jung-gu, Seoul, on the 1st of next month.

Association President Sung Chang-yeop stated in a position paper, "We registered as rental business operators trusting the state's system, but suddenly changing the legal status of rental business operators in a way that threatens their position corresponds to cases where the state misjudges or issues flawed policies and later arbitrarily changes them." He emphasized, "The responsibility lies solely with the state, and it cannot be shifted onto the people."

President Sung added, "Autocratic and dictatorial legislation is plunging not only landlords and tenants but all citizens into hardship," and "if unconstitutional legislation is forcibly enacted, the 520,000 rental business operators and housing landlords will correct the foundation of the legislation through large-scale additional constitutional appeals."

The Democratic Party of Korea's Special Committee on Real Estate announced on the 27th that while maintaining construction rentals, it plans to abolish new registrations for purchase rentals and revoke the capital gains tax exemption benefits for existing operators. Until 2017, the government actively encouraged multi-homeowners to register as rental business operators by offering tax and financial benefits, but after about four years, it reversed its stance, pointing to rental business operators as a cause of rising housing prices and deciding to abolish the system.

In fact, many statements from the ruling party recently have indicated that rental business operators significantly influenced housing price increases. Presidential candidate Lee Jae-myung, Governor of Gyeonggi Province, also emphasized the necessity of abolishing the system on his Facebook on April 30, stating, "The abolition of special privileges for private rental business operators will be a cornerstone showing the upright direction and will of housing policy."

The Ministry of Land, Infrastructure and Transport abolished the short-term rental (4 years) and apartment purchase rental (8 years) systems through the July 10 measures last year. Since then, automatic cancellations and voluntary cancellations have continued, and the currently remaining registered rental housing is estimated to be about 1 million units. The ruling party and government expect that when these properties enter the market, housing prices will stabilize.

However, there are many concerns about side effects from the system's abolition. Analysts say a loss of trust in government policy is inevitable. Among rental business operators, complaints are already rampant that "the government has undermined the consistency of its policies and legal stability itself." There are also concerns that if registered rental housing disappears, the number of rental listings will decrease, potentially destabilizing the market.

Currently, rental housing largely consists of villas and multi-family houses, and the abolition of the registered rental system could worsen housing instability for low-income groups. An industry insider explained, "Even if the system is abolished, the price decline in types of housing that demanders are interested in, such as apartments, will be limited," adding, "especially if rental supply decreases, the rental housing shortage will worsen, and in the mid to long term, housing prices could also rise."

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