Another Flip-Flopping Real Estate Policy... "Pushed Too Hard, Faced Backlash, Then Pretended It Never Happened"

Policy to Maintain Tax Benefits for Rental Business Operators
Withdrawn After Controversy Over Being Blamed as 'Main Cause of House Price Rise'
Frequent Reversals Without Careful Consideration
Experts: "Market Confusion Harms Only the Public"

[Image source=Yonhap News]

The Democratic Party of Korea and the government have decided to maintain the current tax benefits for private rental business operators, which they had initially planned to abolish. Although the party and government had been pushing to reduce various benefits by labeling rental business operators as the 'main culprits of rising housing prices,' they ultimately withdrew the plan due to growing concerns over the side effects of abolishing the system.

Within the industry, criticism is spreading that the government's repeated 'policy missteps' are distorting the real estate market and only increasing public anxiety. Since the causes of rising housing prices are sought externally rather than internally, excessive regulations are being indiscriminately imposed. The repeated pattern of introducing policies without deep consideration and then reverting them when backlash occurs has led to criticism that "the party and government never had a genuine intention to stabilize housing prices in the first place."

No Reduction in Benefits for Rental Business Operators Amid Jeonse Crisis

According to political circles on the 10th, the Democratic Party of Korea has decided not to discuss the reduction of tax benefits for rental business operators any further and to maintain the current system.

Earlier, the Democratic Party's Special Committee on Real Estate announced in May through the 'Housing Market Stabilization Measures' that new registrations for purchase rentals?buying villas, officetels, etc., to rent out?would be completely abolished, and tax benefits for existing rental business operators would also be eliminated. For existing rental business operators, tax benefits excluding capital gains tax surcharges would only be granted if the registration is canceled and the property sold within six months.

This approach by the party and government was based on the judgment that if the properties owned by rental business operators were put on the market, supply would increase. However, it immediately faced backlash from rental business operators. Criticism spread that the government, which had encouraged the rental business system to stabilize the jeonse (long-term lease) market, suddenly blamed them as the main cause of rising housing prices.

In particular, the policy to impose capital gains tax surcharges if the house is not sold within six months after deregistration was criticized as unrealistic. There were significant concerns that multi-homeowners unable to sell their properties might resort to gifting or holding onto them to avoid the 'capital gains tax bomb.'

As the controversy grew, it was reported that opinions within the party and government were divided over changes to the rental business system. With the presidential election approaching and increasing calls to consider public sentiment on real estate, it is analyzed that they ultimately chose to maintain the current system. Accordingly, it is expected that new registrations for non-apartment rental businesses such as officetels, villas, and one-room units, as well as exemptions from capital gains tax surcharges, will continue to be allowed.

Repeated Missteps... Only Trust Erodes

This is not the first time the party and government have introduced and then reversed real estate regulatory policies. Previously, the Democratic Party pushed a policy requiring two years of actual residence to qualify as a union member for reconstruction projects but fully withdrew it amid controversy that it was causing jeonse price increases. They also considered expanding rent increase restrictions under the Lease Protection Act to new contracts but reversed the plan, and changed the priority supply rights criteria for public maintenance projects from union members as of the initial policy announcement date (February 4) to the law revision date (June 29).

Seo Jin-hyung, president of the Korea Real Estate Society and professor at Gyeongin Women's University, pointed out, "The government is impulsively pushing through excessive policies that could cause side effects without proper review," adding, "Subsequently, conscious of elections and public opinion, they keep reversing policies, which only increases market confusion."

In fact, many in the industry analyze that the government's real estate policies were flawed from the start. The Lease Protection Act has fueled conflicts between landlords and tenants, and imposing comprehensive real estate taxes on the top 2% has created a divide between the haves and have-nots, further stirring market confusion. Despite this, housing price stabilization policies have failed, and apartment prices in Seoul, the metropolitan area, and major provinces continue to soar.

Cho Joo-hyun, professor of real estate at Konkuk University, said, "The frequent policy reversals recently show how serious the problems are," adding, "If inconsistent policies increase market confusion, the general public will bear the brunt."

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