[Exclusive] Tax Benefits for Charging 60% of Actual Transaction Price as Rent... Opposition Proposes 'Standard Rent' Bill

Proposal by Kim Du-kwan, Democratic Party Lawmaker
Current 5% Limit on Rent Increase Alone
Makes Negotiating Fair Rent Difficult During Housing Price Decline
Can Prevent Surge in Gap Speculation and Empty Lease Cases

Kim Du-gwan, member of the Democratic Party of Korea./Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Koo Chae-eun] The Democratic Party of Korea is reintroducing the ‘Standard Rent’ bill, which was discussed two years ago but failed due to opposition from the market.

The core of the bill is to set the rental deposit standard within 60% of the official housing price or actual transaction price, and to provide tax benefits to landlords who adopt this system. Unlike the bill proposed two years ago, this approach grants landlords a ‘choice’ and offers incentives.

On the 19th, the office of Kim Doo-kwan, a member of the National Assembly’s Land, Infrastructure and Transport Committee from the Democratic Party, is pushing a bill (amendments to the Special Act on Private Rental Housing and the Housing Lease Protection Act) that applies the rental deposit of real estate lease contracts to be within 60% of the official housing price or actual transaction price announced every January 1. It also limits increases upon renewal to within 60% of the actual transaction price or the official housing price of the relevant year.

The purpose is to prevent phenomena such as gap speculation, where jeonse prices exceed 80-90% of the sale price, or ‘empty shell jeonse’ where the jeonse deposit rent exceeds the sale price.

The bill goes a step further than the ‘Standard Rent’ introduction bill (amendment to the Basic Housing Act) previously proposed by fellow party member Yoon Ho-jung in 2020. At that time, provincial governors were to calculate appropriate rents considering housing location and size. However, it failed to gain traction due to controversies over uniform price regulation, infringement of private property rights, and criticisms of being a socialist system.

[Image source=Yonhap News]

This bill gives landlords a choice. It is neither mandatory nor compulsory. When reporting a housing lease contract, landlords indicate whether they apply for ‘Standard Rent Landlord’ status, and tax benefits are granted only for those contracts. The bill also includes provisions to revoke tax benefits previously applied to housing rental business operators and to provide property tax, comprehensive real estate tax, and capital gains tax benefits to landlords adopting the standard rent system. The scope applies to all residential real estate with rental deposits under 700 million KRW.

Rep. Kim said, “In 2020, the term ‘standard’ was perceived as a uniform regulatory measure, so proper discussions did not take place and the topic was shelved.” He explained, “The Korean-style standard rent prepared this time is designed considering the unique housing system of jeonse in Korea.” He added, “The standard rent is set annually based on the official housing price, and some tax benefits are given to landlords who adopt it. Practically, it will initially run alongside existing private rental regulations but is intended to guide the market toward a standard rent system in the long term.”

However, if the bill is implemented, existing landlords’ tax benefits may decrease, and market backlash regarding the validity of the standard rent calculation criteria is expected. Seo Jin-hyung, co-representative of the Fair Housing Forum and professor of MD Product Planning and Business at Gyeongin Women’s University, said, “There are many objections even to the official land price, so conflicts over the fairness and reliability of the standard rent calculation may arise.” He added, “It is necessary to gather public opinion on whether price regulation of rental housing aligns with market economic principles and whether there are constitutional issues.”

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