Passing the Year-End Amid Ruling and Opposition Party Conflicts Over the 'Abolition of Actual Residence Obligation'

The 'Housing Act Amendment' that includes the abolition of the actual residence obligation for houses subject to the price ceiling system failed to pass the National Assembly and will carry over to the next year. It is uncertain whether the ruling and opposition parties will reach an agreement ahead of the general election in April next year.

View of downtown apartments from Namsan, Seoul. / Photo by Yonhap News

According to the National Assembly on the 31st, the Land, Infrastructure and Transport Committee had planned to hold one more subcommittee meeting within the year to discuss the amendment after the failure to pass it at the bill review subcommittee on the 21st, but it was ultimately canceled.

Earlier, the ruling and opposition parties intended to discuss the amendment again on the 27th, one day before the last plenary session of this year's temporary National Assembly. However, on that day, the opposition unilaterally passed the 'Special Act on Jeonse Fraud Amendment,' which nullified the plan to discuss the amendment.

The actual residence obligation is a regulation requiring occupants of houses under the price ceiling system to reside there themselves for 2 to 5 years from the initial move-in date. It was introduced in 2021 to block speculative demand and supply housing focused on actual demand. If the occupant rents out the house or sells it before fulfilling this obligation, they face up to one year in prison or a fine of 10 million won.

In the real estate market, there have been criticisms that this obligation becomes an obstacle for buyers who have difficulty raising the remaining payment and thus rent out the property. Moreover, as the housing market cooled in the second half of last year, the government announced plans in January this year to ease resale restrictions and abolish the actual residence obligation. Consequently, amendments to the Housing Act and enforcement decree were proposed in February, and resale restrictions were eased through the enforcement decree amendment in April. However, the abolition of the actual residence obligation remains pending in the National Assembly amid opposition concerns that it could encourage so-called 'gap investment.'

With only partial deregulation, confusion is arising in the market. Buyers who find it difficult to move in must apply for purchase to the Korea Land and Housing Corporation (LH). LH calculates the purchase price by adding interest based on the average interest rate of bank time deposits to the sale price.

Among apartments subject to the actual residence obligation, about 15,000 units including 'e-Pyeonhansesang Gangil Urban Bridge' in Gangdong-gu, Seoul, will be ready for occupancy next year. Also, Olympic Park Foreon (formerly Dunchon Jugong Apartment), the largest reconstruction complex since the founding of Korea, is scheduled for occupancy in January 2025 and is directly affected by the actual residence obligation regulation, with resale restrictions lifted as of the 15th of this month.

In particular, since the number of units available for occupancy in Seoul next year is expected to decrease by more than half compared to this year, if the actual residence obligation is maintained, the supply of jeonse and monthly rent housing could further decline. Seo Jin-hyung, head of the Fair Housing Forum (professor at Gyeongin Women's University), said, "There is an aspect where confusion has increased due to the government's lack of strategy for deregulation," adding, "Those who trusted the government's words and made transactions should be protected."

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