Minister of Land, Infrastructure and Transport Park Sang-woo said this during a meeting on the necessity and direction of promoting the new type of long-term rental housing, hosted by Kim Jeong-jae's office of the People Power Party, at the National Assembly building in Yeouido, Seoul, on the 17th.
The new type of long-term private rental housing is designed for corporate rental operators to manage more than 100 dwellings for a minimum of 20 years. Depending on the level of regulation applied, it is divided into ▲ autonomous type ▲ semi-autonomous type ▲ supported type. To introduce this so-called corporate long-term rental housing system, amendments to the private rental housing law are needed, which will be discussed in the National Assembly at the end of this month.
Minister Park noted, "Only 20% of the rental housing market is supplied by the public, while the remaining 80% is provided by individuals" and added, "There is currently no specialized or corporate rental housing." He pointed out that tenants burden the risks associated with properties that have become heavily indebted through gap investments, yet do not have many options to move into other homes.
Minister Park projected that if corporate private rental housing through the new type of long-term rental housing is activated, the choices available to the public would increase. Minister Park stated, "I believe that corporations can provide new choices for citizens at turning points such as marriage or retirement, not just by supplying homes but by linking it to residential services."
During the meeting, opinions were expressed that introducing a new type of long-term private rental housing where corporations become landlords could solve the issues of the domestic housing market, which is excessively reliant on Jeonse. It would provide a stable environment that allows for over 20 years of stable residence, so tenants wouldn't need to urgently find another home in response to a landlord's eviction request like they do now. Additionally, it would reduce the risk of not being able to reclaim large deposits from landlords, as seen in the 'Jeonse fraud' incidents.
Professor Ji Gyu-hyun of Hanyang Cyber University diagnosed, "The domestic rental market is at a backward level," adding that "the current domestic housing market has a structure that allows gap investment using Jeonse, and it is causing repeated project financing crises due to reliance on pre-sale housing development projects." He further noted, "There is currently a shortage of housing supply for corporate-type long-term rental housing," and added, "If corporate long-term rental housing is introduced, the dependency on Jeonse and pre-sale systems would decrease, alleviating issues related to Jeonse risks and crises faced by construction companies due to pre-sales."
There is also a view that new type long-term private rental housing may serve as an opportunity to expand choices for the middle class. This housing type allows for specialized services for youth, newlyweds, and the elderly, and it can charge service fees. Professor Ji stated, "Many policies related to housing are often seen as public rental projects. However, there are many vacant areas aimed at the actual middle class. Long-term private rental housing holds significance in alleviating the recurring housing insecurity issues faced by the middle class."
Regarding concerns that rental prices could significantly increase if corporations become landlords, Professor Ji stated, "It is essential to realize the level of rental prices currently affordable for middle-class tenants in a predictable manner over the long term."
The Ministry of Land is currently taking steps to improve various unreasonable systems to increase corporate participation in the new type long-term private rental housing market. The Ministry is easing the existing 10-year rental price regulations for public-supported private rental housing to introduce new type long-term private rental housing. Tax reduction measures, such as exemptions from heavy acquisition tax and comprehensive real estate tax, are also being implemented.
In terms of rental prices, the initial rental price regulations (95% of the market price) are excluded for autonomous and semi-autonomous types under the private rental law. It has also been decided to apply a regulation on the increase rate so that rental prices can be raised to the surrounding market rates when tenants change. However, the rental period of 2+2 years and a 5% cap on the rental increase rate under the Housing Rental Protection Act apply to all types, including autonomous, semi-autonomous, and supported types.
Corporations argued that additional regulatory relief is necessary to enter the long-term rental housing market. Shin Dong-soo, a researcher at the Korea Real Estate Investment Trusts Association, stated, "Like the existing 10-year public-supported private rental housing, new type long-term rental housing must create a long-term holding structure by utilizing Real Estate Investment Trusts (REITs)," and added, "REITs should actively participate from the development stage starting with project REITs."
Jeong Hyun-jeong, Deputy Minister of D&D Investment, said, "Recently, some investors, including pension funds, have shown interest in the domestic rental housing market and made investments, but the reality is that (investments) are still not easy." She continued, "Private rental housing operators face restrictions on the rental increase rate, and there is a perception that it does not keep pace with inflation rates, leading investors to feel that they do not generate revenue, which makes them stingy regarding housing maintenance. Naturally, once the mandatory rental period ends, they tend to sell the properties."
Furthermore, Deputy Minister Jeong explained, "The housing loan-to-value (LTV) regulations make financing difficult, and the excessive deposit priority repayment criteria, known as 'ban-gong-je', reduces lending capacity, indicating a need for improvement. The LTV is intended to regulate housing speculation forces or multiple homeowners, but it is uniformly applied regardless of the nature of the business entity, making it very challenging to proceed with projects."