The Democratic Party of Korea has presented an amendment to the Housing Lease Protection Act, allowing tenants to occupy dwellings for up to 10 years, as a vital livelihood agenda, leading to a growing controversy in the market. Currently, the 'two laws on lease' included in the Housing Lease Protection Act consist of the right to request contract renewal known as a 2+2 year renewal, and the upper limit on rent increases during contract renewals. They propose to significantly strengthen this.
In comparison to advanced countries in overseas housing welfare, the average residential period for tenants in South Korea is only 3.2 years, which is why the opposition has proposed the introduction of '10-year jeonse' as an agenda. Previously, at the end of last year, opposition lawmakers, including Yoon Jong-oh of the Progressive Party, proposed an amendment to the Housing Lease Protection Act allowing unlimited use of the right to renew a lease. However, they later withdrew the bill. Despite withdrawing due to negative public opinion, there were theories suggesting that the opposition's proposal for an unlimited contract renewal bill was a strategy to extend the term of the current four-year renewal rights.
Many systems are in place in foreign countries, including some regions of Europe and the United States, to protect tenants' rights. However, most of these policies limit rents under a monthly rental system, making it difficult to compare them with South Korea's unique jeonse system, where no rent is paid. Experts express concern that guaranteeing occupation for over 10 years will drastically reduce the supply of jeonse and increase the volatility of housing prices.
◆ "Excessive restrictions on private property spark concerns over a counterproductive policy"
On the 12th, Lee Jae-myung, the leader of the Democratic Party of Korea, who chaired the livelihood consultative meeting, proposed amending the Housing Lease Protection Act to guarantee lease renewal rights for over 10 years. Experts voiced concerns about possible side effects, suggesting that a policy intended to protect the lower classes could instead lead to greater harm—a 'paradox of regulation.'
Lee Sang-geun, a professor of real estate at Sogang University, stated, "Excessive governmental intervention can distort the market and cause extreme fluctuations in housing prices due to the mismatch between supply and demand in the jeonse market." He added, "A system that prevents the disposal of private property, such as dwellings, for 10 years is bound to produce side effects. I worry that a policy intended for the lower classes might backfire." Lee Chang-mu, a professor of urban engineering at Hanyang University, also said, "If the occupancy period is extended to 10 years, it could result in a serious contraction of housing supply, leading to a shortage that would force tenants to live in smaller and poorer environments while paying the same costs."
Professor Yoo Seon-jong of Konkuk University said, "When the system was improved to allow contract renewals up to 4 years, there was a phenomenon of jeonse prices skyrocketing every four years, and extending it beyond 10 years will likely increase the number of landlords trying to receive the entire 10-year rent increase in one go." Professor Seo Jin-hyung of Kwangwoon University noted, "While it is a long-term lease contract aimed at protecting the lower class, it will ultimately lead to a paradox of regulation that harms the lower class as landlords will avoid investing in repairs or improvements, worsening the residential environment."
◆ In New York City, landlords prefer to keep units vacant due to stabilization policies
Protective measures for tenants are also widely implemented abroad. However, due to the absence of a jeonse system and policies that primarily limit rents, direct comparisons with domestic conditions are challenging. In New York City, a rent stabilization policy is enforced, preventing rent increases beyond the ceiling set by the market for buildings constructed between 1947 and 1974.
From October of last year to September of this year, landlords are allowed to raise rents by up to 2.75% for one-year leases and by 5.25% for two-year leases. However, if the landlord undertakes repairs on the building, the rent can be increased above these limits. Forbes reported, "Many landlords facing rising expenses and revenue limitations choose to leave units vacant rather than re-rent them, resulting in a system where no one benefits."
Germany has been implementing the 'Rental Price Brake' (Mietpreisbremse) policy since 2014. In areas where rents are soaring, new lease agreements cannot increase rents by more than 10% above the current market levels.
Meanwhile, a survey indicates a preference for maintaining the current four-year lease renewal period. In a late 2023 survey conducted by the Korea Research Institute for Human Settlements with 2,000 adults, 54.1% responded that a 2+2 year renewal period is appropriate. Among homeowners, 45.2% agreed on the appropriateness of the 2+2 year period, while 54.5% of non-homeowners also agreed. Responses supporting a 2+1 year period were at 22.4%, while those for a 2+3 year period were at 12.2%.