SK D&D and KT Estate, among other corporations engaged in business rental housing, are facing criticism that the restrictions on rental increases are excessive. As the rental increase is limited to the level of inflation, they are reportedly using 'desperate measures' such as initially setting rent somewhat high while actually providing rental waivers of up to 5 months.
According to industry sources on the 2nd, SK D&D is offering up to 5 months of rent-free benefits at its operational 'Episode Gangnam 262'. In the case of Episode Gangnam 262, monthly rent is priced between 1.4 million won and nearly 4 million won, depending on room type, size, contract period, and deposit. It is the most expensive private rental housing operated by SK D&D, which was completed in November 2021. It consists of a total of 101 units and is located in Seocho-dong, Seocho-gu, Seoul.
The monthly rent of 'Episode Gangnam 262' is somewhat higher than market rates. According to the real estate platform Dabang, the average rent for a one-room apartment in Gangnam-gu was recorded at 920,000 won as of June. This is the highest level among Seoul's 24 districts, assuming a monthly deposit of 10 million won. In the case of Episode, residents must also include expenses for shared spaces and community services. SK D&D is currently applying up to 5 months of rent-free benefits at Episode Seocho 393 (rent ranging from 1.4 million to nearly 3 million won) and up to 3 months at Episode Yongsan 241 (ranging from nearly 900,000 to mid-3 million won).
In the industry, it has been pointed out that corporations engaged in rental housing have no choice but to initially set high rents due to the limitations on rental increases. Currently, the rental increase for corporate private rental housing is capped at the rate of change in the residential price index. According to Article 44 of the Special Law on Private Rental Housing and Enforcement Decree Article 34-2, the rent for private rental housing complexes with more than 100 units cannot exceed an increase set by presidential decree, which considers the residential price index, the rate of change in nearby rental prices, and the number of rental housing units, and is limited to a range of 5%.
A representative from the rental industry noted, 'Because the rental increase rate is limited to within the rate of inflation, the rental increase during renewals is only 1-2%.' He added, 'This is a common concern for those operating corporate rental housing, as they have to keep initial rent high relative to the market and apply rent-free benefits, which effectively lowers the rent.'
KT Estate is also providing rent-free benefits for its operational rental housing. The 'Remarkable East Pole' which started moving in last April offers 1 month of rent-free rent, ranging from 970,000 to 2.4 million won. Located in Jayang-dong, Gwangjin-gu, 'Remarkable East Pole' consists of a total of 282 units. In the case of 'Remarkable Dangsan', which operates under KT Estate's 'Remarkable' brand and is managed by Pacific Asset Management, rent-free benefits are applied for 2 to 4 months depending on the type.
Operators of corporate rental housing explained that the 'rent-free benefit' is merely a promotion offered at the time of contract.
A representative from SK D&D stated, 'Unlike general rental housing that only provides private spaces, we include shared spaces, security, and community amenities in the expenses when determining prices.' He noted, 'Promotions vary by timing.'
A representative from KT Estate mentioned, 'While it's true that we cannot raise rents to the level of the residential price index, we do not deliberately set initial rents high.' He added, 'Taking into account the facilities and community amenities that are well-equipped compared to general officetels and rental housing, we have assessed the business viability.'
There are claims in the industry that corporate rental housing is being highlighted as an alternative to the housing fraud and the rise of monthly rents, and that excessive restrictions on rental increases should be adjusted. Last year, the Ministry of Land, Infrastructure and Transport announced a goal to supply 100,000 long-term rental housing units annually for 20 years until 2035. This plan also includes cases where, as long as rental guarantee subscription and reporting of rental contracts are adhered to, the rentals are not subject to regulation. However, in this case, government support (such as fund contributions and loans) will be limited.
An industry representative remarked, 'Given the recent rapid transition from jeonse to monthly rents due to lending regulations, there is a need to relax the rental regulations previously applied to corporate rental housing.' He added, 'This would ensure that operators can secure profitability and expand supply.'