A bill restricting the subjects and prices when private rental businesses sell rental housing has been reintroduced. While the industry notes that some systems are needed to protect tenants, there are concerns that such regulations could lead to a decrease in supply.
According to the National Assembly and the construction industry on the 19th, Lee Kang-il, a member of the Democratic Party of Korea, proposed an amendment to the Special Act on Private Rental Housing on the 21st of last month. The bill includes a regulation that grants tenants of rental housing the right of first refusal when private rental businesses sell privately constructed rental housing, and that the sale price is set at the arithmetic mean of the amounts proposed by the rental business owner and the tenant.
The bill was reintroduced following its withdrawal after being proposed in April. It received criticism for not distinguishing between individual landlords and corporate rental businesses, as it restricts the subjects and prices of all registered rental housing.
Concerns have been raised that setting the sale price through regulation may reduce investment demand and weaken the supply of private rentals. At that time, Lee's office explained, "In provinces where the economy is not doing well, there are many houses operated under rental sales, and in this case, existing tenants should be prioritized when converting to sales after the mandatory rental period, as disputes and conflicts regarding sales prices are frequent, and the intent is to resolve these issues," adding that there was a possibility of misunderstanding as it could be seen as applying to individual landlords, and they would revise it for reintroduction.
After modifying some terms, the bill was reintroduced last month. In particular, the amendment specifies that the target of regulation will be 'privately constructed rental housing,' including not only rental apartments for conversion but also multi-family homes, multi-household residences, and residential officetels built and rented by individuals.
Lee noted, "There is an opinion that the transfer of privately constructed rental housing after the rental obligation period should be left to the discretion of the rental business owner, but existing tenants should be given priority to receive the transfer in order to alleviate tenants' housing anxiety and provide them with the opportunity to secure their own homes," stating that in cases where property is transferred after the rental obligation period, the transfer should be made first to existing tenants and then to public housing operators, and suggesting that matters regarding transfer pricing should be clarified to contribute to the housing stability of low-income households.
Experts say that while some tenant protection is necessary, if prices are determined based on evaluations by appraisal firms, it should not pose a problem, but there are concerns about potential violations of property rights.
Seo Jin-hyung, a professor at the Department of Real Estate Law at Kwangwoon University, said, "If a construction company builds and rents out private rental housing for the purpose of conversion to sales, there should be no major issues in price determination through an appraisal firm," adding, "However, regulating both the subjects and prices of sales itself raises concerns about potential violations of individuals' property rights."
In a situation where concerns about supply shortages in the rental market are increasing following the household debt measures announced on Jun. 27, there are also reactions indicating that if regulations become stricter and the supply of private rental housing decreases, it will ultimately impact those without housing. Go Jun-seok, a professor at Yonsei University, said, "There are concerns that the private rental housing business itself may shrink in the market," and noted, "Although this is a bill aimed at protecting tenants, it may inadvertently lead to increased housing costs for tenants."