President Lee Jae-myung signaled a reduction in tax benefits for registered rental business operators. The move is intended to prompt landlords to put the dwellings they are renting on the market, but critics say this could push already rising jeonse and monthly rents in Seoul even higher amid a shortage of listings. If rental dwellings priced at 60% to 70% of market rates, where tenants can live stably without fear of eviction, disappear, housing insecurity for low- and middle-income residents could worsen.
According to real estate platform Asil on the 11th, as of the previous day there were 20,570 Seoul apartment jeonse listings, down 12.4% from Aug. 15 last year (23,458). Jeonse listings fell in order in Seongbuk District (-72.3%), Jungnang District (-67.8%), Dongdaemun District (-55.8%), Seodaemun District (-52.7%), and Eunpyeong District (-50.5%). Seoul apartment monthly rental listings also fell 2.4% over the same period, from 19,526 to 19,072.
As listings shrink, average jeonse and monthly rents are rising. According to Real Estate R114, last month the average jeonse price for Seoul apartments was 20.99 million won per pyeong (3.3㎡), up 0.47% from the previous month. Jeonse prices have risen for six consecutive months since July last year, gaining 2.54% over half a year. By district, Seocho District posted the highest increase at 3.96%, followed by Gangnam District (3.66%), Gwangjin District (3.60%), Yongsan District (3.41%), and Songpa District (3.15%). The average monthly rent for Seoul apartments also rose by more than 100,000 won over one year. According to the Korea Real Estate Board (REB), the average monthly rent for Seoul apartments climbed 9.9% from 1.34 million won in January last year to 1.47 million won in December.
In this situation, if registered rental listings also decline, jeonse and monthly rents are likely to rise sharply. Earlier, on the 9th, the president mentioned scaling back or eliminating the exclusion from capital gains tax surcharges for purchase-type registered rental business operators. Purchase-type registered rental operators buy existing dwellings, register them, and rent them out—a system introduced in 2017 under the Moon Jae-in administration. In return for capping rent increases within 5% and offering leases of up to eight years, the government provided tax benefits such as exclusion from comprehensive real estate tax aggregation and exemption from capital gains tax surcharges. However, amid criticism that the benefits were excessive, they were reduced, and in Aug. 2020 registration for purchase-type rental dwellings in apartments was halted. Short-term registered rental dwellings were also abolished, but last year they were revived only for non-apartment types such as multi-household dwellings and low-rise apartment.
A real estate expert who requested anonymity said, "Policies and systems should be improved after carefully examining both their effects and side effects from multiple angles, but the president is focused only on bringing multi-homeowners' properties to market, without considering worsening tenant housing insecurity and rising jeonse and monthly rents," adding, "This overlooks the policy's stated aim of 'stabilizing housing for low- and middle-income residents.'"
The expert also noted the policy's effect would be minimal. The expert said, "For purchase-type registered rental business operators in the greater Seoul area, the tax benefit threshold is an officially assessed price of 600 million won or less (300 million won or less outside the capital area), and most rental dwellings that meet this condition are in the outskirts of Seoul, not in the three Gangnam districts or the Han River belt where the president is trying to lower home prices," adding, "If the expectation is that rental listings will surge and bring down apartment prices in the three Gangnam districts and in Mayongseong (Mapo, Yongsan, and Seongdong districts), there will be no effect."
Seong Chang-yeop, head of the Korea Rental Housing Association, said, "More than half of households in Seoul live as tenants, and from their perspective, 40,000 rental dwellings priced below market rates would disappear," adding, "In the end, tenant households will inevitably suffer more due to rising rents." According to the "2024 Seoul housing status survey" that the Seoul Metropolitan Government released late last year, 53.4% of households in Seoul live in jeonse or monthly rentals. The share of households living in owner-occupied homes was 44.1%.
A person surnamed Kim (37), who lives in a Seoul apartment rented out by a registered rental business operator, said, "I have been living for three years in a home with a jeonse price 200 million won below market. I am satisfied because there is no anxiety about the deposit suddenly jumping or having to leave the home due to unforeseen circumstances, but if the landlord sells this home, I will have to look for another, more expensive jeonse," adding, "The government is not at all considering the damage that low- and middle-income people, who inevitably live in jeonse or monthly rentals, will suffer."
Registered rental business operators are also voicing significant discontent. On the Korea Rental Housing Association website and community forums, posts read, "If a tenant exercises the right to renew the contract, we can't even sell—what are we supposed to do?" and "I'm a 70-something livelihood-type rental operator—how am I supposed to live?"