The government is reportedly considering reducing various tax breaks for private rental homes. Land, Infrastructure and Transport Minister said on Friday, “We think that tax benefits for registration of (private) rental homes are excessive to some extent, and thus are considering making some adjustment.” The minister, who submitted last month a bill to amend the tax law to give various tax benefits to home owners that register for housing rental business, has thus shifted policy direction less than one month since due to soaring housing prices in Seoul and some parts of the Greater Seoul region.
The Economy and Finance Ministry, which is actually in charge of tax policy, said, “This will cause distortion in the real estate market,” which suggests that the suggested change of policy direction has not been sufficiently discussed even within the government. It was none other than the ministry that suggested provision of generous benefit to owners of registered private rental homes.
The portion of the Korean population who live in their own home stands around 60 percent, which means four out of 10 households are tenants. In Seoul, the ratio of tenants is even higher at 57 percent. Due to insufficient supply of public rental homes, 70 percent of those tenants are living on jeonse (long-term home lease for lump sum key deposit) homes or monthly rental homes, which are leased by private home owners. For this reason, tenants often face conflict over rent price due to price hikes and are forced to move at every lease term of two years, an issue that has long been considered a serious social problem in Korea.
The galvanizing of private rental homes is a policy that the government has been trumpeting as a measure to ensure co-existence of home owners and tenants by saying it helps ease the problem. This is a policy focused on stabilization of housing conditions for tenants, irrespective of fluctuation of housing prices. We can hardly find justification for Minister Kim’s remarks suggesting a revision to the measure, which has yet to be implemented, in order to curb runaway housing price.