Rental Housings That Are Not for Rent

An increasing number of rental apartments are actually being distributed these days rather than being rented.

According to the housing construction companies and the residents of rental apartments, the report released yesterday stated that rental apartments mainly located in the metropolitan area are being sold illegally, which has rapidly increased recently.

The “A” rental apartment located in Jugjon area in Yongin City, Gyeonggi Province, began welcoming its residents from this month. Residents have to pay 174.8 million won as a rental deposit until the actual move-in.

This payment is almost similar to the market price of general apartments, thus it can be considered as the buying price. Some people, by using the regulation that rental apartment can be transferred for sale after two and a half year past the move-in date, receive the money for the apartment in advance under the name of the rental deposit.

In the third round of housing supply in Hwasung City, Gyeonggi Province, the rental apartments with 2,917 units are also included to open at the end of February. However, all of those units will in fact be offered through an illegal form of distribution.

An official of “B” construction company, which is ready to build rental apartments in the Dongtan area, said, “The residents moved into the apartment by paying rental deposits, but they can transfer ownership in two and a half years.” Another person who counsels the sales of “C” company said, “These rental apartments have the same quality as regular apartments, but the initial price is 3∼10 percent lower.”

Since 2002, the number of units for rental apartments in the metropolitan area that have been sold or will be sold improperly is estimated to surpass 10,000.

Korea Land Corporation offers rental apartment site at a price of 60~85 percent of prime cost for housing site under the name of residence and welfare. After all, the rental apartments supported by government are criticized for being sold inappropriately and producing wastes in finances.

The government is planning to build a total of 1.5 million units starting from this year through 2012 in a bid to stimulate the construction industry market and to increase rental housings.

However, as proven in illegal distribution, the construction companies in the private sector are reluctant to rent, which makes it hard to receive the fund. Consumers also want to take this opportunity to buy a house at a good price. In the case of rent of medium-sized apartments in the metropolitan area, it is not sure if there will be enough demand because the rent deposit seems to be higher than one million won a month.

For this reason, the government’s policy to involve private companies in the rental apartments markets is criticized as lacking reality.

“In this situation when private construction companies evade rental business, it will only produce side effects if the government maintains the rental apartment policy,” an official of a public company, who asked for anonymity, said. “The current system that allows to shift monthly payment to rental deposit also stirs up illegal housing distribution.”

Eun-Woo Lee Kwang-Hyun Kim libra@donga.com kkh@donga.com