There are significant fluctuations in the prices of jeonse - homes rented on long-term deposits, one of the biggest influences on working-class families’ quality of life. Seoul has seen its jeonse prices increase by an ever growing gap for the last 55 consecutive weeks. The South Korean housing market is running right against the expectations of the ruling Democratic Party of Korea that is currently in a hurry to expedite the process of putting the three major laws regarding rent and lease in place and President Moon Jae-in who has asked for swift legislation.
Real estate gurus attribute the rising jeonse prices in the South Korean housing market to a series of failed policies. A policy package of housing market regulations was announced on June 17, by which owners must live two years at their properties, if they are subject to reconstruction. In turn, owners had their tenants leave so that they could move in to meet regulatory obligations, thus leading to shortages of jeonse arrangements available on the market. As the South Korean administration and the ruling Democratic Party attempt to make sure that the National Assembly passes the three major rent and lease bills regarding the contract renewal claim right of tenant, caps on monthly rents and jeonse, and declaration of monthly rents and jeonse within July, homeowners are getting more anxious and worried about what comes next over time. Even some homeowners who have rented their houses at fairly reasonable prices are starting to increase jeonse deposits by a large gap due to the rumor that a bill may pass the National Assembly to keep rents at bay at least for four years. Others demand a monthly rent added to the existing jeonse deposit to lessen their burden of the spikes in property taxes and comprehensive real estate holding taxes.
With tight housing policies met with growing public criticisms, the ruling party is pushing forward with tougher ones to drive homeowners into greater trouble. Floor leader Kim Tae-nyeon of the Democratic Party of Korea said a few days ago that the three major laws may apply to the existing housing contracts retrospectively, according to which homeowners must not increase rents by more than five percent a year. Democratic lawmaker Lee Won-wook proposed a bill to stipulate that homeowners may be able to raise rents by up to the Bank of Korea’s benchmark interest rate (currently 0.5 percent) plus three points in the event that they seek to find a new tenant after the existing jeonse contract expires. Ruling party lawmaker Yun Ho-jeong submitted a bill to allow municipal government leaders to set standard rent ranges in their jurisdictions.
The South Korean government and the ruling party only fuel confusion and instability throughout the housing market by pouring out all the coercive measures that run counter to market principles. They seem to have a long way to go to stabilize the market. Added to that, they even make us think of their policies as a mere backlash against the market. Failed policies are being replaced with tougher but more hopeless ones. It is questionable that the administration and the ruling party have ever listened to housing market experts who argue that it may be illegal to apply the new laws retrospectively to rent and lease contracts that have already been in effect. If new policies keep sending a warning message to the market that owners of multiple houses must sell their properties, it only proves that policymakers do have little understanding of the country’s rent and lease market. The government changed its word from phasing in the three major rent and lease laws almost two years later to accelerating the legislative process, only driving up uncertainties over jeonse prices and burdening tenants more heavily. Their failures in housing policy will come back to haunt the government and the ruling party.