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(EDITORIAL from Korea Herald on March 31)

All News 07:04 March 31, 2022

Cooperation put to the test
Transition team to downscale or abolish three housing lease laws

The presidential transition team decided it wants to scale down or abolish three controversial laws on housing leases, but the Democratic Party of Korea opposes the plan.

The team said Tuesday it would try to persuade the party, but rough negotiations in the National Assembly look inevitable, because the opposition DP holds a legislative majority.

The real estate policies of the Moon Jae-in administration have failed on the whole. This is a result of approaching property issues ideologically. It divided people by homeownership and treated homeowners and landlords like exploiters of the houseless and tenants, dropping tax bombs and tightening regulations. The housing lease laws are one of such regulations.

Fortunately, the transition team targeted the laws as the main culprit behind the confusion in the housing lease market and decided to fix them. It is the right direction. The Ministry of Land, Infrastructure and Transport briefed the team to the same effect.

The three laws were enacted by the DP unilaterally in July 2020. Under the laws, tenants can renew two-year contracts once if they want, unless landlords move into their rented houses. Landlords cannot raise jeonse prices or rents by more than 5 percent when they renew contracts. They are also required to report information on contracts to the government. Jeonse is a rental system specific to Korea. Instead of paying rent regularly, a lump sum is paid to the landlord and returned to the tenant when the contract expires.

At the time of enacting the laws, opposition party lawmakers and experts warned that jeonse houses would decrease and jeonse prices would soar. But the DP ignored the warning and pushed ahead with the legislation.

Warnings became a reality. Jeonse houses diminished, jeonse prices jumped, and landlords converted jeonse into monthly rents. The increase in jeonse prices in Seoul, which moved below 3 percent from 2016 to 2019, soared to 23.8 percent for the recent two years. The laws were made to protect tenants, but they were distressed. Landlords are dissatisfied, too, at contract renewal restriction and jeonse price ceiling.

There is a concern in the market that jeonse prices and monthly rents may soar again in July. Landlords will likely let contracts expire for those tenants who renewed them once in late July two years ago when the new laws went into effect. Landlords will seek new tenants after raising jeonse or rents sharply to compensate for opportunity costs due to price ceiling.

The laws must be mended before a problem breaks out. And yet the DP opposes mending the laws. Rep. Yun Ho-jung, chairperson of the DP's emergency planning committee, said that the laws must not be repealed.

Real estate policies produced wide and deep side effects. They were one of major election issues that made many vote against the Moon administration. The party admits that. Its candidates lost Seoul and Busan mayoral by-elections last year and the presidential election this year.

Some DP lawmakers see the necessity of modifying the laws. It is up to lawmakers to abolish or downscale the three laws. Cooperation of the party is essential to mending them.

The transition team plans to push to fix the laws in stages, out of consideration of the DP's parliamentary majority. Amending the three lease acts is the first step to normalize the distorted real estate market. Revision is needed to solve other interlinked problems such as steeply increased holding taxes and soaring home prices.

Considering that housing leases are a matter closely related to the livelihood of the public, the party must cooperate in working out reasonable alternatives.

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