[REPORTER'S DIARY]Focus on People, Not Builders

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[REPORTER'S DIARY]Focus on People, Not Builders

About a year ago, the Korean-language JoongAng Ilbo published a front-page story on the crisis in rental housing in Seoul and the capital region.

The articles urged the government to redress the inadequate supply of jeonse (lump sum deposit) rental housing available and skyrocketing housing prices. Jeonse rentals require the renter to deposit a large sum of money - hundreds of thousands of dollars for an upscale apartment - with the landlord. The rental fee is the landlord's use of that money.

A year has passed but conditions have grown worse. The problems have spread to other regions of the country, and home prices, which remained relatively stable for years, have risen and put great pressure on those without much money.

Do we really have no appropriate countermeasures? This administration has since 1998 come up with 12 proposals to revive the real estate market. If we examine the proposals closely, they are all focused on pump-priming in order to protect construction companies.

The government removed caps on the sales prices of unfinished apartments, and allowed people to sell their ownership of unfinished apartments, creating a layer of middlemen between the construction companies and genuine house buyers. The government expanded tax and financial benefits for those buying new houses and relaxed qualifications for people to become landlords.

The liberalization of prices of unfinished apartments - to support construction companies in early 1999 - did nothing more than boost house prices, making it more difficult for people to buy their own homes. In Seoul, the price of unfinished apartments went up by an average of 40 percent compared to before the foreign exchange crisis.

Pump-priming measures can be useful, but as the government focuses on helping construction companies overcome their woes, people are suffering - not only from higher house prices, but also from skyrocketing jeonse fees. Many are moving from downtown to the suburbs, from big houses to smaller ones.

This year there has been no low-demand season in the housing market. If the absolute supply of rental housing were insufficient, there would be nothing to be done. But supply is not the problem. More and more landlords are changing contracts from jeonse to wolse (monthly rental), so the gap between supply and demand of jeonse housing is widening all the time.

From one perspective, this is a natural phenomenon in a low-interest era. The long-term decline of interest rates makes it inevitable that fewer landlords want to offer jeonse rental.

However, the government is doing nothing but repeating its old, empty reassurances that the situation will improve after this moving season and that the problems will be resolved as more families move into new apartments.

Oh Jang-seop, the Minister of Construction and Transportation, told construction companies on July 13 that current policies will continue in order to revive the industry this year. It is time for the government to divert its attention from companies to the people, and to tackle housing problems in a serious manner.



The writer is a reporter at the JoongAng Ilbo.

by Hwang Sung-gun

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