Long-term policies for rent crisis

Rising rent, consumer prices and household debt are a triple whammy for the economy. They put the government in a sticky position as it has maintained loose monetary and strong currency policies in order to ward off damage from the global financial crisis.

But stopgap measures won’t solve the problems. The government must re-examine its overall economic policy line. The rent debacle, in particular, should be revisited in consideration of the long term.

Three key factors are behind the worsening rent crisis.

First, families now tend to prefer renting rather than purchasing homes, due to a lethargic real estate market and expectations of cheaper prices down the road. Second, due to stalled housing redevelopment projects, supply has decreased, despite strong potential demand. Third, those who have purchased homes on low interest rates have opted to put them up for two-year or monthly rents to buy time until housing prices recover.

The government has made several gestures to stabilize the rental market. This year, Seoul introduced measures to extend loans for renters and tax breaks for landlords to encourage them to lower rents. The measures have been in vain.

The government instead should return to basics. President Lee Myung-bak had been right in pursuing housing policy to make homes a place to live, not own. However, the government has concentrated on only increasing the supply of affordable housing instead of meeting the growing demand for rental units.

The rent crisis won’t improve until the demand for homes is sufficiently met. The government should accelerate redevelopment and renovation projects in urban and satellite cities. The supply of affordable public housing should instead give way to cheaper and longer-term rental units for non-home owners.

The government should also come up with workable ideas that can produce results in two to three years. The rent crisis may have peaked. The government needs to put real estate policy on the right track by fixing the imbalance in supply and demand.

But ideas like simply offering more loans for renters and encouraging home purchases are irresponsible. There are people without homes because they cannot afford sky-high rent prices.

A public-friendly policy should start with affordable homes for low-income people.