DP bills will hurt, not help, tenantsThe government and ruling party have forced through controversial bills aimed to enhance the rights of tenants. The bills easily passed the Land and Transportation Committee and Legislative Committee, both dominated by ruling party members. The rent market responded. Landlords hurriedly took back rent supplies, as they cannot afford to rent their units. Prices are capped for at least four years under the automatic two-year renewal of two-year jeonse contracts. The new rules will also subject landlords to a jump in property tax bills following recent hikes.
New units have become scarce at Eunma Apartment, a popular rental area due to its proximity to good schools and after-school cram academies. Rents available have risen by 100 million ($83,963) to 200 million won over a few days. Tenants in Seoul were able to live comfortably, as about 62 percent of housing units were available as rentals. But housing costs will jump if new legislation wipes out rental supplies.
Side effects are inevitable, as the government has railroaded the bills through the General Assembly without careful preparation. Rents must be registered in order for the lease renewals and price caps to work. There must be data on rent prices and lease periods to protect the tenants. But the Land Ministry won’t be able to receive registration until June 2021, as it still lacks such database. The ruling party plans to put the mandates on lease renewal and price caps effective next month. Conflicts could occur between landlords and tenants until the database becomes available.
A bigger concern is price distortion. Since there is no accurate database amid a dire shortage of rents, landlords can sign leases with new tenants at sharply higher prices. The legislation could make the lives of tenants more difficult instead of protecting them.
Still, the ruling party is carefree. Rep. Lee Won-wook of the Land and Transportation Committee reasoned that price hikes could be temporary, like 31 years ago, when rental prices soared by 15 to 20 percent after the legal jeonse (lease) contract period was increased from one-terms to two years. He casually said tenants could choose shorter monthly rents over long-term leases.
While the ruling party shows off its muscle through its majority in the legislature, people could lose their basic rights to residential stability.