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One loophole after another

Published: 25 Aug. 2020, 19:53

The real estate bills railroaded through the National Assembly by the ruling Democratic Party (DP) have a plethora of loopholes. The government and the DP pressed ahead with those controversial bills like a military operation in order to “stabilize the heated real estate market and protect the rights of people without homes.” The loopholes may be an inevitable offshoot of the DP’s rush to pass the bills without going through screening by the Legislation and Judiciary Committee and other normal procedures.

For instance, confusion is deepening over the government’s price cap on jeonse (long-term rent with lump-sum deposits) and monthly rents. The revised law on rents and leases put a maximum 5 percent cap on rent hikes, while allowing landlords and tenants to determine the exact rate of price increases on their own. As a result, even if landlords demand from tenants a rate increase within the 5 percent ceiling, landlords can hardly extend their leases as long as tenants don’t accept it. The Land Ministry’s guidelines stipulated that tenants don’t have to comply with their landlords’ demand for a rate hike when the need arises. That’s the same as reverse discrimination for homeowners.

Confusion is also unavoidable over a renewed contract without a written agreement between landlords and tenants. In that case, tenants did not exercise their rights to request a renewed contract, the Land Ministry says. If so, tenants are entitled to reside in a rented house for up to six years, as they can exercise their rights to renew a contract for four years — as guaranteed by the revised law — after the current two-year contract is over. That’s also overly disadvantageous to homeowners.

Should such a disparity necessarily benefit tenants? The answer is no. If rent fees are frozen for four years as the revised law allowed, homeowners will certainly raise rent fees in advance. Tenants could have more trouble finding places as homeowners will be reluctant to lease their houses.

The government’s overbearing approach to the real estate market has triggered disgruntlement. For instance, after enforcement decrees changed as a result of the revision, a husband and wife who jointly own a house must pay more comprehensive property taxes now than a husband who owns a home on his own — even though jointly-owned houses cannot get tax deductions at all.

Nevertheless, the government is sure of success in its policies. Reality may be otherwise, as seen in continuously rising apartment prices. If the government does not change course, it cannot avoid criticism of its ever-divisive real estate policies.