Change the lawThe Moon Jae-in administration’s rent policy is sinking deeper into a slump. There is no solution in sight to solve the dire crisis. The government offers to increase mid-sized public rent or stake-holding ownership supplies, which is a long-term measure. It studies tax exemptions for monthly rent income. But that too cannot solve the fundamental problem. Its stalling of announcing a new measure suggests a lack of a convincing or effective solutions.
The government has brought the dilemma on itself. It should increase private rent offerings to help address the shortage. But it cannot suddenly lift loan and tax regulations to bolster supplies after removing incentives for registered rent suppliers and mandated landlords to live in their own homes. If it eases regulations on rent prices, the housing market could be heated again. Regulatory policies on real estate caused such a conundrum in the past.
While the government dilly-dallies amid a lack of solutions, the rent market slips further astray. According to KB Kookmin Bank, the nationwide rent supply-demand index has hit a 19-year high in October. Jeonse (minimum two-year lease) prices for apartments in Seoul increased by 75.17 million won ($66,352) on average over the last two years. Half of the gain was made in the recent three months after the new Tenant Act requiring an automatic two-year extension in the term and annual rent gain capped at 5 percent went into effect. Higher jeonse prices have fanned housing value and also monthly rent fees. The acts aimed at protecting tenants have ended up hardening the lives of people without their own homes.
The problem should be addressed from the foundation. The president suggested fast establishment of the two tenant acts as a solution to stabilize the jeonse market. But the tenant acts have triggered the crisis. The government’s excess meddling on an affair that must be addressed within the market has brought the chaos. The ruling party’s heedlessness by taking advantage of its dominant position in the National Assembly should be blamed.
The government has so far been irresponsible by hoping that the problem will disappear. Without fixes to the measures that only dried up supplies, the crisis won’t stop. It may not be easy to admit to the past mistakes of the government but that’s the only way to pull out of this regulatory mess.