Mending anti-market policies

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Mending anti-market policies

 The road to hell is paved with good intentions. That can directly apply to the so-called “three laws on rent and lease.” The laws allow tenants to renew their contracts after two years and prevent landlords from raising jeonse (long-term deposits) prices and monthly rents. The government should have taken a prudent approach before the legislation, but it didn’t. The Moon Jae-in administration and ruling Democratic Party (DP) were all bent on distorting market principles in their crusade to protect the underprivileged.

Coupled with the requirement for two years of actual occupancy for tax exemptions on real estate sales, the three laws had a devastating impact on the market, as evidenced by a critical lack of apartments for jeonse and drastic hikes in rents. As a result, monthly rents replaced jeonse, a more stable form of renting a home in Korea. The three laws enacted for good reasons ended up making ordinary people’s lives even tougher. An increasing number of disputes between landlords and tenants shows the adverse effects from the laws enacted with good intentions.

President-elect Yoon Suk-yeol’s transition committee has made it official. It is considering the ideas of extending the binding term for jeonse to three years from two years, offering incentives for “good-hearted” landlords, and restoring the landlord registration system.

The three laws should be revised for the better. The now-defunct landlord registration system aimed at providing tax benefits for those who register themselves as working landlords should be restored to help more apartments appear in the market. Market insiders single out the scrapping of the registration system as the worst real estate policy in the Moon Jae-in administration.

The transition committee and new administration must fix all the loopholes from the government’s rush to control the real estate market based on the DP’s super majority in the National Assembly. The committee and new government should be able to calm public and market concerns from their policy shift.

The incoming administration must not make a mistake in revising the three laws so as not to create any innocent victims. The committee announced that it will take into account market conditions and the minority status of the PPP in the legislature at the moment. Any revision of the three laws calls for an endorsement from the National Assembly. At the same time, the transition committee must find out what the new government can do on its own. We hope the DP also helps the conservative administration to stabilize the real estate market effectively.
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