[BizHankook] A strange scene unfolded during the general audit of the National Assembly’s Land, Infrastructure and Transport Committee on the 23rd. It was not the opposition, but members of the ruling party who demanded that the government overhaul its real estate regulations. Representative Jung Il-young of the Democratic Party of Korea stated, "It is difficult to even find a Jeonse (lump-sum deposit rental) home, and Jeonse prices are rising sharply," and requested a re-examination of the regulations on private rental business operators and the strengthened actual residency requirements. Representative Hwang Hee of the same party suggested relaxing the restrictions on the transfer of membership status for reconstruction and redevelopment projects in speculative districts. Minister of Land, Infrastructure and Transport Hong Ji-sun responded, "I am taking these points very seriously," and "We will review them."
I welcome this scene. It is not because the policy direction has changed; nothing has changed yet. The reason I welcome it is different. It is because those who make policy have finally voiced what the market has been shouting for nearly a year. Acknowledging a problem as a problem is the starting point for all solutions. It is a late but welcome sign of change.
The Minister is right, so regulations must be lifted
Minister Hong stated that the root cause of the Jeonse and monthly rent crisis lies in "supply falling short of demand." I completely agree. This is also what I have been repeating for over 20 years. Ultimately, supply determines both house prices and Jeonse prices. You cannot suppress prices through taxation.
However, if you follow that logic to its conclusion, there is only one outcome: you must remove the regulations that reduce Jeonse supply. Who provides Jeonse units? Excluding new move-in inventory, it is provided by people who own two or more homes, and by rental business operators. These are the suppliers of the Jeonse market. What happens if you impose more taxes on these suppliers, strip away the benefits of registered rental businesses, and force landlords to live in their own homes through residency requirements? Jeonse listings disappear, and the remaining listings turn into monthly rentals. That is the scene we are witnessing right now.
The Minister countered that Jeonse and monthly rental listings are also scarce in regions without these regulations. This is half right and half wrong. The Jeonse shortage in the provinces is the result of a sharp decline in new move-in volume over the past several years. The shortage in Seoul and Gyeonggi is the result of regulations layered on top of a decrease in move-in volume. If you only point out one cause where causes overlap, the prescription will be half-baked. If supply shortage is the root cause, one must distinguish between "move-in supply" that cannot be increased immediately and "rental supply" that can be. The latter can be increased simply by lifting regulations. It costs no money.
"Empty shells" that you are told to sell but cannot
The issue of member status transfers, pointed out by Representative Hwang, is an even clearer contradiction. The government tells multi-home owners to sell their houses. They even promise to open an exit for sales by adjusting tax laws. However, in principle, the transfer of member status is restricted in reconstruction projects within speculative districts after the authorization of the association establishment, and in redevelopment projects after the authorization of the management and disposal plan. Because the member status is not succeeded, from the buyer's perspective, it can become an "empty shell" without the right to move in. Even if one wants to sell, it is difficult to find a buyer.
It is as if they are pushing with one hand and pulling with the other. If the policy goal of pressuring multi-home owners to release inventory is sincere, this is the very first door that must be opened. If inventory in urban renewal zones enters the market, it also helps stabilize prices. It would be ideal if the buyers of such properties were non-homeowners looking for a place to live. As Representative Hwang suggested, creating exceptions based on the buyer's qualifications to allow succession for purchases by non-homeowners and real-demand buyers is sufficiently rational. It filters out speculative demand while giving the market room to breathe.
This regulation was originally created to stop "buyers." But in the current market, it acts as shackles that trap "sellers." If a policy is working against its design intent, it is correct to fix it. The fact that the Minister responded that he would review it is natural, and the faster the review, the better.
We have already learned once
From 2017 to 2020, we conducted the same experiment. We squeezed multi-home owners, stripped away benefits for rental business operators, blocked loans, and bound transactions under a permit system. Over twenty measures were poured out. Everyone knows the results. Apartment prices in Seoul rose sharply, and after the 2020 Lease Laws, Jeonse prices soared. The hypothesis that raising taxes to suppress demand would control prices was already rejected back then.
There is one more fact that was confirmed during that period. Regulation boundaries do not act as price ceilings but rather as locations where prices congregate. Areas designated as regulated zones became "good locations guaranteed by the government," and demand for a "smart single home" flocked there instead. Regulations created polarization. The events that unfolded after reintroducing regulated zones and land transaction permit zones this year are no different.
The most painful point in Representative Jung Il-young's remarks is elsewhere. He said, "What the market hates most is uncertainty," and "If you delay things bit by bit every two or three months, we cannot trust you." This is an accurate diagnosis. The cost greater than the regulation itself is the anxiety of not knowing when or how policies will change. Landlords cannot decide whether to put their homes up for Jeonse, and buyers do not know if they should buy. When everyone waits and watches, listings dry up and transactions stop. In a market where transactions stop, prices are decided by a minority of trades. The price decided in that way is the "record high" we see today.
Welcome, but with three demands
First, it must be a restoration, not a deferral. Deferring actual residency requirements for three months or delaying taxation on rental business operators for half a year is not the way. That sends a signal to the market that "we will tighten things again in half a year." The benefits promised to registered rental business operators should be restored, and the actual residency obligation should be abolished or its scope clearly narrowed. Only when you revert clearly and at once will the market move.
Second, rental supply and move-in supply must be increased simultaneously. Easing private rental regulations is a way to increase Jeonse listings right now, while vitalizing quasi-housing and accelerating urban renewal projects are ways to increase move-in volume in the mid-to-long term. Either one alone is insufficient. The proposal made during the national audit to build 10,000 public rental units on the site of the Seocho-dong legal complex after it is relocated is worth noting in this context. The idea of turning state-owned land in the middle of the city into residential space is correct in itself. However, for 10,000 public rental units to become a solution to the Jeonse crisis in the Gangnam area, the location, supply timing, and rental conditions must match market demand. They must be units that people can actually move into, not just numbers for a press release.
Third, multi-home owners and rental business operators must be redefined as "suppliers," not "enemies." The vast majority of Jeonse supply is handled by the private sector. Unless this fact is acknowledged, no measure can solve the Jeonse crisis. Speculation and leasing are different. A person who buys a house and puts it up for rent is someone supplying rental housing that the public sector cannot. Providing them with reasonable tax systems and predictable rules is the path that benefits tenants.
The market looks at trust, not just direction
Shifting policy is not a defeat. Admitting that something is wrong and correcting it is the most responsible form of politics. I hope the words spoken by ruling party members at the national audit do not end as mere rhetoric for the audit. I hope the Minister's "I will review it" changes to "We will change it like this" before the end of the year.
The victims of the Jeonse crisis are not multi-home owners; they are people without homes. What they want is not a policy that punishes landlords, but a Jeonse home they can move into right now. The fastest way to increase Jeonse homes is right in front of us. We must find ways to increase rental supply without pouring in massive fiscal resources. We just need to untie what has been bound.
The market looks at how trustworthy a direction is, rather than just which direction the government is heading. You cannot buy trust with minor, temporary deferrals. For this shift to be a real shift, it must be bold and clear. As long as you have turned back late, you must go even further.