[경향신문]

A real estate agency in Songpa-gu, Seoul / Kyunghyang Shinmun Archive

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The enforcement of the revised Housing Lease Protection Act, which includes a contract renewal claim, a price cap for lump-sum deposits (jeonse) and monthly rents, and a mandatory report of houses for rent, is expected to accelerate the transition of jeonse to monthly rents in the housing lease market. As the government tightens regulations on people owning multiple properties in an age of the ultra-low interest rate, it will be difficult for homeowners to use the lump-sum deposit (jeonse payment) to invest in other real estate properties, so there’s no need to hold such large sums of money. Meanwhile, if more homeowners lease homes on a monthly rent, it will put a heavier burden on the tenants, so additional measures are necessary. The government and the ruling party must work to improve the policy to prepare for such movements in the market.

First, it is necessary to adjust the calculation of the monthly rent, which is excessive compared to the market interest rate. When homeowners change the payment of the lease from a lump-sum deposit to a monthly rent, the monthly rent is excessively high when considering the market interest rate. When calculating the monthly rent based on the lump-sum deposit, usually the conversion rate is set at the base rate released by the Bank of Korea plus the rate (3.5%) stipulated in the presidential decree. Since the base rate was 0.5% as of July, the conversion rate should be 4%. This means, if a homeowner wants to receive monthly rent for a home that was once rented for a lump-sum deposit of 500 million won and decides on a deposit of 200 million won, then the tenant must pay a monthly rent of 1 million won. If the homeowner deposits 300 million won in a bank, she would receive a monthly interest of over 200,000 won. So she would be earning a bigger profit by leasing the house on a monthly rent. This means it will be difficult to stop the shift toward monthly rents if the current conversion rate is maintained. The tenant would be paying an excessive monthly rent in an age of a 0% market interest rate.

Another problem is that there are no appropriate means to protect tenants, when the homeowner sets the monthly rent too high. The Housing Lease Protection Act, which stipulates the housing lease conversion rate, is a civil law in the form of a special act. So there is no way to enforce administrative punishment for violations. The tenant must take his case to the Rental Housing Dispute Arbitration Committee or file a lawsuit, but even if the arbitration committee presents a solution, if the homeowner does not accept it, the tenant has no choice but to take the case to court. The government needs to urgently improve the policy so that it can protect the tenants from abusive landlords and strengthen the authority of the arbitration committee by ensuring the validity of the committee’s solution to a level on par with a trial outcome. Civic groups including the People’s Solidarity for Participatory Democracy stressed the need for specific improvements on August 3 because of such concerns.

In the real estate market, a well-intentioned policy can trigger unexpected side effects. The market itself is complex and the interests of the homeowners and tenants are tangled leading to all sorts of expedient measures and irregularities. The new policy measure by the government and the ruling party is headed in the right direction, but it is not enough to stabilize the market. If, in the process of implementation, the measures result in aggravating the burden and inconvenience of tenants, the effects of the measures will be compromised. If holes are expected, the government should rush to fill them. We hope the government and the ruling party will not miss the opportunity to improve the policy.

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