[7·10 Real Estate Measures] 'Deemed Rental Housing' Ultimately Abolished... Existing Operators Retain Tax Benefits

Encouraged Registered Rental Housing, Ending Controversy
No Retroactive Application for Existing Operators... Benefits Until Cancellation
Accelerating Lease 3 Laws... Kim "Will Gather Wisdom"

Minister of Land, Infrastructure and Transport Kim Hyun-mi is answering reporters' questions after announcing a comprehensive real estate plan including strengthening the comprehensive real estate holding tax for multi-homeowners at the Government Seoul Office in Jongno-gu, Seoul on the 10th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Moon Jiwon] The registered rental housing system is ultimately heading toward abolition. The government has decided to abolish the 4-year short-term registered rental and extend the mandatory rental period of the 8-year long-term rental to 10 years, excluding apartments from the purchase rental target. However, tax benefits for existing registered rental housing under current rental operators will be maintained until the registration is canceled.

The Ministry of Land, Infrastructure and Transport announced this policy on the 10th through the 'Supplementary Measures for Housing Market Stabilization.'

First, the government decided to abolish the short-term rental (4 years) and the 8-year long-term general purchase rental system for apartments. Accordingly, even if short-term rentals are newly registered or converted to long-term rentals, tax benefits will not be granted. Long-term rental types such as villas, excluding apartments, will be maintained but the mandatory period will be extended from 8 to 10 years.

Registered rental housing sets a mandatory rental period of 4 or 8 years, during which rent increases are limited to a maximum of 5%, in exchange for tax benefits such as comprehensive real estate tax and capital gains tax.

The government has strengthened benefits for registered rental housing over the past three years to stabilize housing for low-income households, but the industry has criticized that it has been abused as a tax-saving tool by multi-homeowners, fueling housing price increases.

In particular, as the ruling party and government recently pushed the so-called '3 Rental Laws'?the Jeonse and Monthly Rent Reporting System, Rent Ceiling System, and Contract Renewal Request Right System?to curb soaring Jeonse prices, the justification for maintaining the existing registered rental housing system has disappeared. If all three laws pass in the National Assembly, the difference between registered rental housing and existing housing will almost disappear.

Registered rental housing by rental operators is automatically deregistered once the mandatory rental period expires. Houses that have passed the minimum mandatory period will be subject to deregistration as soon as the law is amended.

Even before the mandatory rental period ends, if the rental operator voluntarily requests deregistration, deregistration will be allowed without imposing fines for violating the mandatory rental period. Currently, deregistration is only possible if voluntarily requested within one month after registration.

Retroactive application to existing rental operators, which was problematic, will not be implemented. Accordingly, existing rental operators can continue to receive tax benefits until the time of deregistration.

According to the Ministry of Land, Infrastructure and Transport, as of the end of May, 387,000 registered rental units have expired rental periods, and this is expected to increase to 480,000 units by the end of the year. Among these, about 120,000 units are apartments. The ministry expects that most of these 120,000 units will likely be released to the market once the rental period ends.

Minister Kim Hyunmi of the Ministry of Land, Infrastructure and Transport said regarding the 3 Rental Laws, "We will work with the Ministry of Justice, the competent ministry, to ensure the bills pass smoothly," and added, "There are concerns that rents might be raised in advance or that there are factors causing instability in the market, so it is important to manage the system to prevent tenants from suffering damages when it is introduced."