Kim Hyun-mi: "The Jeonse-to-Wolse Conversion Rate of 4.0% Is Too High... Plan to Lower It"

Minister of Land, Infrastructure and Transport Kim Hyun-mi is attending the Housing Supply Expansion Task Force meeting held at the Government Seoul Office in Jongno-gu, Seoul on the morning of the 4th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Moon Hyewon] Kim Hyunmi, Minister of Land, Infrastructure and Transport, said on the 4th, "We plan to lower the current jeonse-to-monthly rent conversion rate set at 4.0%."

Minister Kim made this remark during an appearance on 'JTBC Newsroom' in the afternoon, addressing the recent controversy over the conversion of jeonse deposits to monthly rent.

The current Housing Lease Protection Act stipulates the statutory conversion rate used when changing jeonse to monthly rent. The applied rate is the lower of the two: the rate specified by the enforcement decree (10%) or the sum of the Bank of Korea's announced base interest rate plus the rate set by the enforcement decree (3.5%). The current base interest rate is 0.5% per annum, making the jeonse-to-monthly rent conversion rate 4.0%.

Regarding the difference between the base interest rate and the interest rate, Minister Kim said, "When it was decided to add 3.5% to the base interest rate, the base rate was between 2.5% and 3.0% per annum, but now it is necessary to discuss whether this standard is appropriate," adding, "I think 3.5% is excessive compared to the current base interest rate level, so we plan to lower it."

In response to concerns that the introduction of the rent ceiling system and the right to request contract renewal would increase the conversion of jeonse to monthly rent, he said, "Monthly rent conversion is not possible without the tenant's consent, and since about 50% of jeonse in the metropolitan area and 70% in Gangnam are mostly gap investments requiring large sums of money, conversion to monthly rent will not be easy."

Regarding the disagreement with Seoul City over easing the so-called '35-floor rule' to allow construction up to 50 floors, he explained, "If the area is upgraded to a quasi-residential zone, the relaxation of the 50-floor regulation will apply," adding, "This was a matter on which prior understanding was reached with Seoul City."

When asked about the feasibility of supplying 50,000 housing units through public reconstruction of redevelopment complexes, he replied, "This figure is based on an estimate that about 20% of the 92 project sites will participate," adding, "Many areas inquired during the announcement of public redevelopment, so I believe it will be the same this time. The feasibility of 50,000 units will be judged as the projects proceed."

Regarding the public opposition from the mayor of Gwacheon and lawmakers from Seoul Mapo District, both members of the ruling party, to the government's announcement that day, he explained, "You may recall the strong resistance in Ilsan after the announcement of the 3rd new town last year," adding, "Since consultations were naturally held with the relevant local governments, it is not true that there was no prior discussion at all." He further said, "We will persuade them by incorporating parks or corporate facilities requested by Gwacheon City into the housing complexes as much as possible."