5-Year Public Rental, Preventing 'Tenant Eviction'

Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Chunhee Lee] Acts by private businesses to evict tenants and sell to third parties for market price gains in 5-year public rental housing subject to sale conversion will be fundamentally blocked.

On the 22nd, according to the National Assembly and the Ministry of Land, Infrastructure and Transport, the ruling party and the government plan to process the partial amendment of the "Special Act on Public Housing," which was introduced by Representative Dong-yong Seo of the Democratic Party of Korea containing such content, within this regular session of the National Assembly. It is known that consultations between the ruling party and the government have already been made regarding the contents of the bill.

The 5-year sale conversion public rental housing system allows tenants to live in public rental housing for 5 years after construction and, if they wish, to have priority in purchasing the housing. However, if the priority sale conversion does not occur, there has been controversy as public rental housing operators such as construction companies or rental businesses have attempted to deprive tenants of their qualifications by abusing the provision that allows selling the housing to third parties.

This is because the sale price at conversion is set at an affordable level based on the average of the supply cost and appraisal value, whereas selling to third parties can fetch market prices. In particular, this problem has been more frequent in 5-year rental housing compared to 10-year rental housing, where the sale price is set slightly below market price.

This amendment fundamentally resolves such issues. Even when selling to third parties, the same price calculation procedure as for sale conversion must be followed. From the operator’s perspective, since there is no profit difference between sale conversion and third-party sales, the incentive to attempt third-party sales disappears.

Related regulations on sale conversion qualifications have also been significantly revised. Basically, the qualification for conversion to ownership is defined as a non-homeowner who continuously resides from move-in to the sale conversion point. If selected as a tenant by a first-come, first-served method, in addition, sale conversion is possible if the housing ownership criteria among the qualifications at move-in are met.

Also, when priority sale conversion occurs, rental businesses are obligated to directly verify the tenant’s residence status. The Ministry of Land, Infrastructure and Transport plans to recognize eligibility if actual residence is confirmed through tenant cards, utility bills, etc., even if the tenant is not registered in the resident registration for the rental housing.

Along with this, a regulation will be established requiring rental businesses to compulsorily report to local governments when selling construction rental housing to other operators. This is to regulate frequent cases where rental housing is sold to other rental businesses after construction to gain market price profits.

Penalties will also be newly established. ▲If sale conversion is made to a person not eligible for priority sale conversion ▲If priority sale conversion is not made to an eligible person ▲If transactions are not made at the sale conversion or sale price, offenders may face imprisonment of up to 3 years or fines up to 30 million won. Additionally, a fine of up to 3 million won will be imposed if the tenant’s residence status is not verified.

According to the Ministry of Land, Infrastructure and Transport, as of the end of last year, there are 60,822 households of 5-year rental housing nationwide. Among them, 55,885 households are managed by private construction companies, 2,946 households by Korea Land and Housing Corporation (LH), and 1,991 households by local governments as project operators.