[In-Depth Review] Abolition of Purchase-Registered Rental and the Jeonwolse Market

Senior Research Fellow Kim Deokrye, Korea Institute of Housing and Urban Research

Kim Deok-rye, Senior Research Fellow at the Korea Institute of Housing and Urban Research

The purchase rental registration system is on the path to being abolished. The rental housing registration system was introduced to stabilize the monthly rent and deposit market for low-income households. In the early days of the government, it was announced that a system foundation would be created for tenants and landlords to coexist, and in December 2017, the "Plan to Revitalize Rental Housing Registration" was also announced.

However, the government policy did not last even a year. With the announcement of the September 13 measures (2018) and December 16 measures (2019), the benefits given to registered rental business operators were reduced, and in last year's July 10 measures, it was declared that existing registered rentals would be automatically deregistered upon the expiration of the minimum rental obligation period, effectively declaring the abolition of the rental housing registration system. This was concretized in the recent National Assembly policy of "Abolishing New Purchase Rental Registrations and Voluntary Deregistration."

The system introduced to stabilize monthly rent and deposit for low-income households is being phased out as it is pointed out as a major cause of rising housing prices. Whether abolishing the purchase rental registration system will stabilize housing prices remains to be seen.

People live under various rental arrangements. Those living with monthly rent without a deposit, saggeulje (monthly rent with small deposit), or yeonse (yearly rent) are more vulnerable housing groups than those living with jeonse (key money deposit) or monthly rent with a deposit. Most of them live in private rental housing.

Analyzing the 2019 Housing Survey, out of a total of 19.94 million households, about 7.59 million are tenant households. Among these 7.59 million households, 86.5% live in private rental housing. When classified by rental type, 94.9% of jeonse households, 77.8% of monthly rent with deposit households, 99.9% of monthly rent without deposit households, 99.3% of saggeulje or yeonse households, and 100% of ilse (daily rent) households live in private rental housing. Meanwhile, households living in public rental housing are about 3.6% of jeonse households and 19.8% of monthly rent with deposit households.

Thus, the monthly rent and deposit market, which accounts for 38.1% of the entire housing market, depends 86.5% on the private rental market. This is why if the private rental market collapses, tenant households will inevitably face difficulties.

The private rental market consists of housing provided by registered rental business operators and unregistered multi-homeowners. Considering this, the National Assembly's policy to abolish purchase rental registration in the future will inevitably affect the housing situation of tenant households living in private rental housing.

Especially since most monthly rent without deposit households, saggeulje, yeonse, and ilse households live in private rental housing, the impact is expected to be greater.

In Seoul, 100% of monthly rent without deposit households, saggeulje, and yeonse households live in private rental housing, and the types of housing they live in are mostly non-apartment types such as detached houses, row houses, and multi-family houses. Among the housing supplied as private rental housing, apartments account for about 50-70%, but non-apartments account for 95-100%.

In conclusion, if the government policy adopted as a solution to the housing price problem caused by the rapid rise in apartment prices abolishes the purchase rental housing registration system and excessively regulates multi-homeowners, causing them to give up private rentals, then monthly rent without deposit households, saggeulje, and yeonse households living in non-apartment housing with weak purchasing power may face greater difficulties. We hope the sharp focus on the private rental housing market will be eased.