"Legislative Research Service Proposes Improvements to Housing Subscription for Single-Person Households and Foreigners' Real Estate Regulations"

Analysis Report on Key Issues of the National Assembly Inspection

In June, apartment gifts in Songpa-gu, Seoul, increased to an all-time high. The rise in gift transactions is interpreted as multi-homeowners with high-priced apartments rushing to gift homes to their children in response to the government's strengthened taxes, including property taxes. The photo shows apartments in the Songpa-gu area on the morning of the 1st.

The National Assembly Legislative Research Office, the only government policy research institute in Korea, has drawn attention by proposing improvements to the subscription system for young adults starting their careers and regulations on foreign real estate acquisitions, among other real estate policy reforms. This is interpreted as a measure to soothe the angry public sentiment over real estate, as market instability such as rapid house price increases continues despite the government's 26 real estate measures and repeated requests to refrain from speculative buying.

According to the issue analysis report on the Land, Infrastructure and Transport Committee released by the Legislative Research Office on the 3rd ahead of this year's government audit, numerous criticisms of the current government real estate policies and proposed amendments were included. This report is a carefully selected summary of audit topics that the Legislative Research Office recommends focusing on during the audit, provided to all National Assembly members' offices as basic reference material for the audit.

First, the Legislative Research Office suggested improvements to the subscription system and provision of housing finance for socially vulnerable groups in real estate, such as young adults starting their careers and single-person households. The office stated, "Despite the increasing trend of single-person households, existing housing policies focus on multi-person households," and called for improvements to the subscription system as one of the measures for these groups. Under the current subscription point system, the score for the number of dependents (up to 32 points) accounts for the largest portion (38%) of the total points. Newlyweds and single-person households with fewer dependents are practically unable to win subscriptions. The office proposed, "The point system should diversify its categories or reduce the weight of the number of dependents to lessen its impact," and added, "Consideration of dependents can be supplemented through special supply systems."

The surge in fraudulent subscriptions due to the so-called ‘lottery subscription’ phenomenon was also highlighted. As speculative demand aiming for capital gains flows into the subscription market, overheating occurs along with fraudulent activities such as subscription account trading, qualification transfers, and false residence registrations, which ultimately harm genuine demanders. The Legislative Research Office pointed out, "Local governments should activate continuous crackdowns, impose strong penalties when fraudulent subscriptions are confirmed, and strengthen guidance and supervision of project operators."

The ‘sudden pauper’ phenomenon, where asset gaps widen to an unbridgeable level due to soaring housing prices, was also identified as a serious issue. The office noted, "The possibility of home purchases for low-asset households such as newlyweds and young people is decreasing, causing an increasing asset gap between homeowners and non-homeowners," and emphasized the need for discussions on a housing supply system that alleviates the burden on non-homeowners.

Criticism was also raised that the special housing supply system for policy-favored households is out of touch with reality, with multi-child families as a representative example. For families with three or more children, special supply is provided for houses under 85㎡ exclusive area, typically consisting of three bedrooms, a kitchen, and a living room. The office stated, "For families with three or more children of different genders, the number of rooms may be insufficient," and called for improvements considering both housing and social environments.

However, the report did not include proposals to ease punitive taxation targeting multi-homeowners. Although there are calls to encourage multi-homeowners to sell properties through tax relief, no suggestions related to real estate taxation were included. Instead, it advocated for regulations on ‘foreign real estate’ to address reverse discrimination issues. The Legislative Research Office said, "Regulations on speculative real estate acquisitions by non-resident foreigners can be considered," citing measures such as vacant home taxes and bans on purchasing newly built homes implemented in countries like Australia and New Zealand. While domestic residents are subject to various financial regulations such as Loan-to-Value (LTV), Debt-to-Income (DTI) ratios, and submission of financing plans, these regulations do not apply to foreigners.