[Viewpoint] Rebuilding the Foundation for Private Rental Housing Supply Needed

The housing market in our country is different from those in the United States or the United Kingdom. This is because there are systems unique to Korea. The subscription system, private registered rental housing system, price ceiling system for sale, and the Jeonse system are representative examples. Since these systems operate, the domestic housing market must be examined from a Korean perspective.

In the eyes of French scholars, 'apartments' were considered unsuitable living spaces. From this viewpoint, there was once a critical perspective on apartments to the extent that the term 'Apartment Republic' circulated. However, Koreans still prefer apartments.

The rental market is similar. People prefer Jeonse because they can live without monthly rent payments by only paying a deposit. This rental method emerged during a time when housing finance was underdeveloped, and although there are arguments that it should now disappear since it is private financing, people still want Jeonse.

As of 2019, the nationwide Jeonse ratio is 15.1%. The remaining rental households live on monthly rent. The problem lies precisely at this point.

We tend to think of monthly rent the same way as Western-style monthly rent. However, if we think a little deeper, Korea’s monthly rent is categorized into monthly rent with a deposit, monthly rent without a deposit, and Sagle rent for statistical purposes. Monthly rent with a deposit differs from Western-style monthly rent. Although it is monthly rent, the deposit itself is very high. Ban-jeonse (half-Jeonse) is also monthly rent, but the deposit amount is at the level of Jeonse deposits.

Among these, monthly rent with a deposit involves a double burden of both rent and deposit. If the Jeonse-to-monthly rent conversion progresses rapidly and Jeonse housing decreases, the double burden on tenants’ rent payments will increase further. However, in other countries, the burden of deposits for monthly rent households is not as large as in Korea. This is because deposits are about 3 to 4 times the monthly rent.

Korea’s rental market is divided into Jeonse, monthly rent with a deposit, monthly rent without a deposit, and Sagle rent. As of 2020, there are 8,279,000 rental housing units, accounting for 38.2% of all housing. Among rental housing, 3,270,000 units are registered rental housing, with 1,737,000 public rental units and 1,533,000 private registered rental units. The remaining 5,009,000 units are understood to be unregistered rental housing owned by multi-homeowners.

This means that the proportion of rental housing supplied by the private sector is very large. Among rental housing, 60.5% is supplied to the market by multi-homeowners in an unregistered state. This is why multi-homeowners should not be viewed solely as speculators.

Private registered rental housing is also important. It is public housing that allows residence for 10 years and limits rent increases to 5%, so it can be expected to have a housing stability effect for tenant households. From the perspective of general tenants who do not qualify for public rental housing, private registered rental housing is rental housing that can reduce housing cost burdens and increase housing stability.

Soon, the contract periods for Jeonse and monthly rent households using the right to request contract renewal will begin to expire. To stabilize the Jeonse and monthly rent market, a smooth private rental housing supply base must be rebuilt.

Kim Deok-rye, Director of Housing Policy Research Division, Korea Research Institute for Human Settlements