"One-Year Extension for Jeonwolse Reporting System... Real Estate Market Hard Landing Eased"

"Repealing the Three Lease Laws Is Not the Answer... Incorporate Market Principles"
No Government Intervention in Unsold Housing... Preparing for Soaring House Prices

The government has decided to extend the grace period for the Jeonwolse 신고제 (Jeonwolse Reporting System), one of the 'Lease 3 Laws,' by one more year until the end of May next year. It assessed that the feared hard landing risk in the real estate market at the beginning of the year has been resolved. However, it judged that it is premature for this trend to reverse into a rise in real estate prices again.

Minister of Land, Infrastructure and Transport Won Hee-ryong is speaking at the press corps luncheon meeting on the 16th. / Photo by Ministry of Land, Infrastructure and Transport

On the 16th, Won Hee-ryong, Minister of Land, Infrastructure and Transport, stated at a luncheon meeting with the press corps, "At the point where we have organized the overall framework of the lease market and grasped the main structure, we intend to also focus on the fragmentary administration of Jeonwolse 신고 (reporting)," expressing this view.

The Jeonwolse 신고제 is a system that requires the parties involved in a lease contract to mandatorily report the contract details within 30 days from the contract date if the deposit exceeds 60 million KRW or the monthly rent exceeds 300,000 KRW.

Previously, after the passage of the Lease 3 Laws at the end of July 2020, the government implemented the Jeonwolse 신고제 from June of the following year with a one-year guidance period. However, with the inauguration of the new government last year and increasing demands for amendments to the Lease 3 Laws, the guidance period was extended by one year and is set to expire at the end of this month.

If the obligation to report Jeonwolse is violated, a fine ranging from 40,000 KRW to a maximum of 1 million KRW will be imposed proportionally to the unreported period and contract amount. If a lease contract is falsely reported, a uniform fine of 1 million KRW will be applied.

Regarding this, Minister Won said, "Regardless of fines, the reporting rate continues to rise, and amid problems such as reverse Jeonse, empty Jeonse, and Jeonse fraud, the registered rental business system also needs to be revised," adding, "We have internally decided to generously extend the implementation of the Jeonwolse 신고제 by one year." According to the Ministry of Land, Infrastructure and Transport, the number of reports increased from 68,353 in June 2021 to 146,424 in June last year, and recorded 190,266 in March this year after the introduction of the Jeonwolse 신고제.

However, the policy is not to abolish the Lease 3 Laws themselves. Minister Won said, "The Lease 3 Laws consist of three elements: price restriction, period extension, and reporting. We can reorganize this framework. Abolition is not necessarily the answer," adding, "We are considering a direction that incorporates market principles a bit more, such as extending the period or providing tax benefits to landlords who raise prices less."

The current Lease 3 Laws merely force landlords to comply with a single stick against the complex issues of gap investment and Jeonse fraud, which cannot be a solution. He added, "It is time to analyze and review many anticipated problems in the lease market and present a realistic fundamental system."

He also clarified that the government will not artificially intervene in unsold housing. Instead, the plan is to act preemptively to prepare for concerns about a surge in housing prices three years later, in the latter half of the current administration's term.

Minister Won emphasized, "Some of the unsold 90,000 housing units are being resolved, so there will be no shocks to the real estate market or financial institutions, nor will construction companies experience liquidity crunches within 3 to 4 months," adding, "It may become more difficult depending on the economic situation afterward, but currently, it is a situation that can be predicted and managed."

He continued, "We have lifted almost all regulations related to project permits and subscription, but we will make the process smoother," adding, "The relevant ministries will cooperate closely in both real and financial aspects to prevent excessive fluctuations in supply in the public sector, including the redevelopment of the 1st generation new towns."

Furthermore, when landlords cannot return deposits to tenants due to reverse Jeonse caused by investment failures and have to take out loans themselves, the government will pave the way for support. Minister Won said, "There was a consensus with financial authorities," adding, "Whether unbearable gap investments are fraudulent will require legal judgment, but we intend to consider them as fraud in the end and include them within the scope of support."

He added, "The real-financial sectors will cooperate to intensify efforts to rectify Jeonse fraud, illegal private financing, and securities fraud, which mainly affect youth and low-income groups."