[Initial Perspective] 'Saengsuk,' a Time Bomb from the National Audit 4 Years Ago, Must Find a Solution in This Year's Audit

Raised Issues on Living Accommodation Facility Regulations at National Audit 4 Years Ago
Over 100,000 Households to Become Illegal Facilities Starting Next Year

Now a Time Bomb
Ignored at National Audit, No Interest

Rental Market Faces Jeonse Crisis, Real Estate PF Also Shaken

At the Ministry of Land, Infrastructure and Transport (MOLIT) audit in October 2020, the issue was a focal point of intense scrutiny, but now it has become a ticking time bomb that is being ignored during the audit. The question is whether these are homes where people live or inns that receive guests. This refers to the residential lodging facilities (hereafter referred to as Saengsuk) caught in between, unable to move forward or back.

With over 100,000 households nationwide, Saengsuk is set to become illegal facilities starting January next year. The grace period for fines imposed by MOLIT on Saengsuk ends this year. Residents are clamoring that a ‘Saengsuk crisis’ is imminent. Yet, this year’s MOLIT audit showed not the slightest interest in Saengsuk. Allegations involving the presidential residence and the Yangpyeong Expressway, related to Mrs. Kim Geon-hee, overshadowed the entire audit.

In fact, the Saengsuk controversy began with a statement by former lawmaker Cho Eung-cheon during the MOLIT audit four years ago. The gist was, “Saengsuk has a structure almost indistinguishable from apartments. Yet, they are sold without requiring subscription savings accounts, have no loan restrictions, and are not counted as housing units, so they must be regulated.” Startled, former Minister Kim Hyun-mi immediately declared at the audit that Saengsuk would no longer be allowed for residential use.

Going forward, residents of Saengsuk must choose one of three options to continue living where they are. ‘Pay an enforcement penalty amounting to 10% of the official property price annually,’ ‘Convert the building by adding linen rooms, register as a lodging business, and live as if in an inn,’ or ‘Build new parking lots and go through complicated procedures such as district unit plan changes to convert it into officetels.’ Whichever option is chosen, the future looks bleak.

Former lawmaker Cho’s criticism that Saengsuk is a privilege and the government’s stance to correct its use are fundamentally valid. However, residents also have their say. Initially, Saengsuk was a regulatory blind spot that the government neglected. Therefore, developers and construction companies were able to promote Saengsuk as if they were apartments. Their argument is, “If the government had clearly stated from the start that moving in was not allowed, we wouldn’t have bought or lived here. Now saying ‘it was allowed then but not now,’ what are we supposed to do?”

The Saengsuk crisis is also likely to lead to a jeonse (long-term lease) crisis. Most Saengsuk in Suwon, Gyeonggi Province, are rental units. The Suwon Saengsuk Association said there are about 140 Saengsuk buildings in Suwon, each with 35 to 50 units. Rental businesses that started with permits suddenly become illegal, and if tenants decide to vacate en masse, landlords face a serious dilemma. “The deposit refunds owed to tenants per building could be around 1 to 2 billion KRW, but there is no way to prepare that money,” they said.

Saengsuk is also exacerbating financial difficulties for construction companies. Buyers who must pay fines are filing lawsuits nationwide against developers to cancel their purchases. As a result, developers cannot collect the remaining payments, and contractors are unable to receive construction fees.

Residents’ demand is for Saengsuk to be recognized as quasi-housing where people can live. However, MOLIT drew a line, saying, “Some Saengsuk have already been converted to officetels with great difficulty, so it would be unfair.” Laws and fairness are important. Nevertheless, Saengsuk is an issue that requires measures from the perspective of protecting citizens’ housing.

On the 7th, while ruling and opposition lawmakers and the minister were heatedly debating the Yangpyeong Expressway preferential treatment allegations during the MOLIT audit, a desperate plea appeared in the YouTube live stream comment section: ‘The National Assembly and government should resolve the Saengsuk issue and give residents the choice between housing and lodging.’ Those who turned the Saengsuk problem into a ticking time bomb four years ago, and those who must prevent the bomb from exploding before the year ends, are all present in the audit hall.