(This article was originally posted on Yeonhap News on August 28^th, 2024 in Korean and translated. See the original article through URL link below) 

URL: 기업이 집주인인 20년 임대주택 나온다…임대료 규제 대폭 완화 (daum.net)

To invigorate corporate participation in the housing rental market, the government has proposed the introduction of a '20-year long-term rental housing' scheme with significantly eased rent regulations. 

Unlike the existing 10-year long-term rental housing, this new scheme allows for rent to be increased to market rates when tenants change, and rent increases higher than the 'housing cost inflation rate' will also be permitted.

The plan aims to attract corporations into the private rental market, which has been primarily driven by small-scale individuals and has been marred by issues like 'jeonse' (a Korean real estate term referring to a large lump-sum deposit rental system) fraud, to supply high-quality rental housing with long-term occupancy options.

However, for this plan to be implemented, the amendment to the Private Rental Housing Act must be passed by the National Assembly.

On the 28th, the Ministry of Land, Infrastructure, and Transport announced the 'New Rental Housing Supply Plan for the Stability of Housing for the Working Class, Middle Class, and Future Generations' during an economic ministers' meeting held at the Government Complex Seoul.

The corporate long-term rental housing promoted by the government involves entities like Real Estate Investment Trusts (REITs) or corporations mandatorily renting out large-scale rental housing complexes with 100 or more units for over 20 years. There are no restrictions on the types of housing that can be rented out.

The key points are the easing of rent regulations and tax benefits.

These measures are incentives to ensure that corporations can secure profitability through rental income alone, rather than needing to sell the property after the mandatory rental period.

Currently, businesses that own 100 or more units of 10-year long-term rental housing are subject to regulations such as the monthly rent increase cap of 5% and a restriction that rent increases cannot exceed the housing cost inflation rate in the region.

For example, if the housing cost inflation rate in Seoul is 3%, a corporation engaged in the rental housing business in Seoul can only increase rent by up to 3%, not 5%.

When raising rent, the landlord must consult with the tenants' representative council, and even if the tenant changes, rent increases are restricted during the mandatory rental period.

The government has decided to remove all these regulations for the 20-year long-term rental housing scheme.

Other rent regulations will be differentially applied according to the business model, categorized into three types: Autonomous, Semi-Autonomous, and Supported.

The structure is such that the more regulations a business model receives, the more government support it will receive.

The 'Autonomous' model is free from rent regulations. As long as the business adheres to mandatory rental insurance and rental contract reporting obligations, it can operate without significant government support.

The 'Semi-Autonomous' model allows tenants to continuously exercise their lease renewal rights during the rental period, with rent increases limited to 5%. In return, the government offers low-interest fund loans and local tax reductions to support housing construction financing.

The 'Supported' model limits initial rent to 95% of the market rate and requires priority supply to be given to those without homes. While subject to more regulations, businesses in this model will receive substantial support such as funding from public funds, loans, and discounts on public land.

Businesses that comply with the rent increase standards for each model will be eligible for exemptions from heavy corporate taxation. This includes exemptions from the acquisition tax surcharge (12%), exclusion from comprehensive real estate tax aggregation, and additional corporate tax (20%).

To ensure that corporate long-term rental businesses can secure urban private land smoothly, the government will provide a capital gains tax reduction (10%) for individual landowners who sell their land and exclude corporate landowners from the 10% additional corporate tax when they sell.

Given the 20-year long-term nature of the project, the government also plans to lower barriers for insurance companies to enter the market by allowing them to invest in rental housing and by relaxing the 'solvency ratio,' a financial soundness assessment indicator, from 20% to 25% for long-term rental housing ownership.

The government will also ease regulations on transactions of rental housing between corporate landlords.

For example, if a business entity transfers an entire rental housing complex after operating it for more than five years, the receiving business entity will be allowed to inherit the existing tax benefits through a comprehensive transfer process.

Minister of Land, Infrastructure, and Transport Park Sang-woo stated, "We expect that the introduction of 20-year long-term rental housing will supply sufficient high-quality rental housing where tenants can live without worries of moving or 'jeonse' fraud, for as long as they desire," adding, "We will closely cooperate with the National Assembly and relevant ministries to implement follow-up measures such as legislative amendments and site selection."

The government has set a goal to supply 100,000 units of 20-year long-term rental housing by 2035, with an annual supply of 10,000 units.

A pilot project for 'Silver Stay,' a long-term rental housing concept that provides specialized facilities and services for the elderly, will also be launched this year, as it can be implemented through amendments to the enforcement ordinance.