Deputy Prime Minister and Finance Minister Lee Hyoung-il said rent regulations should be eased as much as possible to revitalize private rental housing projects running 20 years or longer. He added that related laws need to be revised to secure the viability of such long-term rental businesses and reduce uncertainty for the private sector.
Lee made the remarks on the 6th at a parliamentary audit held by the National Assembly's Finance, Economy and Planning Committee, responding to a question on measures to stabilize the property market from Rep. Kim Tae-nyeon of the Democratic Party of Korea. "Our property market is highly abnormal. People take out loans stretching their finances to the limit to buy homes in anticipation of price gains, prices rise again, and this vicious cycle continues," Kim said. "There are limits to containing this with taxes and regulations."
Kim added that it is difficult to stabilize the property market simply by expanding supply without a clear plan, and proposed designing a public housing system that people would actually want to live in. Lee responded that the idea closely resembles the 20-year long-term private rental structure the Ministry of Finance and Economy has been discussing with the Ministry of Land, Infrastructure and Transport, and said he would review it.
Lee stressed in particular that rent regulations should be eased to ensure business viability. "The most fundamental element of business viability is linked to rent regulation," he said. "What we have in mind is easing rent regulations as much as possible."
Specifically, he explained that excessively strict rent caps erode the profitability of long-term rental projects, creating an incentive for operators to recoup returns by converting units into for-sale (ownership) housing. "If rent regulations are in place, operators ultimately cannot make returns during the rental period, so there is an incentive to make up for it through conversion to for-sale (ownership) housing," Lee said. "Rent regulations should be eased as much as possible, and projects should proceed only once viability is secured."
He also said predictability in rent regulation matters, given that these projects must be sustained over a long period. "Because these run 20 years or longer, the private sector feels uneasy if rent regulation policy changes frequently," Lee said. "On that front, the land ministry could push for a revision of the law."
