Abolishing an institution and abolishing what an institution does are two different things. Even a bad institution sometimes serves a purpose, so caution is required when scrapping any system. G.K. Chesterton, the 20th-century British writer, illustrated this argument using the metaphor of a fence. The gist is this: if you do not know why a fence was built, you have no right to tear it down. There is no harm in removing it only after confirming that it has outlived its usefulness.
The context behind the government's designation of multi-home owners as a "fence" that undermines housing price stability is understandable. In an era awash with low-interest liquidity, there were multi-home owners who disrupted the market by engaging in unaffordable gap investments, using other people's jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) deposits as leverage. The greed of some eventually spread into jeonse fraud, leaving deep scars on our society. Yet it is questionable whether the various loan and tax regulations implemented to reduce the number of multi-home owners are timely. This is because multi-home owners have clearly performed a function in the market.
For a long time, multi-home owners have been the de facto suppliers in the jeonse market. They filled the void left by insufficient public rental housing, and their role stood out especially in large cities where land is scarce and the population is dense. While landlords grew their assets using tenants' deposits, tenants in turn were able to secure housing at low cost and accumulate savings. Some argue that jeonse is a form of private financing that will naturally disappear as the financial system develops, but it is hard to deny that it has substantially resolved the housing needs of millions of households over several decades.
Sure enough, as multi-home owners were squeezed, affordable jeonse listings quickly disappeared. Because multi-home owners tend to keep one "trophy property" when disposing of their homes, the decline was steeper in the greater metropolitan area than in Seoul, and in outlying districts more than in the three Gangnam districts. According to real estate platform Asil, Seoul apartment jeonse listings fell by about 21% since the current administration took office. While listings in the three Gangnam districts rose 10% to 13,989, the remaining 22 districts plunged 45.7% from 11,487 to 6,242. Jeonse listings in Gyeonggi Province were cut in half outright, from 25,059 to 12,278.
When a system goes wrong, the cost is always borne by the weakest. The jeonse shortage led to rising prices, pushing Seoul residents who lack sufficient financial means from apartments to villas, and from Seoul to Gyeonggi Province. Before pulling out the fence called multi-home owners, the government should first have asked who would take over the work they were doing. Even now, it is time to ask that question.
