The Democratic Party of Korea has asked the government to extend through next year a waiver of the owner-occupancy requirement that applies to home purchases in land transaction permit zones, and to allow lease renewals under the waiver. The proposal is intended to encourage owners who plan to sell their homes next year under the government's tax overhaul to put them on the market, while also protecting tenants' housing stability.
Kwon Chil-seung, chairman of the Democratic Party's policy committee, made the formal request at a meeting of the party's floor leadership at the National Assembly on Sept. 15. "Applications for the expanded waiver of the owner-occupancy requirement in land transaction permit zones are only accepted through the end of this year, which means those who want to sell a home next year under the tax reform plan cannot apply," he said.
Under current rules, buyers of a home in a land transaction permit zone must move in within four months of receiving approval and live there for two years. After all of Seoul and parts of Gyeonggi Province were designated as permit zones in October last year, transactions involving homes with tenants ground to a halt, prompting the government to introduce a supplementary measure in May this year. Non-homeowners who buy a home that was under lease as of May 12 may postpone the owner-occupancy requirement until the existing lease expires. The waiver, however, covers only the remaining lease term and excludes lease renewals.
"Because only the remaining lease term is recognized and renewal contracts are not, there is an impact on tenants' housing stability," Kwon said. "To stabilize the jeonse (a lump-sum deposit lease) and monthly rent market, we need to consider extending the occupancy waiver through next year and allowing lease renewals as well."
The Democratic Party's proposal also seeks to minimize the conflict between the government's tax reform plan and the land transaction permit system. The government is tightening capital gains taxes on owners of a single home who do not live in it, in order to encourage listings, but the owner-occupancy requirement in permit zones can restrict transactions of homes with tenants. Even if an owner puts a property up for sale, a deal is unlikely to close if the buyer cannot meet the occupancy requirement after taking over the existing lease. By lengthening the occupancy waiver period, the party aims to amplify the effect of the tax overhaul in bringing homes to market.
