SEOUL, Nov. 19 (Korea Bizwire) — South Korea will supply 114,000 public ‘jeonse’ houses by 2022 to help tackle a shortage of the two-year contract-based rental homes, the transport ministry said Thursday.
The government plans to purchase existing homes to convert them into public jeonse houses mainly for the underprivileged who have difficulties in finding such homes, as higher demand has pushed up jeonse prices amid low rates and a recently passed related bill, the Ministry of Land, Infrastructure and Transport said in a statement.
Over 40 percent, or 49,000 homes, out of the planned 114,000 jeonse houses will be provided across the nation by the first half of next year, the statement said.
The government will supply some public homes that have been vacant for more than three months as jeonse houses early next year and convert vacant offices, hotels and shopping malls into jeonse homes late next year, it said.
Jeonse is a localized property lease system in which tenants pay a large deposit instead of monthly rent. It usually consists of a two-year contract, with the homeowner paying back the principal upon the completion of the contract.
In a policy meeting with the land minister and other officials, Finance Minister Hong Nam-ki said a recent hike in the jeonse home market was affected by low rates, the tenant protection laws that limit the rights of landlords, and a sharp increase in the number of households.
In July, the tenant protection laws went into effect as the government seeks to enhance tenants’ rights in the face of rising home prices.
The new legislation on housing leases allow tenants to extend their two-year jeonse contracts for another two years. Previously, the first two-year contract was guaranteed under the law.
After the 4-year contract period, landlords are able to raise jeonse deposits by up to 5 percent.
The 5 percent limit on jeonse prices could be lowered depending on the policies of provincial governments. Owners of homes are allowed to refuse additional extensions if they move into the homes themselves.
Instead of stabilizing the jeonse home lease market, the revised laws have pushed up jeonse prices in recent months, as a growing number of home owners chose to move in or existing tenants exercised their right to renew their leasing contracts for another two years.
Many South Koreans view jeonse as a way to save on housing expenses, compared with monthly rent, and regard it as a step to achieving the dream of possessing their own homes.
Land Minister Kim Hyun-mee said the new laws have already shown they have a positive impact on the real estate market.
“The new laws helped seven out of 10 tenants continue to live in their jeonse houses without a sharp increase in their lump-sum deposits. More jeonse homes will help stabilize the home lease market,” she said.
Under the latest public housing plan, the government will provide 70,000 public jeonse homes, including 35,000 in the capital city, in the greater Seoul area, home to half of the country’s 51.6 million population, the statement said.
In September, the government announced that it will purchase properties needed to build 300,000 public homes in the greater Seoul area and supply them to the underprivileged from 2023.
The government has announced more than 20 rounds of measures, including tax hikes and loan regulations, to stabilize the real estate market in the past three years.
But the measures have fallen short of curbing home prices amid low rates and ample liquidity in the markets.