Government Moves to Eliminate 'Wedding Penalty' in Housing and Loans

The government is taking steps to reduce the so-called "wedding penalty," which has resulted in disadvantages for newlyweds in areas such as loans, public housing, and youth asset formation. This initiative involves revising regulations related to public housing eligibility, interest rates on jeonse loans, and tax benefits for married couples.

According to relevant authorities on July 30, the government is gradually improving the marriage penalty in housing, asset formation, and tax sectors based on the "Marriage-Friendly Policy Improvement Plan" announced last month.

The pace of these improvements has accelerated. President Lee Jae-myung requested a comprehensive investigation into cases where newlyweds face disadvantages after marriage during a national discussion on real estate policy held on July 23. Prime Minister Han Seung-soo also mentioned on July 27 that 12 additional related cases have been identified, and discussions on improvement measures are ongoing with relevant departments.
 
The most significant changes are in the housing support sector. For dual-income newlywed households, the income threshold for happy housing will increase from 7.63 million won to 9.39 million won, while the general supply standard for integrated public rental housing will rise from 7.98 million won to 9.24 million won.

Additionally, unmarried young individuals living in public rental housing will be allowed to renew their contracts once, even if their income or asset levels exceed the criteria after marriage. This aims to alleviate the burden of losing residency or being forced to vacate due to increased income from dual-income households.

The interest burden for young couples utilizing the buffer jeonse loan will also decrease. When extending a loan approved before marriage, the additional interest rate applied if the combined income exceeds the threshold will be halved from 0.3 percentage points to 0.15 percentage points. However, the additional interest rate will not be eliminated entirely, meaning some burden based on combined income will remain.
 
In the housing supply sector, support has shifted focus from the duration of marriage to the presence of children. As of July 15, a new special supply program for newborns has been established, allocating 10% of the supply of private housing to families with children under two years old.

While the existing special supply for newlyweds requires marriage within the last seven years, the newborn special supply allows families with children under two to apply regardless of marital status or duration. Couples who have not registered their marriage or have been married for over seven years can also qualify if they have a child under two.

The youth future savings program has also relaxed the income criteria for married couples. The income threshold for a two-person household consisting of a subscriber and their spouse has increased from 200% to 250% of the median income for the standard type, and from 150% to 200% for the preferential type.

Launched last month, the youth future savings program allows participants to contribute up to 500,000 won monthly for three years, with the government providing support of 6% or 12% of the contributions based on income. This measure aims to reduce the issue of disqualification due to the combined income from marriage registration.
 
In the tax sector, a plan is underway to allow couples living separately due to work or relocation to each receive tax deductions on their jeonse loan principal and interest payments. Currently, even if they reside separately, they are considered a single household, resulting in only one person receiving the benefit.

The issue of fuel tax refunds for couples who each own small cars before marriage will also be addressed. Under the current system, after marriage registration, a household is considered to own two small cars, which may exclude both from the refund. The plan is to allow a refund of up to 300,000 won annually for one small car per household.

These tax-related measures are in the planning stage and will require amendments to relevant laws. The actual implementation timeline and specific requirements will need to be confirmed through future tax law revisions and subsequent regulations.

This reform aims to reduce the inequities faced by couples who lose support or face increased burdens after marriage. However, concerns remain that the combined income criteria for major policy loans, such as the Ddimum and Bogumjari loans, still exist, limiting the elimination of the wedding penalty for dual-income newlywed couples.

Kim Dae-jong, a professor at Sejong University's Business School, stated, "This policy to improve institutional inequities is significant in lowering barriers to marriage and childbirth," but emphasized that to enhance its practical effects, support for acquisition taxes and property taxes for first-time homebuyers should also be strengthened.