The South Korean government will end the special rental program for cooperative landlords by the end of this year, shifting its focus to expanding long-term private rentals operated by real estate investment trusts (REITs) and corporations for over 20 years. This marks a significant shift in rental policy from supporting individual landlords to promoting large-scale, long-term supply by professional operators.
On August 13, the government announced a plan to expedite housing supply, which includes expanding public-supported private rental models that operate for more than 20 years. This initiative aims to encourage the supply of private rental housing by providing financial support to rental operators and broadening the exceptions to mortgage regulations.
Kim Yoon-deok, Minister of Land, Infrastructure and Transport, stated, “We will introduce a public-supported private rental model that operates for over 20 years and launch tailored long-term mortgage products to promote the supply of long-term private rental housing.”
Financial Services Commission Chairman Lee Ok-won added, “We will enhance financial support needed at various stages of supply, including relocation loans, operating funds for rental businesses, and financing for non-apartment operators.”
The Ministry of Economy and Finance announced on August 3 that the special rental program for cooperative landlords will end on December 31. This program allowed landlords who raised rents by no more than 5% compared to the previous contract to be exempt from certain tax requirements when selling the property after maintaining the lease for a specified period.
The government determined that, with the implementation of the rent cap limiting rent increases to 5% upon contract renewal, the need for additional tax exemptions had diminished. The decision also reflects concerns that excessive benefits were being granted to single-home landlords who do not reside in their properties.
In lieu of tax benefits for individual landlords, the government plans to increase the supply of privately operated rental housing that is stable and long-term. This includes expanding financial support for rental operators and broadening the exceptions for mortgage regulations.
The government will also diversify the supply methods for public rental housing. It plans to introduce a universal public rental housing model with relaxed income and asset criteria, as well as a universal lease rental system aimed at young people.
Approximately 15% of public housing units will be offered through a shared-equity model, allowing buyers to pay for their homes over an extended period, and a profit-sharing model that divides the profits from property sales between the public and private sectors. This initiative aims to broaden housing options for young people and newlyweds based on their financial circumstances.
If these policies are successfully implemented, they are expected to reduce the risk of rental properties being sold or security deposits being returned due to the financial situations of individual landlords. However, concerns remain that transitioning the rental market from individual landlords to professional operators may take considerable time, and delays in expanding long-term private rentals after the end of the cooperative landlord program could weaken incentives to control rent increases during the transition period.
* This article has been translated by AI.
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