The main purpose of providing support for the enterprise-type rental housing project (New Stay housing project) is to stabilize the availability of residences for the working and middle class by increasing the supply rental housing units with rental t ...
The main purpose of providing support for the enterprise-type rental housing project (New Stay housing project) is to stabilize the availability of residences for the working and middle class by increasing the supply rental housing units with rental terms and conditions equivalent to those in neighboring areas where such rental housing units are to be built.
When an eight-year rental commitment period, a condition imposed on such enterprise-type rental housing units, expires, they complete the function as rented houses and will be sold in the country’s housing market without being subject to any regulation even though such rental housing units were built with the various types of assistance and guarantees offered by the Government, based on the application of the provisions concerning many special cases stipulated by statutes. Therefore, it would be meaningful to examine the limited public interest in conducting the enterprise-type rental housing project and to analyze and prove who could take profits made at the time such rented houses are sold.
Where a rental business entity itself or a public institution on behalf of rental business entities develops housing sites to build enterprise-type rental housing properties, unprecedented financial and tax assistance have been provided. Such assistance includes the expropriation of land of private persons, the conversion of the use of parks and green areas for developing such housing sites, and so forth. Taking into consideration that the unprecedented support has been given but there was no regulation, other than the specified condition, ‘an eight-year rental commitment period with rental terms and conditions equivalent to those in neighboring areas’, it is doubtful what would be the public interest in conducting the enterprise-type rental housing project. Because a trend in housing patterns is changing from “a place to possess” to “a place to rent”, if rental housing built under the project is to be used as ‘a place to reside’ for a long-term perspective, it should be available for renting even after the eight-year lease period expires. From this perspective, it is considered that there is not enough public interest and continuity in the enterprise-type rental housing project. Great profits were expected to arise from sales of rental housing at the expiration of the rental commitment period. The results of analysis indicate that such great profits have been taken by rental business entities. Therefore, it can ultimately be said that the New Stay plan itself does not promote the residential stability of people in working and middle class.
Since it is difficult to withdrawal of such special support policy for the enterprise-type rental housing project which had already been legislated, this study suggests an alternative, a “guaranteed rental yield system”. The guaranteed rental yield system refers to a system in which a deficiency suffered by any relevant business entity, who fails or intentionally delays to achieve a specified rental yield calculated from when enterprise-type rental housing units are constructed to when the eight-year rental commitment period expires, can be compensated with premiums made when rental housing units are sold.
The benefit derived from the guaranteed rental yield system is that any relevant rental business operator can be flexible in choosing a rental yield, within a certain range, from the time of building to the time of selling. Where it is necessary to set lower rents to supply affordable rental housing properties in a downtown on a long-term basis or where a period for being engaged in rental business is to be extended even after the lease period has elapsed, a deficiency suffered by a relevant business operator in terms of a rental yield can be guaranteed. Also, a premium rate can be suggested as an inducement to supply affordable rented houses on a long-term basis. Since such method plays a role of extending an actual lease period at a lower rent rate, it could be a solution to the issues, such as there are not enough public interest and continuity in the enterprise-type rental housing project.
As a specific suggestion, the provision, “a rental business operator may transfer its rental housing units to civilians after the period has expired” provided for in Article 43 (3) of the Special Act on Private Rental Housing needs to be amended as “a rental business operator may transfer its rental housing units to citizens after the lease period has elapsed and the profits arising from such transfer shall be distributed and paid to the rental business entity according to a rental yield prescribed by Presidential Decree”. This amendment goes for the effect of killing two birds with one stone in voluntarily lowering the level of a rental yield based upon the extension of the lease period and in actualizing a distributive justice in society. The intent of this researcher and law makers are the same with regard to the standpoint that a renal yield should be guaranteed without fail.
Another implication obtained from this study for the Korean society can be summarized as follows:
Geun-hye Park’s government had increased the supply of enterprise-type rental housing units while reducing the supply of public rental housing units for the reason the debt ratio of LH corporation was high. However, the biggest major issue Korean citizens are concerned about is that it has continuously raised issues, such as a high level of rental fees needed for obtaining enterprise-type rental housing units; conflicts arising from the removal of a ban on the development or renovation of green belt areas; and provision of excessive special business favors to the private sector. In this respect, it is claimed that the Special Act on Public Rental Housing should be repealed. Also, a law, tentatively named as ‘Social Public Housing Act’ should be enacted for the purpose of offering rental housing units to moderate income households at a very affordable price because such Act will encourages civic and social organizations, etc. to participate in rental housing construction projects. (Eun-Young Choi)
When Geun-hye Park’s government enacted the Special Act on Public Rental Housing in order to stimulate the domestic economy quickly, the legislation was made without lively discussions by people. Furthermore, a fundamental problem is that the government’s economic stimulus package was made at the expense of ordinary poor people. Even though enterprise-type rental housing units, which shall be deemed privately-built housing units after the termination of an eight-year rental commitment period, would be sold, it could not be the solution for assuring housing stability for moderate income households. It might cause an increase in the income inequality index (the measurement of inequality in comparison of the level of income of the high-income class to that of the low-income class), and aggravate problems arising from the low birth rate which the Korean society is facing.