Interior view of a public apartment building in northern Seoul / Courtesy of Seoul Metropolitan Government
By Yi Whan-woo
The Government plans to encourage insurance companies to participate in the rental market as part of its broader strategy to increase housing supply and is seeking to involve larger private sector companies in these efforts.
The housing rental market was accessible to both private companies and public housing developers.
According to the Ministry of Land, Infrastructure and Transport, the private sector accounts for 80 percent of the rental housing market, while the public sector accounts for the remaining 20 percent.
However, the market is predominantly made up of private individuals and small businesses. Strict regulations make it difficult to make a profit, which is why larger companies show little interest in managing rental properties.
Under these circumstances, the Ministry of Land Use announced on Wednesday a series of measures that offer benefits to companies entering the residential rental market.
The companies from various sectors that the ministry encouraged to join included housing construction companies and real estate investment trusts (REITs).
“We believe that insurers can leverage their expertise and experience in dealing with long-term products to rent out apartments and make a profit,” the ministry said.
The benefits are offered to those who rent more than 100 apartments in a single residential complex for 20 years or more.
The term for renting out owner-occupied homes is to be extended beyond the current ten years. In return, the companies concerned will benefit from simplified regulations, according to the ministry.
For example, the ministry announced that the 5 percent cap on rent increases would be abolished. In addition, the regulation that does not allow rent increases in areas with rental housing to exceed the inflation rate will be abolished.
Even if the inflation rate in the city were three percent, rent prices in Seoul would not rise more than three percent.
“We believe that the new measure can contribute to an efficient supply of housing,” the ministry said, adding that it would “work closely with the relevant ministries and the National Assembly so that the plan can come into force immediately.”
