Finance Minister Hong Nam-ki said last week that “many people have benefited from revised rental and tenancy laws.” During an economic ministers' meeting, he said that far more people have continued to live in their rental homes by paying slightly increased deposits and monthly rental fees since the new laws took effect a year ago.
However, leasing costs have soared, with rentals becoming far more difficult to find. Dual prices have been formed between new and renewed contracts, and home lease-related disputes surged. If the government's top economic policymaker turns his face away from such a harsh reality and sees only what he wants to see, that is irrational and irresponsible.
According to KB Kookmin Bank, deposits on rental homes in Seoul have risen by 25 percent on average in the past year. Some new tenants have to pay two times higher deposits for similar-sized homes in the same apartment complexes than those who renew their leasing contracts. Even if tenants manage to renew their existing contracts for another two years thanks to the revised laws, some landlords unlawfully demand much higher deposits in excess of the 5 percent hike limit.
Conflicts between tenants and landlords have also increased. According to the Korea Legal Aid Corp., the number of requests for dispute settlement regarding leasing contracts in the first half of this year rose by more than 10 times from a year ago. All this is due to growing difficulty getting a rental. According to Asil, a real estate big data provider, the number of homes offered for lease on a deposit basis has fallen by 15 percent over the past three months.
Still, the government is repeating the same remarks that the rental housing market will stabilize soon. For the government to ease tenants' difficulties, it should stabilize prices and supply far more homes than now. However, the reality is going in the opposite direction. It is a serious problem if the top economic policymaker cannot see the market as it is. Misperception of reality is bound to result in policy failures.