ed Housing rental market

The government has unveiled a package of measures in response to changes in the nation’s housing rental market ― a rapid shift from our unique rental system called “jeonse’’ to monthly rent.

The package, among other things, envisions enabling tenants who earn 70 million won a year or less to be eligible for a tax deduction of up to 10 percent of their monthly rental fees.

This means that a worker who spends 6 million won a year as rent will get 600,000 won deducted from his or her tax bill. Currently, this worker can get a tax deduction of only 216,000 won.

The Ministry of Land, Infrastructure and Transport will also make it possible for tenants to apply for tax deductions without the consent of homeowners, who are bound to shun their home lease for fear of taxation on their income from monthly rent.

The package comes amid a fast transition from a rental market dominated by jeonse, the two-year lease contract with lump-sum deposits, into that dominated by monthly rent. In fact, the proportion of homes leased by monthly rent surged to 46.7 percent in January, compared with 35.4 percent two years ago.

Tenants still prefer the jeonse system because they can get the deposits back when they move out and use them to buy their own homes later. Besides, it costs less. But the supply of jeonse housing has run short of demand, driving up prices, as landlords have been switching to the monthly rent system in droves amid low interest rates.

The government is right to shift its focus in housing rental policies from jeonse to the monthly rent system, given that the ongoing trend is irreversible. The current situation is transitional, but the prevailing view is that the monthly rent system will take hold in the long term, considering that a surge in housing prices have already become a thing of the past.

It’s also right for the government to bar tenants of high-priced jeonse from receiving loans with state guarantees because it will help encourage jeonse tenants to buy homes.

But the package deserves criticism, given that it lacks viable measures to rein in soaring jeonse prices, which have risen for 78 consecutive months in Seoul.

To enable the monthly rent system to make a soft-landing, several prerequisites should be met, the most vital being reasonable standards for monthly rent.

As is often the case, rent is determined by homeowners unilaterally at the expense of tenants who are usually the socially weak.

Consequently, the government needs to offer objective guidelines for monthly rent. It’ll be also necessary to prepare countermeasures in advance in case rent soars.