Reasons for Proposal
The percentage of house ownership among all households in Korea had been on the decline, from 56.4% in 2008 to 54.3% in 2010, 53.8% in 2012, and 53.6% in 2014, while increasing slightly from 56.8% in 2016 to 57.7% in 2017, 57.7% in 2018, and 58% in 2019. Lease households still account for more than 40% of the population. In particular, the percentage of house ownership in 2019 is just 46.4% in the low-income group and 59.6% in the middle-income group. More than 53% of the low-income group and 40% of the middle-income group are experiencing a serious crisis due to high housing prices, housing cost burden, and frequent moving. Residential instability and deepening financial burdens among lease households are not simply a pain felt by such households, but lead to a contraction in consumption and the domestic market in Korea, widen the gap between different groups, pose an obstacle to social integration, and act as one of the most important factors that make it difficult to produce future generations, which urgently calls for a social solution.
To tackle residential instability due to short-term leases and continuously rising or rapidly increasing rent, which are experienced by Korean people today, large cities in major countries such as Germany, France, the UK, and Japan, as well as New York, Los Angeles, and Washington D.C. in the United States, have long implemented lease stabilization policies under the framework of “lease renewal, fair rent/dispute resolution, and rate increase cap.” Although there are slight differences between countries, lease stabilization policies abroad commonly aim for long-term and stable leases through the lease renewal system, require the adjustment of rent based on standard rent, which is notified as a guideline by the local government to adjust rent for lease renewal by considering consumer price increases, the lessor’s tax or charge change, and changing economic circumstances, and set the upper limit of increases to prevent rent from being raised too much when rent is adjusted for lease renewal.
In this regard, this Act aims to allow the lessee to exercise the right to renew the contract when the housing lease contract period expires, require any rent increase for renewal to not exceed the percentage prescribed by Presidential Decree within 5% under the Enforcement Decree of the Housing Lease Protection Act, mandate the Mayor and Do Governor to calculate and notify a reasonable standard rent acceptable in the local community, and use this standard rent as the basis to resolve any dispute by the Dispute Resolution Committee established in Si/Do in an effort to alleviate the housing cost burden for working-class and middle-class people who do not own a house.
Details
A. Obligate the lessor to not reject a contract renewal claimed by the lessee, but allow the lessor to not accept a contract renewal claimed by the lessee if there is any justifiable reason such as three rent installments overdue by the lessee Require any refusal due to redevelopment or the lessor’s actual occupancy to be notified in writing no later than 1 month before the contact expiration and require the lessor to compensate for three times the sum of moving expenses borne by the lessee and increase in rent for two years if such refusal turns out to be false For any lease renewed as requested by the lessee, allow previous contract conditions to be followed tentatively until new rent is determined and retroactively apply new conditions once they are determined by agreement between the parties, resolution, or ruling from the initial date of the contract (Articles 6 (1) to (5), newly inserted)
B. Specify the reasons for a rent increase/decrease to make it easier to exercise the right to increase/decrease rent Specify in law that the lessor’s increase claim must not exceed the percentage prescribed by Presidential Decree within 5% of the agreed rent or deposit, and ban any increase within 1 year after the lease contract or last rent increase (Articles 7 (1) to (3), newly inserted)
C. To investigate standard rent that can be referenced for housing leases, place a House Rent Calculation Committee in the Si/Do, require the Si/Do Governor to calculate and notify the local standard rent every 1 year or less, and allow the Minister of Land, Infrastructure and Transport and the Si/Do Governor to establish a Housing Lease Information System to operate lease administration efficiently (Articles 7-3 to 7-5, newly inserted)
D. If the lessee has paid rent or a deposit exceeding the increase percentage under Article 7 (2) or the rent or deposit randomly determined in violation of Article 7 (3), allow the lessee to claim the return of the extra amount of paid rent or deposit (Article 10-2)
E. Require the Dispute Resolution Committee to use the notified standard rent, if any, as the basis to resolve any dispute related to deposit or rent (Article 21 (3), newly inserted)
