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A Study on the Partial Amendement to the Special Act on Public Housing

  • Public Land Law Review
  • Abbr : KPLLR
  • 2016, 75(), pp.15-41
  • Publisher : Korean Public Land Law Association
  • Research Area : Social Science > Law

Sunbae Lee 1

1선문대학교

Accredited

ABSTRACT

The past ‘Participatory Government’ introduced the current ‘ten-year rental housing” as an alternative when a five year rental commitment period failed to provide rental housing units for low income non-home owners and opportunities of home ownership because of its short obligatory period. When an obligatory initial occupation period for housing units with a five-year rental commitment period reached two and a half year, such units were usually converted to be sold for the renters’ home ownership. The ten-year rental housing system provides support for moderate income households in the income group (income level 5 to 6) with no housing unit to live in such rental housing units at a low price for a long-term (ten years) while saving some money to have an opportunity to own their units after the ten-year rental commitment period expires. However, the Ministry Land and Maritime Affairs at that time did not establish any guidelines to estimate prices for conversion of ten-year rental housing units for home ownership. As a result, renters had anxiety for financing unconfirmed prices for rent-to-own; and rental housing business entities found unexpected room for misuse, such as unlawful pre-purchasing order and the unfair conversion for home ownership made earlier than the rental commitment period. Whenever such cases occur, a legislative bill for partial amendment of the Special Act on Public Housing (hereinafter the Act), had repeatedly been presented. The legislative bill suggests that only the guidelines for calculating prices for conversion of ten-year rental housing for ownership should be reverted to the guidelines for calculating prices for conversion of ‘five-year rental housing’. The bill fails to consider ‘the characteristics of the ten-year rental housing’, in which rental housing units are built with the money paid by renters and the construction costs for rental housing units can be recovered in full when they are sold to the renters after the obligatory rental commitment period at a price well above the construction costs. Besides, such rental units are managed and maintained with the money paid by the renters during the obligatory rental commitment period. The fact that the rental housing business entities are making too much profit too easily has never been considered in the proposed bill. If ten-year rental housing units of 24 pyeong-type built in Segok area in Gangnam-gu of Seoul are made conversion for home ownership in accordance with the partial amendment to the Act, the Land and Housing Corporation (LH) could easily earn a profit 2.15 times more than its original housing price. Such profit rate is six times more than the profit rate obtained from selling apartments built by the private sector. Furthermore, depreciation expense, increased rents (security deposit), construction profits, etc.. are not included in calculating such a high profit rate. Gaining excessive profits in the rental housing business is shown to have been more aggravated in Pankyo area in Sungnam-si, Gyonggi-do. With regard to such cases, we have to question whether or not housing stability can be assured by current system. Despite all these obvious problems, it seems very irresponsible to propose the same partially amended bill over and over again as the second best solution in which only the guidelines are replaced from the ones of Ten year rental housing to the ones of Five year rental housing just because there is not any better alternative. What the proposer of this partial amendment bill of the Act did should certainly be avoided, such as holding debates of little substance at the National Assembly Members’ Building only with some irresponsible tenants and some random professors who do not have any expertise on the matter, and excluding experts who have researched and analyzed the standards for assessing feasible prices for rent-to-own of ten-year rental housing and the Association to which the experts belong. It is highly commendable for Min, Hong-chul, one of the members of the 20th National Assembly to move to table a bill in order to solve the delay in establishing guidelines for assessing prices for rent-to-own of ten-year rental housing because it is the issue of an urgent legislative importance. However, since the bill contains a lot of tricky issues to resolve, it is necessary to go through reviews of different perspectives by the experts and to gather various opinions from stakeholders to seek the best possible alternatives which can guarantee reasonable profits for rental business operators and achieve the aim of 'assuring housing stability' at the same time. It should be considered why there are no reasonable provisions regulating prices in making conversion for home ownership with regard to ten-year public rental housing (publicly constructed) while an upper limit scheme is specified for selling housing units built by the private sector on public housing sites. So far debates in forums related to the amendment of the Act have been for advocating the guidelines for rent-to-own prices of five-year rental housing to share profits to be gained after the conversion for home ownership is made or for delivering one-sided point of view for profits of rental housing business entities as if such debates could solve the current problems. It should also be recognized that only debates focused on the original purposes of the ‘(previous) Rental Housing Act’ (ensuring housing stability for non-home owners) can get to the bottom of these issues. If it is not easy to specify any guidelines for assessing prices for rent-to-own, it could be a long-term perspective solution to obtain a judgement of a court and set reasonable guidelines therefor by synthesizing such judgement. Also, The Korea Public Land Law Association may use and develop the research outcome, “Plan for securing a reasonable profit (within 25 percent) of construction costs” to establish specific guidelines for assessing prices for rent-to-own of ten-year rental housing units.

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* References for papers published after 2022 are currently being built.

This paper was written with support from the National Research Foundation of Korea.