About 40,000 units of New Stay, a corporate-run rental housing program aimed at middle-income households, are approaching the end of their mandatory lease terms, even as the rent squeeze intensifies in Seoul and the wider metropolitan area. While the government is expanding a range of rental housing models, critics say efforts to build up the stock of long-term rental homes will fall short if existing rental units return to the for-sale market once their mandatory terms end. Some argue the country needs an institutional framework that keeps already-secured rental homes in the rental market over the long run, rather than focusing only on new supply.
Mandatory lease terms will expire at 49 New Stay sites nationwide, covering 39,430 units, by 2030, according to real estate industry data released on the 12th. New Stay was introduced in 2015 as a corporate-run private rental housing program to improve housing stability for middle-income households. It places no limits on tenant income or unit size, caps annual rent increases at 5% and guarantees residency for at least eight years. Major sites include e-Pyeonhan Sesang Dohwa in Incheon's Dohwa district with 2,077 units, Suwon Gwonseon Kumeugreen in Suwon, Gyeonggi Province, with 2,400 units, and Dongtan Haengbok Village Prugio in Hwaseong with 1,135 units.
At e-Pyeonhan Sesang Terrace Wirye in Seongnam, Gyeonggi Province, and e-Pyeonhan Sesang Dohwa in Incheon — the first New Stay sites nationwide to reach the end of their mandatory lease terms — shareholders approved a conversion to for-sale units last month, and operators are now in talks with tenants. The mandatory term ended in November last year, but with no sale terms agreed, the lease period was extended by one year and is set to expire next month. Korea Housing & Urban Guarantee Corporation (HUG) said the conversion will be offered to non-homeowners first, with any unsold units allotted to third parties.
The government has recently been promoting rental housing models designed to meet a wider range of housing needs. Prime Minister Han Seong-sook visited WeStay Byeolnae, a publicly supported private rental complex in Namyangju, Gyeonggi Province, on the 6th to review its operations. The 491-unit complex was developed with tenants forming a cooperative and taking part in the design and management of the housing. "What matters in housing policy is fully guaranteeing people's right to choose the home they live in," Han said, stressing the role of social economy actors in creating a variety of housing models.
But critics say that apart from expanding new supply models, the institutional foundation for keeping existing rental homes in the rental market over the long term remains inadequate. Under New Stay rules, a complex can continue operating as rental housing if the original operator sells the entire site to another rental business once the mandatory term ends. Industry officials say such bulk sales are difficult because of the tax burden on the purchase and the need to raise large amounts of capital. Selling units individually to general buyers reduces the existing stock of corporate-run apartment rentals.
Experts say the country needs to build an industry ecosystem in which existing homes can remain rental assets, rather than simply introducing a new type of rental housing with each administration. Even if developers recoup their investment, long-term investors such as pension funds and real estate investment trusts should be able to acquire the homes and continue operating them, they say. Easing the rent squeeze requires both increasing new housing supply and ensuring that homes keep serving the rental market after their mandatory terms end, building up a stable stock of rental housing, according to analysts.
"When this law was first introduced, the premise was that another rental operator would take over after the term expired and keep the homes as rentals," said Lee Sang-young, a professor at Myongji University. "In practice, tax issues have made bulk sales difficult, so they are being converted into individual sales instead." He added, "An individual may be able to get a home, but what disappears from the market is quality apartment rental housing."