On August 28, 2024, the Government announced the  New Rental Housing Supply Plan for Housing Stability of Low and Middle-Income Groups and Future Generations (the “New Plan”) at the Ministerial Meeting for Economic Policy, which aims to stimulate the supply of rental housing and provide long-term and stable housing.

The key terms of the New Plan are as follows:
 

• The New Plan categorizes business models into the following three types: (i) supported-type housing, (ii) semi-autonomous housing, and (iii) autonomous housing. The plan is to deregulate and relax the relevant regulations governing the three types of housing in the mentioned order (i.e., from (i) to (iii)). In particular, the regulations and support for each type are differentiated as below.
   

• While the obligation to procure mandatory rental insurance and the regulations under the Housing Lease Protection Act will be uniformly applied to all three types of housing, the regulations relating to rent (such as lease renewal right of the tenant, rent escalation rate (5%) and restrictions applicable to the initial rent) will apply differentially depending on the housing type.
   

• Tenant Eligibility: There will be no restrictions placed on tenant eligibility for the autonomous and semi-autonomous housing types. For the supported-type housing, the only eligibility requirement that will continue to apply will be the priority supply to non-homeowners.
   

• Urban Planning: All types of housing will benefit from eased regulations on floor area ratio, building usage, public rental housing acquisition prices and parking space requirements.
   

• Corporate Tax Exemptions: Owners of private rental housing will be exempted from (i) additional corporate acquisition tax (12%), (ii) aggregation of comprehensive real estate holding tax, and (iii) imposition of additional corporate income tax (20%), subject to compliance with the 20-year minimum lease period and the rent escalation standard applicable to each of the housing types.
   

• Local Tax Reductions: Some semi-autonomous and supported housing types will be entitled to reduction in local taxes such as, acquisition taxes and property taxes, among others.
   

• In order to secure private funding at a low interest rate depending on the different types of housing, PF guarantees, mortgage guarantees and funding by funds such as the Housing and Urban Fund (for supported-type housing) will be provided. Additionally, low-interest loans, at a level similar to ten-year leasing, will be offered.
   

• Urban Private Land: (i) 10% capital gains tax reduction will be offered to individual landowners selling sites for long-term rental housing construction, and (ii) an exemption of additional 10% from corporate income tax will be granted to companies selling non-business land that they own to long-term rental housing developers for rental housing projects.
   

• Public Land and State-Owned Property: (i) Public land will be supplied at appraised value, (ii) conversion of public rental land to long-term private rental housing will be permitted if necessary in private rental housing promotion districts, and (iii) with respect to supported-type housing, long-term (50-year) leasing of idle state-owned land will be available by way of private contract.
   

The Government’s New Plan is significant as it includes substantial deregulation and enhancements aimed at expanding the supply of high-quality rental housing that provides long-term and stable housing. Notably, foreign investors who have primarily focused on commercial real estate investments, such as offices, hotels and retail spaces in Korea are now actively considering and pursuing investments in housing-related markets, including rental housing, co-living spaces and senior housing, in line with the evolving residential landscape and housing market in Korea. We expect the Government’s New Plan and ongoing policy enhancements in the housing market to expand investment opportunities not only for domestic investors but also for foreign investors as mentioned above. Meanwhile, in order to implement this new private rental housing system, amendments to relevant laws such as the Private Rental Housing Act, Local Tax Act, Comprehensive Real Estate Holding Tax Act and Corporate Income Tax Act will be necessary. Anyone interested is advised to follow future developments regarding these legislative amendments.

[Korean Version]