Government Moves to Tackle Surging Rental Prices with Non-Apartment Purchase-Based Rentals

Allowing Partial Purchases Instead of Entire Building Acquisitions to Expand Rental Supply
54,000 New Units to Be Built... Shorter Timelines with LH Advance Consulting

The government has announced plans to increase the supply of non-apartment purchase-based rental housing in regulated areas of the Seoul metropolitan region, as it believes that residential instability has intensified recently, particularly due to a sharp surge in jeonse and monthly rental prices centered on Seoul apartments.

With the supply shortage persisting for several years and the entire city of Seoul designated as a land transaction permission zone to encourage actual residency, a decrease in available rental properties and the consequent spike in jeonse and monthly rental prices were somewhat anticipated. The government’s aim is to revive the non-apartment housing market, which has been shrinking due to the aftermath of rental fraud and other factors, to quickly alleviate the crisis. However, since rental demand is directly tied to people’s immediate housing needs, experts predict that resolving this issue will not be easy.

Villa district of downtown Seoul viewed from Namsan, Seoul. 2025.06.27 Photo by Dongjoo Yoon

'Faster Non-Apartment Supply'—Boosting Purchase-Based Rentals

Purchase-based rental housing is considered a measure that can deliver relatively quick supply effects. In the case of acquiring existing homes for rental purposes, after assessing the condition of the properties and carrying out necessary refurbishments, residents can move in almost immediately. Even in the case of new-build purchase agreements, the process is faster compared to construction-based rentals on public land. For non-apartment units such as row houses and multiplex homes, if the relevant procedures are expedited, there have been cases where residents can move in within two years of the announcement.

At the beginning of this month, Minister of Land, Infrastructure and Transport Kim Yoonduk met with reporters at an apartment construction site in Sejong and said, "We are working on various tasks related to purchase-based rentals," adding, "The expression 'Yeongkkeul' (meaning to pull together all possible resources) is appropriate, and our policy is to strive for a diverse supply of housing, including urban-style homes."

As announced at the meeting of real estate-related ministers on May 22, the plan is to supply 66,000 non-apartment units in regulated areas of the Seoul metropolitan region over the next two years. This figure is nearly twice the 36,000 units supplied over the past two years. To achieve this, the government will now allow partial purchases, in contrast to the previous practice of acquiring entire buildings. For example, instead of purchasing a single site with all 100 units, it will now be possible to buy a specified number, such as 20 out of 100 units. The minimum purchase requirements will also be relaxed: currently, the minimum is 19 units in Seoul and 50 in Gyeonggi Province, but this will be lowered to 10 units. In addition, regulations will be revised so that the current building age limit of 10 years or less for existing purchase-based rentals will no longer apply.

Of the 66,000 non-apartment units to be supplied over the next two years, as announced by the government, 54,000 will be newly built. Accordingly, measures have been introduced to expedite new construction as much as possible. Housing developers will be able to receive support for up to 80% of land acquisition costs, up from the previous 70%. Furthermore, for the remaining land costs and design expenses, as well as other initial project costs, the Korea Housing and Urban Guarantee Corporation (HUG) will provide stronger project financing (PF) loan guarantees, reducing the developers’ financial burden to about 10% of the land costs.

Relieving Developers' Funding Pressure Before and After Groundbreaking

Construction costs will be paid according to the progress rate. Previously, developers would receive some payments after the framework construction and the remainder at completion, but now payments will be disbursed every three months based on the construction progress. To prevent project mismanagement, funds will be managed through trust companies and other agents to enhance transparency, and Korea Land & Housing Corporation (LH) and HUG will secure the first priority in trust beneficiary rights as an additional safeguard.

Furthermore, to reduce the time spent on design and ensure a certain level of quality, LH will provide standard floor plans and advance consulting starting from the design stage. Kim Youngguk, Director-General for Housing and Land Policy at the Ministry of Land, Infrastructure and Transport, said, "With the supply of private-sector non-apartment housing—a crucial rung in the housing ladder—currently shrinking, the public sector will actively purchase and supply such homes to support market normalization."

Experts generally view these measures positively but also note certain limitations. Yang Jiyeong, Senior Specialist at Shinhan Bank Premier Pathfinder, said, "The LH-led purchase-based rental program is a positive signal for resolving the jeonse and monthly rental crisis, as it creates conditions that can free the non-apartment market from the rental fraud issues that caused its previous contraction. Opening up new funding channels for developers will also greatly incentivize small and mid-sized construction companies to participate."

Lee Eunhyeong, Research Fellow at the Construction Policy Research Institute, said, "The government's active response to the contraction of the non-apartment market is positive in intent. However, as long as regulations on multi-home owners and demand suppression measures remain in place, there will inevitably be limits to increasing non-apartment supply through means other than purchase-based rentals."

Sharp Rise in Both Sales and Rental Prices... Growing Housing Instability

The plan to expand purchase-based rentals for non-apartment units, discussed at the real estate ministers’ meeting held on this day, was not an official agenda item. Normally, ministerial-level meetings discuss only those items that have been finalized through prior inter-ministerial consultations, but this measure was not subject to that process. It appears that the meeting was convened urgently due to clear signs of market instability, such as the rapid rise in sales and jeonse prices, particularly for Seoul apartments.

According to the weekly apartment price trends report released by Korea Real Estate Board the previous day, apartment prices in Seoul rose by 0.31%, marking the largest increase in 16 weeks. Areas designated as regulated zones, such as the three Gangnam districts and Yongsan District, saw the pace of price increases accelerate after turning upward the previous week. The upward trend was especially pronounced in surrounding areas where apartment prices are relatively lower.

This content was produced with the assistance of AI translation services.