Government Introduces Measures to Address Reverse Tax Crisis
The government has unveiled a set of measures aimed at tackling the reverse tax crisis. To address the issue of landlords who are unable to return the jeonse deposit, the current DSR (Total Principal Interest Repayment Ratio) will be replaced with a new approach. Under this system, 60% of the DTI (Total Debt Repayment Ratio) will be applied to landlords without sufficient funds to return the deposit. For landlords with an annual income of 50 million won, this change is expected to result in an increased loan limit of approximately 175 million won, thereby facilitating the deposit return process.
In an effort to alleviate the burden of housing costs, the government has decided to maintain the fair market value ratio in comprehensive real estate tax at the previous year’s level. This move is intended to relieve the real estate tax burden for homeowners. Additionally, the government plans to provide an additional 23 trillion won in support and stepping-stone loans for young people and newlyweds.
DSR to DTI Shift for Deposit Return
Important government bodies such as the Ministry of Strategy and Finance and the Ministry of Land, Infrastructure and Transport have announced the “Economic Policy Guidance for the Second Half of 2023,” outlining their plans.
One of the key measures focuses on addressing risks in the rental market, particularly related to jeonse fraud and reverse jeonse. The central aspect of this plan involves relaxing loan regulations for landlords who are unable to refund the jeonse deposit due to reduced rental prices.
The current DSR, which imposes more stringent regulations than the DTI, will be replaced with a 60% DTI for individuals. The DSR takes into account not only the principal and interest of other loans held by individuals but also their annual income, making it a stricter regulation. On the other hand, the DTI only considers the principal and interest of the mortgage loan and other loans. By applying the less regulated DTI for deposit return purposes, the government aims to facilitate the process.
According to government calculations, a landlord earning 50 million won annually, with no other loans and receiving a loan with a 4% interest rate and 30-year maturity, could secure 350 million won based on a 40% DSR. However, under the new 60% DTI, they could obtain 525 million won, resulting in an additional 175 million won in loans. For an individual with an annual income of 100 million won, the loan limit would increase from 700 million won to 1.05 billion won. Considering that the average amount of deposit that landlords need to return due to reverse jeonse is around 70 million won, this measure is expected to effectively address the reverse tax crisis.
Furthermore, regulations on the rental business interest payment ratio (RTI) will be relaxed for rental businesses. RTI is calculated by dividing annual rental income by annual interest expenses. Currently, a loan is granted only when the RTI ratio exceeds 1.25 to 1.5. However, under the new regulations, the ratio need only be above 1 when the deposit is returned.
It should be noted that these adjustments will be in effect temporarily for one year, starting from the end of this month. Additionally, the measures will only apply to landlords who find themselves in a reverse position after the deposit return period has expired, and support will be provided within the deposit difference. In cases where a subsequent tenant cannot be found, a loan will be granted under a special agreement. This unique arrangement dictates that the loan should be repaid using the subsequent tenant’s jeonse deposit, ensuring the protection of subsequent tenants.
To protect the interests of subsequent tenants, landlords will be required to bear the guarantee fee for deposit return, and the bank will transfer the loan amount to the tenant’s account, preventing the deposit from being used for purposes other than deposit refund.
The government also plans to enhance the registration requirements for the mandatory guarantee of rental businesses. However, existing registered rental houses will be granted a grace period. Financial assistance programs for charter fraud victims, implemented through a special law in June last year, will also continue to provide support.
In the medium to long term, the government aims to improve the existing lease laws, including the lease reporting system, the right to request contract renewal, and the monthly rent ceiling.
Maintaining Fair Market Value Ratio for Comprehensive Real Estate Tax
The government has proposed additional plans to alleviate housing costs and expand housing support for homeless individuals and young people.
As part of efforts to reduce housing cost burdens, the government has decided to maintain the fair market value ratio applied to comprehensive real estate tax at the same level as the previous year (60%). This decision aims to ensure that the amount of tax collected remains similar to that of 2020.
Furthermore, the deadline for tax support for landlords who have reduced rent for small business owners will be extended until the end of next year, providing them with continued financial assistance.
To enhance housing support for young people and newlyweds, the government plans to allocate an additional 23 trillion won for stepping-stone and support loans. Initially, a supply of 21 trillion won was intended for this year, but the amount has been increased to 44 trillion won.
The annual payment limit for housing subscription comprehensive savings income deduction applications will be raised from 2.4 million won to 3 million won, while tax benefits for preferential youth products will be continued. Homeless youth will also enjoy advantages such as favorable interest rates of up to 1.5% points.
In addition, starting this month, a deposit refund guarantee fee support program will be implemented, fully covering up to 300,000 won for young people. The income requirements for purchasing homes and obtaining special loans for lease funds for new women will also be eased. The current income requirements for newlyweds, set at 60 million won for jeonse and 70 million won for buying a house, will be adjusted to 75 million won and 85 million won, respectively.
The government has come up with measures to stop the reverse tax crisis. Instead of the current DSR (Total Principal Interest Repayment Ratio), 60% of the DTI (Total Debt Repayment Ratio) will be applied to landlords who do not have the jeonse deposit to return. In the case of a landlord with an annual income of 50 million won, it is estimated that the loan limit will increase by around 175 million won. It means increasing the limit and returning the deposit.
In order to alleviate the housing cost burden, the government will maintain the fair market value ratio of comprehensive real estate tax at last year’s level to alleviate the real estate tax burden, and intends to supply an additional 23 trillion won in stepping stone and support loans for young people and newlyweds.
/Photo = Reporter Lee Myeong-geun qwe123@
DSR 40% → DTI 60% for ‘deposit form’ purpose
Relevant ministries such as the Ministry of Strategy and Finance and the Ministry of Land, Infrastructure and Transport announced on the 4th “Economic Policy Guidance for the Second Half of 2023,” including these contents.
First of all, the government came up with a plan to control risks in the car rental market, such as jeonse fraud and reverse jeonse. The main point is that loan regulations will be eased only for landlords who cannot return the deposit due to the reduction in the rental price.
First of all, it was decided to apply a 60% DTI instead of the current 40% DSR for individuals. At present, the government applies the DSR, which is a stronger regulation than the current DTI, to manage household loans.
DSR is considered a stronger regulation because it is a method of determining the loan limit by dividing the principal and interest not only the principal and interest of other loans held by individuals with the annual income. The DTI is calculated by taking into account the principal and interest of the mortgage loan which must be repaid annually and the interest of other loans only. Ultimately, it means that the existing DTI, which is less regulated, will be applied to return the jeonse deposit.
According to the government, assuming a multi-homed person with an annual income of 50 million earned and no other loans receives a loan with an interest rate of 4% and a maturity of 30 years, they could receive 350 million earned in a DSR of 40% , but applying a DTI of 60% would earn 525 million. With 10,000 earned, you can get a total of 175 million more earned loans. If the annual income is 100 million, it will increase from 700 million to 1.05 billion won. Considering that the average amount that the landlord has to return due to reverse jeonse is an average of 70 million won, it is analyzed that it will be enough to solve the reverse jeonse crisis.
In addition, it was decided to ease regulations on the ratio of rental business interest payments (RTI) for rental businesses. RTI is an indicator of annual rental income divided by annual interest expenses. In the current system, the loan was given only when the RTI was 1.25 to 1.5 times or more, but only when the deposit is returned, it must be more than 1 time.
Deregulation of Jeonse Deposit Refund Loans. / graphics = watch biz.
However, this scheme will be applied temporarily for one year from the end of this month. In addition, it is only targeted at landlords who are in a reverse position after the deposit return period has arrived, and support is provided within the difference in deposit. If a subsequent tenant cannot be found, a loan is provided under a special contract. This is a special agreement where the loan is first repaid with the subsequent tenant’s jeonse deposit.
In addition, in order to protect subsequent tenants, the landlord is required to bear the guarantee fee for the return of the deposit, and the bank pays the loan to the tenant’s account to prohibit the use of the deposit for purposes other than returning the deposit. .
In addition, the government promotes a plan to improve the requirements for registration for the compulsory guarantee of the rental business, but give a grace period for existing registered rental houses. In order to support victims of charter fraud, related financial assistance programs are implemented through a special law last June.
In the medium to long term, it is a policy to review a visit to Korea to improve the 3 lease laws, such as the lease reporting system, the right to request contract renewal, and the monthly rent ceiling.
Maintain a fair market value ratio of 60%… “Comprehensive real estate tax level in 2020”
It also proposed plans to ease the burden of housing costs and expand housing support for homeless people and young people.
First of all, in order to alleviate the burden of housing costs, it was decided to maintain the fair market value ratio applied to the comprehensive real estate tax at last year’s level (60%). It is explained that this will be similar to the amount of tax collected in 2020.
In addition, it was decided to extend the deadline for tax support for landlords who reduced the rent for small business owners from the end of this year until the end of next year.
In order to strengthen housing support for young people and newlyweds, an additional 23 trillion has been won in stepping stone and support loans in progress. Initially, the intention was to supply 21 trillion won this year, but it will increase to 44 trillion won.
The annual payment limit for housing subscription comprehensive savings income deduction application will be raised from 2.4 million won to 3 million won, and tax benefits for preferential youth products will continue to be provided. It is an advantage such as providing a favorable interest rate of up to 1.5% points for homeless youth.
A scheme to fully back up to 300,000 won for deposit refund guarantee fees for young people will be implemented from this month. The income requirements for buying houses and special loans for lease funds for new women are also eased. The current income requirements for newlyweds are 60 million won for jeonse and 70 million won for buying a house, but these are being eased to 75 million won and 85 million won, respectively.
#landlords #Jeonse #Return #Loan.. #DTI #DSR
