Landlords petition against tax benefit cuts for registered rental apartments

Public opposition to the government's 2026 tax reform plan is mounting, with a wave of petitions targeting measures that would raise property holding and capital gains tax burdens on multi-home owners, high-value properties and non-resident single homeowners. A petition calling for the withdrawal of a proposed 1 billion won ($718,000) cap on the long-term holding special deduction for single homeowners has drawn nearly 50,000 signatures, and a separate petition has emerged demanding that tax benefits for registered rental apartment operators be preserved. Petitioners argue that unilaterally scaling back or abolishing incentives granted under the Moon Jae-in administration to encourage private rental housing supply — only to reverse them as policy priorities shift — will deepen public distrust in government.

According to the National Assembly's electronic petition portal on Friday, a petition registered Thursday titled "Please honor the tax benefit promise made to apartment rental operators who have completed their eight-year mandatory rental period" has cleared the 100-signature threshold needed to advance to public petition status. Under the National Assembly's public consent petition system, a petition that receives 100 signatures within 30 days is converted to a public petition open to all citizens, and one that gathers 50,000 signatures within 30 days is referred to the relevant standing committee.

The petitioner, identified as Maeng, said that during the Moon administration in 2017, the government went beyond encouraging rental registration — it was "practically coercive" — and that she had registered her apartment as a rental unit trusting the government's promise of tax benefits. "For eight years, my tenant lived in the apartment at half the market jeonse price," she said. "The tenant's child went from sixth grade in elementary school all the way through to university without disruption." She added that although she was unable to raise the deposit, she felt proud to have contributed to the country in her own way. "But now, the moment the eight-year mandatory rental period ends, the government says it will strip away the tax benefits," she said.

Maeng and other rental operators are pushing back because the 2026 tax reform plan announced Aug. 3 includes provisions that would sharply increase the tax burden on registered rentals — reducing the preferential long-term holding special deduction rate from 50 percent to 30 percent and imposing a 50 percent capital gains tax surcharge in 2028, then eliminating the preferential deduction entirely and applying the surcharge from 2029 onward. The plan also calls for scrapping, starting next year, the "win-win lease" arrangement under which single homeowners who cap rent increases at 5 percent over two years are exempted from the two-year residency requirement for the single-household capital gains tax exemption and the long-term holding deduction — with a condition that properties must be sold by 2029 to qualify for the tax-free benefit.

The registered rental system offers tax incentives in exchange for compliance with rules including a 5 percent cap on rent increases and adherence to mandatory rental periods. In 2017, the Moon administration aggressively promoted registration of purchase-type rental businesses, offering exemptions from capital gains and comprehensive real estate tax surcharges as well as acquisition tax reductions, in a bid to stabilize the jeonse and monthly rent market. Apartment registered rentals were abolished in 2020, but the tax benefit rollback has been announced just as units that were newly registered in bulk at the government's urging in 2018 and 2019 are reaching the end of their mandatory rental periods and facing automatic deregistration.

"Retroactively stripping tax benefits at this stage is unconstitutional," Maeng said. "It will destroy the trust between the government and its citizens, and encourage the suspicion that if you follow what the government tells you, it will just reverse course on you later." She called on the government to apply any new reform measures only to newly registered rental operators going forward.

While the government has signaled that operators whose mandatory rental periods have ended should dispose of their properties by 2027, critics point out that many landlords are effectively blocked from selling — by remaining lease contract terms, tenants exercising their right to request contract renewal, or restrictions on transferring union membership status for properties subject to redevelopment projects.

Concerns are also growing that the tax benefit cuts could accelerate the jeonse and monthly rent shortage in the greater Seoul area. An analysis of Ministry of Land, Infrastructure and Transport data on registered private rental housing by the Korea Housing Landlords Association found that 22,822 registered rental apartments in Seoul are set to be deregistered this year as their mandatory rental periods expire, with another 14,861 units projected to follow next year and the year after. If those units are converted to owner-occupied residences or put up for sale, the jeonse supply crunch could deepen significantly, the association warned.

"Retroactively abolishing special tax treatment for registered rental apartments and raising property holding taxes on small-scale multi-home owners will shrink the supply of registered rental housing — which is nearly on par with public rental housing — and undermine residential stability for tenants," said Seong Chang-yeop, chairman of the Korea Housing Landlords Association. "The government and the National Assembly must conduct a full review of the tax reform plan."