Do the Right to Lease Renewal and the Rent Cap Curb Apartment Rent Increases?: Dissecting Rent Dynamics in a Regulated Housing Market

This study investigates the impact of the right to lease renewal and rent cap, introduced through the “Two Lease Acts” in July 2020, on apartment rent in Seoul, South Korea. By comparing rent price changes based on the exercise of the right to lease renewal, we find that exercising the right led to a 12.29 percentage point lower rent increase rate compared to non-exercise. While this suggests that the Two Lease Acts enhanced tenants’ housing stability, the 5% rent cap raises concerns about potential long-term market distortions and structural problems. A tenure type comparison shows that the policy had the strongest price suppression effect in Chonsei (lump-sum deposit leases), whereas the effects were weaker in monthly rent and mixed rental types. A regional comparison reveals that the effect was most pronounced in the southeastern districts, more limited in the northwestern districts, and not statistically significant in the southwestern and northeastern districts relative to the central area. These findings confirm that the right to lease renewal and rent cap contributed to rent stabilization, while revealing that their effectiveness varied across spatial and contractual contexts. This suggests that a uniform application of these policies may have limitations and highlights the need for more tailored policy designs that reflect the characteristics of housing submarkets and lease types.