YONGSAN GARRISON, South Korea — Landlords and some real estate agents are poised to protest a new military housing program they say won’t work.
Meanwhile the military maintains it will save millions of dollars and halt rent-gouging by using a South Korean payment system.
The “Housing Opportunities Made Easy” (HOME) program begins July 12 with the opening of a Web site where servicemembers can pick out apartments.
Servicemembers will use one company — based in the Army Community Service building on south post — to find an apartment and sign a lease.
The system will be fully functional by the end of the month.
But it means private real estate firms — which are concentrated around U.S. military bases — will have a reduced role in finding apartments for servicemembers and no power to negotiate rental contracts.
That power will go to Korea Regional Property Management (KRPM) Inc., the firm selected by the military to administer the HOME program.
The system could fundamentally alter the South Korean real estate market in which the military pays $100 million annually to house nearly 4,000 servicemembers and civilians off base.
A memo is being prepared to make the program mandatory for servicemembers, officials said.
Civilians will have the option to utilize either the old system or use KRPM, but will be “strongly encouraged” to use the new system.
A grandfather clause will allow those servicemembers who currently have leases under the old system to keep those until the lease expires, officials said.
The housing market — where rents between $2,000 and $4,000 a month are common in the Seoul area — will no longer see base-affiliated tenants paying American-style monthly rent.
It also supplants a system created by the military a few years ago designed to limit the amount of money it would pay to a landlord based on size and quality of an apartment and a person’s rank.
In the past, landlords and real estate agents often negotiated rent at a person’s maximum housing limit.
But the fair market value system drew the ire of landlords and put the military in the business of determining real estate prices.
Under the new system, the military no longer will determine the fair market value of apartments, said John DiGenio, a management analyst for the Installation Management Agency-Korea Region.
“This puts U.S. personnel on par with their Korean counterparts,” DiGenio said. “Why should U.S. personnel pay more [than Koreans]? Why should United States personnel pay a foreigner’s premium?”
Officials don’t doubt that landlords who have received fat monthly rent checks from foreigners will criticize the new system.
One official agreed to detail the program but did not want to be identified because of harassment and threat of violence from those opposing it.
Nevertheless, the military believes they will be able to get quality apartments for servicemembers.
It’s an effort to reduce housing costs, officials said, using a modification of the Korean cheonsae system.
When a servicemember finds an apartment, KRPM gives the landlord a deposit of 70 percent of the apartment’s value, determined by a South Korean bank. The loan comes from a South Korean bank.
In return, the military pays the prevailing interest rate — around 6 percent — on the deposit.
What the landlord gets is an interest-free loan that can be used for other investments but must be returned after the lease period is completed.
Brig. Gen. John A. Macdonald, director of IMA-KORO, recently entered into a 24-month agreement with KRPM, officials said.
It’s a trial run of a program for Area II, officials said. If it’s successful, the program could be implemented throughout South Korea.
Macdonald is chairman of a board of directors along with co-chairman Col. Timothy McNulty, Area II and 34th Support Group commander. The board will evaluate the program monthly, officials said.
Real estate agents oppose the military’s selection of KRPM under what’s called a “master lease agreement.” A master lease agreement is like a contract, but not called a contract under federal acquisition rules, officials said.
“IMA-KORO decided to select a single company … for the project, which goes against the fair selection of qualified candidates,” wrote Lee Kuen-sik, part of the Yongsan Realtors Association, in a June 8 letter to Macdonald.
The nine-page letter also accuses the military of unfair business practices. Lee said his group has contacted the Department of Defense Inspector General’s office and considered approaching members of Congress.
KRPM was picked for their knowledge of property management, wrote Macdonald in a June 16 response.
“During this time of constrained public resources, U.S. government agencies have to aggressively seek ways to reduce costs,” Macdonald wrote in his response, provided to Stars and Stripes by Lee.
“However, after discussions with Army contracting professionals, this region decided to employ a ‘sole source’ provider to serve as the Property Management Corporation (PMC) during the test period.”
Once registered, real estate agents can contact KRPM to list their properties and will receive a fee if their listing is selected.
Properties can be listed only once, and real estate agents must compete with each other to be first to list a particular property.
Under South Korean law, real estate agencies make around 0.3 percent of a lease’s value as their finder fee, and agencies will receive that fee from KRPM.
So far, about 40 real estate agents are registered with KRPM and about 250 properties are listed, officials said. However, Lee said only three of 26 member of the Yongsan Realtors Association have signed up.
Lee said he will not register his real estate agency, Midas, with KRPM. He’s owned the real estate agency for 18 years and serves around 250 soldiers annually. The new program will destroy the real estate market around the base, Lee claims.
“Absolutely, no,” Lee said when asked if he would join.
In his office, Lee has a stack of papers with 700 signatures from landlords who oppose the program. They are planning a protest July 16 outside the base gates, Lee said.
During a June 21 meeting at the Capital Hotel where KRPM officials explained the process to realty agencies, several landlords chanted “Cheonsae, no!” and loudly protested the new plan.
Landlords fear that they won’t be compensated properly for investments they have made in their property to comply with military housing standards, said Patrick Nam, director of DRC Property Management agency in Yongsan.
Military renters do pay slightly higher rent than South Koreans, but those landlords take a certain financial risk because of a lease clause that allows tenants to cancel a lease with 30 days’ notice, Nam said.
Officials: Program to offer convenience
YONGSAN GARRISON, South Korea — If all goes as planned, servicemembers will have a smooth, streamlined way to both find and pay for off-post apartments, officials said this week.
Servicemembers who know they’ll be living off base can look at apartments even before they come to South Korea at www.usfkhousing.com.
The Web site, run by Korea Regional Property Management (KRPM), will have apartment listings submitted by local real estate agents starting July 12.
KRPM will have an office in the Army Community Service building on South Post.
The office — staffed by bilingual representatives — will be responsible for taking servicemembers to see apartments they are interested in.
Once an apartment is picked, a KRPM staffer will arrange a lease. KRPM also will have a 24-hour, 7-day-a-week call center to deal with problems between landlords and tenants, officials said.
KRPM will help arrange other services, such as phone and cable television, officials said. KRPM will be required to provide monthly utility statements in English to renters.
The statements are intended to head off claims by landlords that tenants exceeded allowed utility limits during their lease.
KRPM also will agree to fix apartments to put them in good condition for soldiers, officials said.
The company will put new floors and wallpaper in those apartments that need it, and the Army will reimburse the company for those costs.
In the end, KRPM will make about 10 percent from the cost of a lease, a figure that officials estimated to be $5 to $7 million annually, while the Army saves around $25 million, officials estimate.
— Jeremy Kirk