Dazayo, a South Korean startup providing lodging services with empty houses in rural communities, is allowed to resume its business under restricted conditions after being forced to suspend operation more than a year amid strong opposition from local guest house operators.

The government announced Monday that an agreement has been reached between Dazayo and local residents through the government’s “one-step-at-a-time model,” a dispute and settlement arbitration framework established in June to help solve conflicts between startups and established industries.

Dazayo has been approved to rent up to 50 houses for maximum 300 days per year in five regions including Jeju. It should use houses that have been emptied for more than one year and less than 230 square meters in size. It must return some part of the profits to the community and go through negotiations with local residents for issues like noise, parking and safety.

The feasibility of its business will be tested for two years under the regulatory sandbox, which allows companies to test new services and products that are banned under the existing regulations, in a controlled environment during a designated period time.

Dazayo was founded in 2015 as a home-sharing business operator like Airbnb. The company leases empty houses in rural villages without fees in exchange for renovation and rents them to consumers for 10 years, and then returns the houses to the owners after the contract expires. But it had to suspend its business due to the fierce backlash from local residents and guest house operators arguing Dazayo is illegal. Under the current law, lodging business is only allowed to people who actually live in the houses as a primary residence.

The Ministry of Economy and Finance launched the dispute settlement mechanism in June to help the related parties reach compromise where both could benefit.

Dazayo will first reopen the business in Jeju and Seogwipo and select three additional cities or counties after negotiations with local governments. Finance minister Hong Nam-ki said Monday that the ministry has set aside 2.5 billion won ($2.15 million) in budget for next year to support safety education and consulting program for the house renting business in rural areas.

By Oh Chan-jong and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]