Seoul City Provides Loan Interest Support for Households with Expired Jeonse and Monthly Rent Contract Renewals

Two Years of the Lease Protection Act... Preparing for Rental Market Turmoil Following Renewal Contract Expiration
Interest Support Up to 300 Million KRW Loan Limit for Low-Income Households
Additional Interest Support for Rental Deposits for 2,500 Young Adults and Newlyweds

[Asia Economy Reporter Kim Hyemin] Seoul City announced on the 11th that it will support loan interest to ease the burden of tenants who applied the right to request contract renewal, such as the sharp rise in jeonse deposits, ahead of the two-year implementation of the Lease Protection Act in August.

Seoul City plans to promote a "Jeonse and Monthly Rent Market Stabilization Plan" based on this content.

The city recently observed that the rate of increase in jeonse prices has stabilized, and with the housing supply and demand expected to remain smooth until next year, it anticipates the jeonse market will remain relatively stable in the second half of this year. However, tenants who exercised the "2+2 contract renewal right" after August 2020 will enter the jeonse and monthly rent market this year, facing sharply increased jeonse prices over the past two years during new contracts. To alleviate this burden, the city has prepared proactive measures. It expects that the volume of contracts expiring by the end of this year will account for about 15% of the total jeonse transactions (an average of 4,730 cases per month).

First, Seoul City will temporarily support loan interest for households facing a surge in jeonse prices. Starting in August, low-income households whose contract renewal rights expire and who must sign new jeonse contracts will receive interest support at a maximum annual rate in the 3% range (with a minimum personal burden interest rate in the 1% range) based on a loan limit of up to 300 million KRW. This support will be provided for up to two years to non-homeowners whose renewal contracts expire between August 2022 and July 2023, with interest rates applied differentially according to income brackets.

The number of newlywed couples receiving interest support for rental deposits, which is currently 8,000 households, will be expanded to 15,000 households. The loan limit will also increase from a maximum of 200 million KRW to 300 million KRW. Especially, since the rental deposit loan limit has been frozen for four years and expanding it is limited by local government budgets alone, Seoul City plans to actively request matching national funds from the central government.

Financial support for youth will also be strengthened. The scope of youth monthly rent and rental deposit interest support currently provided will be expanded, and the loan limit for rental deposits will be increased from the current maximum of 70 million KRW to 150 million KRW, with plans to propose this to the government. The city-level monthly rent support for youth with income below 150% of the median income will cover up to 30,000 people this year. Separately, Seoul City plans to propose extending the period and expanding the target of the government’s temporary monthly rent support for youth with income below 60% of the median income this year.

To prevent distortion of information caused by arbitrarily predicted supply data on real estate applications or cafes, the city will also provide "tenant supply forecast information" that will actually come onto the market on a monthly basis.

The city plans to post monthly data on rental supply forecast information (tentatively named "Jeongbo Mongttang Jeongbotong") linked to the Seoul Housing Portal and continuously provide data through agreements with real estate direct transaction platforms. This will include detailed supply data segmented by region, area, and type, along with the jeonse price ratio by region. Additionally, in cooperation with the government, the city will provide a text message service to households with upcoming lease contract expirations, informing them of the timing when they can request contract renewal, important notes, and reporting obligations for lease contracts.

Along with this, Seoul City will propose to the government to include management fees as a reporting item in lease contracts and recommend legal amendments to revive short-term private rentals and strengthen tax support. However, since private rental apartments may be distorted as a tax-saving tool for multi-homeowners and could stimulate speculative demand, the city plans to propose activating private rentals only for low-rise housing excluding apartments.

Kim Seongbo, Director of Seoul City Housing Policy Office, said, "We will promptly prepare support procedures for tenants so that low-income households whose jeonse renewal contracts expire in August do not suffer difficulties in finding homes due to the sharp rise in jeonse prices, and we will accelerate efforts to stabilize the overall jeonse and monthly rent market."

This content was produced with the assistance of AI translation services.