Tenants Who Have Used All Lease Renewal Rights... Need an Average of 160 Million KRW More for New Contracts

High Interest Burden During Rising Rates
Possibility of Switching to Monthly or Semi-Jeonse Rent
Some May Be Pushed to Outskirts

Government and Seoul City Deliberate on Rent Stabilization Measures
Temporary Loan Interest Support and Expansion of Private Rental Housing Construction

[Asia Economy Reporter Kim Hye-min] The 15,000 households coming back onto the jeonse and monthly rent market after their jeonse renewal contracts have ended are now facing sharply increased jeonse prices over the past two years. For housing stability, moving to the current residence or nearby is the best option, but it has been found that at least an additional 100 million KRW in funds is needed to do so.

According to data received on the 12th from the Ministry of Land, Infrastructure and Transport by Rep. Kim Sang-hoon of the People Power Party, the average jeonse price of Seoul apartments renewed between August and December 2020 was 513.02 million KRW. However, last month, the average jeonse price of Seoul apartments was 675.7 million KRW (based on KB Kookmin Bank). This means that those signing new jeonse contracts will need approximately 160 million KRW more.

The problem is that tenants must pay deposits much higher than the current market price. Since landlords who have not raised the jeonse deposit for two years may raise the deposit all at once considering the current market price and the use of the renewal right, this possibility cannot be ruled out.

The first way to cover the sharply increased jeonse deposit is through loans, but as interest rates have risen, tenants must bear high interest costs. If loans are difficult, tenants are likely to convert jeonse to monthly rent or half-jeonse, or be pushed to the outskirts. All of these situations increase tenants' burdens or threaten housing stability.

Experts have urged the new government to take this issue seriously and prepare countermeasures. Kim Deok-rye, head of policy research at the Korea Research Institute for Housing and Urban Affairs, said, "Not only will tenants’ housing become unstable, but the sudden surge in jeonse and monthly rent demand could also stimulate the market," adding, "Rather than struggling over repealing or maintaining the lease protection law, which could lead to political disputes, it is important to present alternatives that can immediately alleviate the damage." Proposed measures include raising the loan limits for jeonse funds and supporting interest payments, as well as providing incentives to ‘good landlords’ who extend lease periods.

The Seoul Metropolitan Government has proactively introduced measures to stabilize the jeonse and monthly rent market. The main points include temporarily supporting loan interest for low-income households whose renewal contracts have expired for two years and expanding interest support programs for tenants such as youth and newlyweds. They also plan to propose legal amendments to activate private rentals for low-rise housing excluding apartments.

The new government also judges that immediate legal amendments are difficult and is considering supplementary measures such as expanding private rental construction and reviving the private rental business system. The Presidential Transition Committee has announced national tasks including △promoting private rental housing supply through activation of rental REITs △expanding registered rental housing such as construction rentals △preparing improvement plans for the lease protection law system. They also plan to create a task force (TF) in the National Assembly standing committee to allow sufficient discussion between ruling and opposition parties on the lease protection law.

Rep. Kim said, "The renewal contract claim right, created to protect tenants, has rather locked up jeonse supply and caused jeonse prices to soar," adding, "From the end of July this year, new contracts with exhausted renewal rights will come out, and tenants will face a bombshell of deposits and rents."

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