[The Editors' Verdict] The Butterfly Effect of Jeonse Loans

Government Took Easy Route During Jeonse Crisis
Only Increased Loans, Causing Excess Liquidity
Comprehensive Review Needed for Loan and Guarantee Policies

The jeonse crisis and reverse jeonse crisis occur periodically. Ultimately, the biggest victims in this process are tenants and ordinary people. On top of this, fraudulent schemes that cleverly exploit loopholes in the system create hellish situations like the recent jeonse scams. Although jeonse scams existed in the past, their scale and organization have grown significantly in recent times. The rapid rise in housing prices over the past few years and the ultra-low interest rate environment created favorable conditions for this.

While immediate relief measures for victims are a priority, fundamental countermeasures and institutional reforms are also necessary. This issue cannot be dismissed merely as a matter of shameless fraud, blind spots in the jeonse system, or tenants’ insufficient knowledge of lease agreements.

The government bears significant responsibility as a contributor to market distortion. Each time a jeonse crisis occurs, the government has chosen easy and convenient solutions such as increasing loans and guarantees. When a housing price decline phase lasts for a considerable period, jeonse prices rise. Since supply does not increase and people avoid buying houses, only seeking jeonse, jeonse prices inevitably go up. When a housing price rise phase coincides with external factors, jeonse prices provide strong support from below, causing housing prices to rise together. The government, having failed to control housing prices, gains public favor by expanding jeonse loan and guarantee limits. This cycle has repeated over the past decade. When it coincides with election periods, public generosity increases and the bubble inflates like a balloon.

Housing prices propped up by jeonse loans continue to rise, and even the middle class and multi-homeowners begin to use jeonse loans as gap investment funds. The government generously released jeonse funds (loans) whenever jeonse prices rose, which also led to excessive liquidity in the real estate market.

Since the government provided jeonse loans even for relatively high-priced jeonse housing to the middle class, there was no reason not to take them in a low-interest environment. Because guarantees eliminated concerns about defaults, commercial banks easily profited from interest. Jeonse loans ultimately became a catalyst for driving up housing prices and a pillar supporting housing prices. The inevitable shift to monthly rent was also supported by jeonse loans. However, even if jeonse loans are reduced and guarantees curtailed, the methods and implementation must be gradual and stepwise. Policies during downturns require even more caution.

The government should expand loans for returning rental deposits to landlords with solid collateral. Even if policies for landlords are not popular with the public, they should be considered if necessary for market stabilization. The spread of anxiety caused by fears of “empty shell houses” and jeonse scams could worsen the problem, so preventing this in advance can stop the damage from transferring to tenants and block negative chain reactions.

A friend living in a villa with a high jeonse-to-sale price ratio recently complains of headaches due to anxiety. They lose sleep at night after seeing sensational reports calling it “just the beginning” or a “reverse jeonse time bomb.” Although they secured a confirmed date as a senior tenant and subscribed to guarantee insurance, their anxiety does not subside. They have no tenant rights registration and do not need jeonse rights registration, but due to lack of knowledge and distrust in the world, they are tossed about. It is the role of our media to provide accurate information without provoking anxiety.

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