[Column] Signs of a Reversed Jeonse Crisis... Need to Find Both Symptomatic and Root Cause Treatments Simultaneously

"Park Mo (33), a tenant living in Seoul, missed the expiration of his jeonse contract in early last month but has not received his deposit. The jeonse price has dropped by 30 million won compared to two years ago. The landlord keeps repeating that he should wait until a new tenant comes."

This case was introduced in a news report 19 years ago, in 2004. Regardless of the reason, when housing prices fall, reverse jeonse naturally occurs. It is a nightmare for both tenants who cannot get back their deposits, which are almost their entire assets, and landlords who may face bankruptcy.

History repeats itself. This year, signs of a reverse jeonse crisis are clear. According to the Korea Housing & Urban Guarantee Corporation (HUG), the amount of jeonse deposit return accidents from January to April exceeded 1 trillion won, already approaching last year's level. The future is even more problematic. This is because a large volume of jeonse contracts made at peak prices will be released in the second half of the year, and the number of new housing units is also considerable.

As the crisis approaches, it seems urgent to prepare symptomatic treatments first. Some landlord organizations and related industry sectors argue that the Debt Service Ratio (DSR) regulation applied to deposit return loans should be temporarily relaxed.

Symptomatic treatments will come in some form. On the 15th, President Yoon Suk-yeol received reports from related ministers on real estate and instructed them to "consider measures to ease the burden on vulnerable housing groups such as reverse jeonse."

However, at the same time, a fundamental 'causal treatment' to fix the recurring jeonse problem must be considered. The jeonse system is premised on rising housing prices. During the rise, it induces gap investments, causing a surge in household debt and bubbles, and during the decline, it carries the risk of becoming a debt bomb. This is why calls for abolishing jeonse gain traction each time.

It is impossible to eliminate a naturally occurring system. Therefore, a 'orderly retreat' plan is necessary. Experts suggest including jeonse loan funds in the DSR regulation, reducing the jeonse deposit guarantee limit to below 70%, and establishing a deposit escrow system.

The key is how to build social consensus. Since the jeonse system serves as a "housing ladder" for the working class, no government in history has attempted or succeeded in reforming it. Therefore, now, when the harms of the jeonse system such as jeonse fraud and reverse jeonse concerns are emerging, is the right time to prepare both symptomatic treatments and mid- to long-term institutional improvements as causal treatments.

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